TDC budget counts cost of Covid-19

The Timaru District Council is bracing itself for the ongoing effects of Covid-19 on its budget.

The council’s budget, which will be debated on Tuesday, proposes a rates increase of 3.89 per cent for the 2020-21 financial year as it predicts the net financial impact of Covid-19 to be at least $1.05 million to $1.5m.

‘‘Without any compensatory measures, assuming a net financial impact from Covid-19 of $1.05m, this would result in an average rates increase of 2 per cent to 6 per cent,’’ a report to the council says, noting that ‘‘every $500,000 of net movement in the council’s revenue equates to a rates’ increase of approximately 1 per cent’’.

‘‘The net financial impact of Covid-19 on council means that further measures are required . . . in order to deliver a budget that results in an average rates increase of no more than 4 per cent.’’

The report notes that councillors, in order to shave the rates down to below 4 per cent, have ‘‘increased the prior requirement for efficiencies and savings of $800,000 to $1,550,000 to come from a combination of operating and personnel costs’’.

Fees and charges revenue is expected to drop by $1.2m as a result of Covid-19, as areas such as building, parking, swimming pools and airport are forecasting material drops in fees and charges.

‘‘The ongoing impact of the Covid-19 crisis will be felt across New Zealand, all sectors and council operations for some time (potentially years). Council has a role to play in supporting recovery,’’ the report says.

There is also a major drop-off in dividend income from the council’s holdings company Timaru District Holdings Ltd (TDHL) of $850,000, largely off the back of lines company Alpine Energy – 47.5 per cent owned by TDHL – having its dividend reduced by $3.6m.

Contracting costs have also increased by $2m over what was initially projected for 2020-21, with the majority of this down to increased costs for council’s various infrastructure activities.

The report assumes the council will be operating at Covid-19 Alert Level 2 for much of the remainder of 2020.

‘‘We carried out this work in alert Level 4 without knowing how long we might be in different alert levels, or whether restrictions at different alert levels would change, and therefore in a situation where it was difficult to predict impact with any certainty.

‘‘We applied assumptions based on information coming out of central government and within the sector, but also found that information to be changeable.’’

The report outlines three options for the councillors should they want to reduce the rates increase even further. These are reducing levels in service, reducing the amount in funding for depreciation, or increasing borrowing; the last mentioned being the recommended option, as council has net debt of $45m.

In non-Covid-19 related matters, consultant costs associated with the District Plan Review have been carried forward from the 2019-20 year, leading to a variance in the budget of $820,000, while IT costs of $500,000 have also been carried forward from 2019-20 and insurance costs are up $340,000 on the Long Term Plan (LTP). Carbon credit costs are also proposed to increase up to $650,000 on the LTP figure because of an increase in the cost of the units and increase use of council’s landfill.