Wednesday 4 October 2017
Hamilton City Council has been borrowing to fund a multi-million dollar annual shortfall in operating revenue, effectively subsidising rates for the city’s residential ratepayers.
Compared to other growth councils and neighbouring regions, Hamilton rates are substantially lower on average, ranging from around $400 to $950 less each year.
Those were the clear messages to city councillors at a detailed rates briefing session in the lead up to the 2018-28 10-Year Plan.
Hamilton’s average residential rate is around $2200, almost $450 less than Tauranga, $600 less than Cambridge and more than $900 cheaper than Raglan.
Mayor Andrew King says there is no doubt the funding shortfall must be addressed through the 10-Year Plan process.
“Information presented by Pricewaterhouse Coopers (PwC) based on the 2015-2025 10-Year Plan shows from 2012 to 2016 the Council used $48 million of debt capacity to meet the everyday running costs of the city. If this doesn’t change, that figure will be $68 million by 2025.
“That’s $68 million that won’t be available for new infrastructure, managing growth or other things our community want and need. Our base operating costs are underfunded by millions of dollars every year. We have to address this,” Mayor King says.
Mayor King says the PwC report earlier in the year confirmed advice from staff that Hamilton’s growth, and associated revenue, had masked the fact the city’s everyday costs were not being met from regular revenue.
“The recommended financial measure by PwC, now approved by Council, hasn’t created the shortfall – it let’s us see it clearly for the first time,” Mayor King says. The PwC measure effectively removes development contributions (growth-related payments by developers towards infrastructure costs) from the city’s income.
These contributions are specifically for infrastructure and shouldn’t be used to fund debt for other things.
“If we want a financial strategy which says everyday costs are met by regular revenue such as rates and charges, we need to look closely at our rating structures and levels. This briefing outlined options including localised targeted rates for specific projects, city-wide targeted rates specifically for transport and community facilities and whether we move to a full capital value rating system immediately.”
The briefing also considered the benefits of a ‘flat fee’ for base costs (for things like water, roads and rubbish collection) for all ratepayers to smooth rate fluctuations between properties of differing values.
Mayor King says the briefing provided vital information as the draft budget is prepared.
“We need to look at every option to make the right choices for our city. At this point, nothing is off the table, including reducing levels of service and associated cost. The Council and our community have some big decisions to make in the next few months.”
The draft budget will be considered by the Council on 19 October. Further Council budget meetings, community consultation and hearings will be held before the 10-Year Plan is finalised next year.