Perhaps you’ve managed to avoid miserable economic news over the holidays, choosing to accentuate the positive.

Well, forgive me for being Mr. Gloom & Doom, but 2009 is looking pretty grim for our economy. Over the past few weeks …

  • PM Key announced an employment summit for February, calling 2009 a “particularly challenging year” and facing forecasts that put NZ unemployment at 7-7.5% all the way into 2011.
  • Business confidence sank to levels last seen in NZ in the 70’s, with 77% of firms surveyed by the NZ Institute of Economic Research expecting the business situation to deteriorate in the next six months.
  • If another quarter’s gross domestic product figures actually match this sinking confidence, as expected, NZ will record its fifth consecutive quarterly drop in GDP, a situation unprecedented in NZ.
  • Dun & Bradstreet (and other prognosticators) cite NZ’s high consumer debt, falling house prices, declining exports and falling incoming tourist figures — all of which apply to Hawke’s Bay — as reasons for deepening economic recession in 2009.

But against this backdrop, which obviously suggests local ratepayers will be feeling considerable pain, will our local bodies simply fiddle on?

On Thursday the 29th, the Hastings District Council will be the first local body to meet officially in 2009. At that session and a succession of meetings in early February, the HDC will grapple with its long term plan, with emphasis on budget levels for the next three fiscal years, beginning in July 2009.

It will be interesting to see whether HDC (and Napier and HB Regional Councils, as they follow similar schedules) adapt in any way to the harsh economic conditions ahead. Given falling house/land prices, how conservatively will they project their property value-determined rate base over the next few years? Given stagnant or falling household incomes (to say nothing of outright unemployment), how will they factor in ratepayers’ diminishing capacity to pay increasing rates?

Councillors seem thrilled when they can announce that rates will “only” increase commensurate to inflation … as if that were a stellar performance in fiscal stewardship. But the last time I checked, Councillors didn’t award inflation increases to ratepayers’ salaries, wages or retirement payments.

The times call for more stringent options to be considered, such as:

  1. Making spending reductions in the current fiscal year, which still has five months to run;
  2. Proposing an “austerity option” in the LTCCPs wherein rates do not increase at all over the next three years (certainly the ratepayers have at least the right to consider what that scenario looks like); and,
  3. Freezing the pay levels of Councillors and Council employees for the next fiscal year — yielding as much as $1 million in real dollar savings, and perhaps even greater value in attitude change as employees lose their personal insulation from the recession.

I suspect if Council employees were actually facing up to a pay freeze, they might be inspired to find the alternative spending cuts to avoid such personal calamity! Sound unfair or draconian? How many ratepayer households are assured their income will increase 3-4% over the coming year?

In tough times, ratepayers have every right to expect that their elected Councillors will throw “business as usual” to the wind. In the next few weeks, we should see signs of whether Councillors are living on the same planet as the rest of us.

Tom Belford

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1 Comment

  1. Agree entirely that current financial situation dire for many people and that, yes, rates always increase with little regard to whether people can afford to pay these increases. The 10% penalty added if you pay your rates late is also unfriendly… at least my power supplier refers to a 20% discount if I pay on time.

    Council should tighten their belts and focus on the essentials. I eagerly await, as the Tui Ad says, the news that rates will decrease,

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