Stark rates choices laid bare
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.