Stark rates choices laid bare

Waikato Times - - Front Page - LIBBY WIL­SON and EL­TON RIKIHANA SMALLMAN

A bil­lion dol­lars in debt and be­ing on credit watch are among the risks if Hamil­ton doesn’t up its rates in­crease, a se­nior coun­cil leader says.

Hamil­ton Mayor Andrew King is propos­ing an av­er­age 16.5 per cent rate hike to right the city books in one fell swoop.

It’s far above the 3.8 per cent an­nual in­crease Hamil­ton City Coun­cil in­tro­duced in 2012, say­ing it would last for a decade.

That’s no longer a re­al­is­tic op­tion and would force coun­cil to cut a swag of ser­vices by half, coun­cil’s gen­eral man­ager for cor­po­rate David Bryant said.

The sce­nario was shown to coun­cil­lors to an­swer the ques­tion: ‘‘What would hap­pen if we kept the rates the same?’’

How­ever, Na­tional’s Hamil­ton East MP David Ben­nett says the pro­posed in­crease is a sign of coun­cil miss­ing a trick or ‘‘some­thing else go­ing on’’.

Bryant says city sys­tems – traf­fic, wa­ter, sew­er­age – will end up over­loaded with new peo­ple and de­vel­op­ment if coun­cil doesn’t sink money into them.

Growth ar­eas in Ro­to­tuna and Ro­tokauri will be full in three or four years so coun­cil needs to get go­ing on Pea­cocke, he said.

‘‘Our rates are re­ally on par with coun­cils that aren’t grow­ing … They don’t have pres­sure on their in­fra­struc­ture, they don’t have to open up a new growth cell, they don’t have to build a bridge over a river to gain ac­cess to land.’’

If the rates rise stayed at 3.8 per cent, coun­cil would have to chop half the cap­i­tal spend­ing in King’s sug­gested bud­get, he said.

The last time dras­tic cuts hap­pened, in 2011, coun­cil­lors took a slasher to city projects, along with moves such as re­duc­ing street light hours.

Now, stick­ing with the sta­tus quo would leave the books in deficit un­til 2026, and debt would pass

$1b in the same year, Bryant said. The debt-to-rev­enue ra­tio would rise enough to ring alarm bells with coun­cil’s lender, the Lo­cal Gov­ern­ment Fund­ing Agency.

At 230 per cent, the agency would put coun­cil on credit watch, Bryant said. At 250 per cent, it would stop lend­ing.

The mayor’s sug­gested so­lu­tion is ratepayers fork­ing out for the mas­sive in­crease, then a re­turn to 3.8 per cent a year.

His spend­ing plan in­cludes

$220m on traf­fic con­ges­tion and prob­lems, $80m for new com­mu­nity fa­cil­i­ties, and $21m for look­ing af­ter what the city has al­ready got. The 16.5 per cent fig­ure isn’t fi­nalised, Bryant said, but would put coun­cil in the black from 2019, leav­ing money to re­pay debt.

It would keep debt un­der $800m and the debt-to-rev­enue ra­tio be­low dan­ger lev­els.

Spread­ing the rate in­crease pain across three years – each go­ing up 8 per cent – is the other op­tion.

That would bal­ance the books in 2021, Bryant said, but the mayor is wor­ried.

‘‘It’s open to, in the next cou­ple of years, coun­cil not fol­low­ing through with this plan – which leaves us in a deficit po­si­tion.’’

But Ben­nett says 16.5 per cent is an un­be­liev­able in­crease which ratepayers can’t jus­tify in terms of vis­i­ble in­creases in ser­vices.

‘‘It would in­di­cate, with a one­off rate in­crease like that, that there is some struc­tural de­fi­ciency within coun­cil – they’ve missed some­thing – or it would in­di­cate there is some­thing else go­ing on to do with the fact they know there is an ex­pen­sive growth cell com­ing their way be­cause they’ve made a po­lit­i­cal de­ci­sion to go to that area.’’

He’s talk­ing about the much­vaunted Pea­cocke growth cell where the last gov­ern­ment promised a $272m loan from the Hous­ing In­fra­struc­ture Fund to build a bridge across the Waikato River, road­ing ex­ten­sions and up­grades, wa­ter and waste­water.

Coun­cil says Pea­cocke will pro­vide space for more than 3700 houses over the next decade and 8100 in the next 30 years.

The south­west­ern Pea­cocke growth cell is com­par­a­tively ex­pen­sive, Ben­nett said, and coun­cil should be look­ing at the most cost ef­fec­tive places around the city.

David Ben­nett

David Bryant

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