Nod to 5 percent rate increase

MAXIMUM rate increases of 5 percent for the first three years of the Long-Term Plan (LTP) and a set limit on debt of $80 million rising to $100m were the guidelines staff gave to councillors yesterday for the council’s 2018-2028 draft financial strategy.

The council wants projected rate increases for the LTP to be smoothed out over the 10-year term of the new plan, and also favours having set debt level limits rather than ones based on a percentage of rates revenue.

Staff have been asked to model the proposed rates and debt levels against the works programme and come back to the Future Tairawhiti committee meeting on January 25 with an updated draft revenue and financial policy.

Chief executive Nedine Thatcher Swann said the councillors were being asked to provide guidance on the level of rates increases and borrowings for inclusion in a final draft financial strategy which will then go out for
public consultation.

After listening to a presentation from acting chief financial officer Pauline Foreman, councillors agreed to smooth the draft rates increases — which she had presented as starting at 6.8 percent for 2018/19, 5.7 percent for 2019/20, dropped to about 4 then 3 percent before rising to about 5 percent in years five and six of the plan.

Instead the council accepted a smoothing proposal which would have the rates increases levelled at 5 percent for the next three years.

Ms Foreman said the draft estimates before the council were not set in concrete — there were processes for changes to be made. It was a question of what level of rates and debt the council was comfortable with.

Shannon Dowsing said the council was looking at worst-case scenarios. If there were financial contributions from other sources, the situation would improve.

Eastland Community Trust had a long-term policy of not funding core infrastructure. He found that ironic for a trust that was actually funded by core district infrastructure.

Brian Wilson said it would be a useful exercise to go to funders with information on what the community could afford and what the difference was with other councils that had access to funding.

Supporting success

Amber Dunn said the council was there to support success for the community and make the region shine. She was not sure this draft did that. At the moment an increase of around 5 percent would do that and that would be a nice way to tell the community, rather than just say your rates are going up by 5 percent.

Bill Burdett said ratepayers had affordability problems at 2 percent; at 5 percent that would get bigger.

The council needed to be careful about how it did smoothing, and there was always a risk that debt would get beyond them because of rising interest charges. The council needed to concentrate on its core infrastructure, said Mr Burdett.

Mayor Meng Foon said he would like to see upgrading of the Aerodrome Road area brought forward. At present it was a goat track for big trucks. He was told construction could not start until 2019.

Pat Seymour said a 5 percent increase was too high — and half of that would be spent on roading alone. She did not want debt to go above $80m; debt had a tendency to creep upwards.

Graeme Thomson said the projected draft programme would in effect nearly double rates over the 10 years. A $100m debt level would mean the council was paying the Australian banks it dealt with $6m a year in interest. As an alternative, the council could ask Eastland Community Trust for an interest-free loan, he suggested. That would allow the trust to protect and maintain its capital.

Meredith Akuhata-Brown said the district was facing many challenges. The new government was providing money for infrastructure in the regions, and she asked whether the council should have a cap on how much it asked ECT for.

MAXIMUM rate increases of 5 percent for the first three years of the Long-Term Plan (LTP) and a set limit on debt of $80 million rising to $100m were the guidelines staff gave to councillors yesterday for the council’s 2018-2028 draft financial strategy.

The council wants projected rate increases for the LTP to be smoothed out over the 10-year term of the new plan, and also favours having set debt level limits rather than ones based on a percentage of rates revenue.

Staff have been asked to model the proposed rates and debt levels against the works programme and come back to the Future Tairawhiti committee meeting on January 25 with an updated draft revenue and financial policy.

Chief executive Nedine Thatcher Swann said the councillors were being asked to provide guidance on the level of rates increases and borrowings for inclusion in a final draft financial strategy which will then go out for
public consultation.

After listening to a presentation from acting chief financial officer Pauline Foreman, councillors agreed to smooth the draft rates increases — which she had presented as starting at 6.8 percent for 2018/19, 5.7 percent for 2019/20, dropped to about 4 then 3 percent before rising to about 5 percent in years five and six of the plan.

Instead the council accepted a smoothing proposal which would have the rates increases levelled at 5 percent for the next three years.

Ms Foreman said the draft estimates before the council were not set in concrete — there were processes for changes to be made. It was a question of what level of rates and debt the council was comfortable with.

Shannon Dowsing said the council was looking at worst-case scenarios. If there were financial contributions from other sources, the situation would improve.

Eastland Community Trust had a long-term policy of not funding core infrastructure. He found that ironic for a trust that was actually funded by core district infrastructure.

Brian Wilson said it would be a useful exercise to go to funders with information on what the community could afford and what the difference was with other councils that had access to funding.

Supporting success

Amber Dunn said the council was there to support success for the community and make the region shine. She was not sure this draft did that. At the moment an increase of around 5 percent would do that and that would be a nice way to tell the community, rather than just say your rates are going up by 5 percent.

Bill Burdett said ratepayers had affordability problems at 2 percent; at 5 percent that would get bigger.

The council needed to be careful about how it did smoothing, and there was always a risk that debt would get beyond them because of rising interest charges. The council needed to concentrate on its core infrastructure, said Mr Burdett.

Mayor Meng Foon said he would like to see upgrading of the Aerodrome Road area brought forward. At present it was a goat track for big trucks. He was told construction could not start until 2019.

Pat Seymour said a 5 percent increase was too high — and half of that would be spent on roading alone. She did not want debt to go above $80m; debt had a tendency to creep upwards.

Graeme Thomson said the projected draft programme would in effect nearly double rates over the 10 years. A $100m debt level would mean the council was paying the Australian banks it dealt with $6m a year in interest. As an alternative, the council could ask Eastland Community Trust for an interest-free loan, he suggested. That would allow the trust to protect and maintain its capital.

Meredith Akuhata-Brown said the district was facing many challenges. The new government was providing money for infrastructure in the regions, and she asked whether the council should have a cap on how much it asked ECT for.

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    See also:
    April 21 editorial, The local share of roads spending