Live now — pay later

LETTER

It is becoming increasingly obvious that Gisborne District Council is spending more than is available from local rates and other sources of income. Budgets are being busted and we now hear that “Peter is being robbed to pay Paul”, to the tune of around $30 million in internal loans. This is on top of the $40m of existing external borrowing. Presumably allowance has already been made in the budgets for servicing the external loans but I very much doubt whether any allowance has been made for either servicing or repaying the internal borrowings.

When money is “borrowed” from “Dept A” by “Dept B”, and spent, then Dept A either has to do without (as the money can only be spent once) or the money has to be found elsewhere, by further external borrowing or by ratepayer funding. The ratepayer will cop the bill one way or another.

As we have heard from our CEO, the cost of borrowing and repaying $1m is $84,000 a year (for 20 years). The cost of borrowing and repaying $30m is therefore about $2.5m a year for 20 years. By her own figures — a 1 percent increase in rates raises $550,000 per year — this would correspond to a 4.5 percent increase in rates. The cost of paying off $70m of borrowings is equivalent to a rate rise of 10.7 percent.

As many Gisborne residents already struggle to pay their rates, I am certainly not advocating such rate rises to enable us to pay our way — but I am suggesting that vote-winning promises of no more than 2 percent rate rises is simply storing up costs for the future; maybe the future is now! The chairman of the finance and audit committee has his work cut out in sorting this can of worms.

Peter Wooding

It is becoming increasingly obvious that Gisborne District Council is spending more than is available from local rates and other sources of income. Budgets are being busted and we now hear that “Peter is being robbed to pay Paul”, to the tune of around $30 million in internal loans. This is on top of the $40m of existing external borrowing. Presumably allowance has already been made in the budgets for servicing the external loans but I very much doubt whether any allowance has been made for either servicing or repaying the internal borrowings.

When money is “borrowed” from “Dept A” by “Dept B”, and spent, then Dept A either has to do without (as the money can only be spent once) or the money has to be found elsewhere, by further external borrowing or by ratepayer funding. The ratepayer will cop the bill one way or another.

As we have heard from our CEO, the cost of borrowing and repaying $1m is $84,000 a year (for 20 years). The cost of borrowing and repaying $30m is therefore about $2.5m a year for 20 years. By her own figures — a 1 percent increase in rates raises $550,000 per year — this would correspond to a 4.5 percent increase in rates. The cost of paying off $70m of borrowings is equivalent to a rate rise of 10.7 percent.

As many Gisborne residents already struggle to pay their rates, I am certainly not advocating such rate rises to enable us to pay our way — but I am suggesting that vote-winning promises of no more than 2 percent rate rises is simply storing up costs for the future; maybe the future is now! The chairman of the finance and audit committee has his work cut out in sorting this can of worms.

Peter Wooding

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winston moreton - 1 month ago
Top insight and analysis Mr Wooding. Amazing that the chair of the finance committee is not sure (calling for a report) where $30m of ratepayers funds have gone . . . More worrying is the committee chair who is floating the idea of water meters to bolster council income.

Peter Jones - 1 month ago
The GDC's debt pattern is consistent with UN agenda 2030 which seeks to end private property ownership and destroy capitalism. Unrepayable debt clocked up on non-productive capital spending is the method. I have sounded the alarm on water metering to deaf ears many times before.

Mary-Ann de Kort - 1 month ago
Thank you Mr Wooding and Winston Moreton. It appears as though there should be a comprehensive audit of internal council lending and an account of essential spending. Luxury and non-essential spending should be put on a backburner until such time as the actual financial status is clarified.

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