Councils’ budget season is upon us, and the Hastings, Napier and Regional Councils — with the predictability of the tides — are each proposing to increase your rates. Unlike households and businesses, Councils have no difficulty increasing their expenditures when times are tough.

The latest Government figures show an annual inflation rate of 4.5% in the year through March, expected to reach 5.5% in the year through June, at which point new Council budgets will be taking effect. About half of that inflation is attributed to the GST hike, much of the rest is driven by price increases for food and fuel … expenses most of us cannot readily avoid or easily reduce.

But that doesn’t bother Councils. They simply increase rates … apparently oblivious to the inability of many heavily stressed ratepayers — individuals and businesses alike — to absorb the increase. In the Council budget deliberations I witness, Councillors dramatically voice expressions of deep concern about the depressed economy and the hardships faced by ratepayers, but their statements are mere lip service, unmatched by actual budget cutting.

Do Councillors really feel the pain of today’s ratepayers … either figuratively or actually (at least some of them pay rates themselves)? What’s the evidence of that?

Here’s an overview of the budget proposals.

Hastings

  • Rates increase — 2.92% (Rating Area 1 – 3.1%; Rating Area 2 – 2.0%
  • Total expenditure — $118.0 million (inc. $25.1 depreciation)
  • Total debt — $119.3 million (inc. $81.2 million ‘external’ and $38.1 million ‘internal’)

Napier

  • Rates increase — 1.97%
  • Total expenditure –$120.7 million (inc. $22.1 million depreciation)
  • Total debt — $52.0 million (inc. $4.0 million ‘external’ and $48.0 million ‘internal’)

HB Regional Council

  • Rates increase — 2.45%
  • Total expenditure — $47.9 million (inc. $1.98 million depreciation)
  • Total debt — $15.1 million

In comparing the above, note that, unlike Hastings, the Napier and Regional Councils own significant assets (such as property/leaseholds, and for HBRC, the Port) that generate income to significantly offset ratings requirements. As a result, whereas Hastings Council must meet 51% of its proposed 2011/12 funding requirement from rates (general and targeted), Napier proposes to fund only 37% of its budget through rates, and the Regional Council a mere 29%. This fiscal reality might have something to do with Mayor Yule’s affection for amalgamation!

One might hope that, consequently, spending at Hastings would be put under a stronger microscope than spending at either Napier or HBRC, because more of it is directly financed by ratepayers. But only the persistent HDC Councillor Bradshaw seems to operate that way … and for his trouble, he was ousted as Finance Chair. Meantime, HBRC Councillors Kirton and Gilbertson have argued that their Council isn’t nearly tough enough on spending, because ratepayers bear relatively little of the cost and scream less.

It’s interesting to note that despite its ‘big spender’ image, Hastings actually trails Napier in terms of operating budget … the day-to-day job of providing local services. Napier’s proposed operating expenditure for 2011/12 is $79 million; Hastings’ is $67 million. I guess it takes a lot of money to polish the Napier gem!

Note further that to actually freeze rates (i.e., no rates increase over 2010/11), Councils would need to cut spending, not simply hold it steady. The funding requirements proposed by Hastings, Napier and HBRC for next year don’t involve much, if any, expenditure increase over 2010/11 — Hastings is up $797,000 (less than 1%), Napier down $247,000, and HBRC up $31,000. one might ask then, what necessitates the rates increases? That’s where the money-shuffling amongst Councils’ various honey pots (including loans and reserves) gets confusing!

For some ratepayers, the key financial issues are overall spending and debt levels, and associated rates. For others, the issue is one of spending priorities … how to divide the pie.

Whatever your perspective, if you would like to comment officially on Councils’ budgets, here are the submission deadlines:

  • Hastings — May 10, with consideration of submissions beginning June 2
  • Napier — May 16, with consideration of submissions on June 2
  • Regional Council — May 10, with consideration of submissions beginning June 8

Remember, it’s your money, not theirs … have your say!

Tom Belford

P.S. Speaking of having your say, have you taken the BayBuzz Fluoride Survey yet? Just go here.

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1 Comment

  1. Periods of economic growth are always followed by a consolidation phase. Really hot periods of growth often by a bust, or a protracted consolidation phase – like a decade or more. That is the lesson of economic history. None of the major problems that caused the 2008 financial crisis have been dealt with. The gross indebtedness is still there, and one day this will be joined by inflation – a consequence of the incessant money printing that governments have entered into. More trouble is coming and a business as usual approach to local government simply won't work. But as is always the case, politicians are only ever compelled to action once the situation is absolutely desperate. And they hope that won't be in their current term.

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