Rates storm

Rough weather ahead for city’s fi­nances

Waikato Times - - Front Page - LIBBY WIL­SON

‘‘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’’.

PHOTO: TOM LEE/STUFF

If there were a 16.5 per cent rate in­crease, coun­cil could stop us­ing debt to fund ev­ery­day costs.

Hamil­ton City Coun­cil gen­eral man­ager for cor­po­rate David Bryant and chief ex­ec­u­tive Richard Briggs say un­ex­pected growth is to blame for the tough fi­nan­cial spot.

Hamil­ton Gar­dens is one of the ar­eas in which coun­cil would have to halve spend­ing if 3.8 per cent an­nual rate in­creases were to stay.

Mayor An­drew King: ‘‘Hamil­ton rates need to go up an av­er­age of 16.5 per cent.’’

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