Rates storm
Rough weather ahead for city’s finances
‘‘This council’s not looking to put up rates to pay for baubles or toys for the city. It’s ensuring we have got a really robust base to invest in the future.’’
Richard Briggs
Three hard-to-swallow options are in front of Hamilton councillors as they try to tame a rates monster that keeps rearing its head.
Mayor Andrew King says city rates need to jump 16.5 per cent, but his colleagues have been shown two other choices.
One is to stagger the rate rise, the other to stick with the current 3.8 per cent annual increase and slash services including theatres, Hamilton Gardens, and cemeteries. Keeping 3.8 per cent rate increases would play havoc with council’s debt levels, council papers say.
‘‘We would blow it,’’ corporate general manager David Bryant said.
Debt would climb its way past $1 billion, sending the debt to revenue ratio over its limit.
So council says it would have to make cuts, big ones – $25 million from council’s base operating costs and $700m from capital spending.
‘‘All of the following services will need to be cut by 50 per cent: theatres, libraries, pools, zoo, H3, community support, Hamilton Gardens, community and sports parks, cemeteries.’’
If there were a 16.5 per cent rate increase, council could stop using debt to fund everyday costs.
King has proposed a budget with this in mind, including a $220m spend on improving the transport network, $80m for community infrastructure and city development, and the development of the Peacocke area.
The third option is spreading the rates rise across three years, each with an increase of 8 per cent.
But how did we get here?
Two of Hamilton City Council’s top financial minds are pointing the finger firmly at unexpected levels of growth – as in March, when the mayor urged councillors to put rates up by 12 per cent. Council set its financial strategy in 2012 when city growth was practically stalled, chief executive Richard Briggs said. It worked at the time – as endorsed in a PwC review – but doesn’t cut it now that growth has exploded.
‘‘The one thing we probably for fiscal reasons didn’t do in 2012 was consider whether or not the growth curve was going to kick back up again like it has,’’ Briggs said.
‘‘If we had known that I can guarantee you … council would have made a different decision. But all of the metrics coming out of all the agencies in 2012 were that growth was going to curve straight off.
‘‘For us, where we were in 2012, we were basically a car we weren’t driving that often. So we didn’t have to replace the tyres, put as much fuel in the tank, and so forth.’’
But now growth has ramped up, or the car’s being driven every day, increasing pressure on all parts of it, and driving up costs.
Development contributions from new growth also masked deficits for the everyday costs of running the city, Briggs said.
Briggs warned King and that’s what led to the first rates shock in March. Councillors said no to an increase but Briggs said they now know the consequences of each option before them.
Growth snuck up on council, Bryant said.
‘‘It could be argued that in the last few years the 3.8 per cent rate increase has just not been enough, and that’s taken us to this point.
‘‘Whilst it might be hard to swallow, our level of rates increase hasn’t been what it would ordinarily have been for a growth council experiencing those issues.’’
Briggs and Bryant say ratepayers can trust them to get the city out of the tight financial spot.
A 16.5 per cent increase would catch council up to where it needs to be, and ongoing 3.8 per cent increases would provide the backstop. ‘‘This council’s not looking to put up rates to pay for baubles or toys for the city. It’s ensuring we have got a really robust base to invest in the future,’’ Briggs said.
Bryant agreed – but said it comes down to councillors ‘‘making the right decision, the courageous decision, and taking the city forward’’.