Talk to the bank, council

Hamilton City Council have asked Facebook users to tell them what we think about the 19.9% rates increase. Here is what I think.

As the need for high-rate increases has recently appeared in council financials, that it would be prudent to explore all options before committing the community to more pain than required.

The problem lies in the debt to revenue limits set by the Local Government Funding Agency: $285 of debt for every $100 of income in 2024-25, and $280 per $100 income in later years.

This is best outlined inthe consultation document under How we plan to manage the city’s finances, where any reduction in the average rates increase has a negative impact on the debt to revenue ratio. A small reduction in the rate increase is available before maxing the ratio out to $285. But are the ratios working as they should be? The ongoing effect on the 2021-31 ten-year plan of Covid supply chain problems, inclement weather events, and Reserve Bank intervention to drive down inflation have seen prices soar to deliver programmed works.

It may be prudent to take the Reserve Bank Governor’s advice to mortgage holders staring down the barrel of high interest rates – to talk to your bank.

In the council’s case, asking the Local Government Funding Agency if current settings are appropriate? Especially in a city experiencing the fastest growth in the country and if hamstringing growth by unrealistic targets works in the best interest of the nation?

In the interim, the council could continue along a path of budget cuts. They could also review the current year’s forecast position for savings. It could well be that part of the $125 million budgeted in 2023-24 Annual Plan cashflow could be available to fund part of the 2024-25 capital program, which could have an impact on the proposed 19.9% rate increase.

Eric Thompson, Hamilton (abridged)