Regional Council needs $10m more

At their Corporate and Strategic Committee meeting next Wednesday, Regional Councillors will be considering the need for a $10 million rates increase in 2024/25.

As explained to me …

“Currently the Council, in FY24/25 is facing an extra $10m of cost that needs to be funded because of inflationary pressure, lower than expected investment income and rates smoothing undertaken in prior years.”

“Rates smoothing” refers to HBRC’s decision in prior years to steady rates in the face of Covid hardship. As the Agenda paper explains, that deferral must now be recouped:

“A large proportion of the rates increase relates to deferred increases from previous years (the Council borrowed funds to smooth the rates increases in the past 4 years particularly to enable a decision to have a zero-rate increase during COVID). In other words, the costs to operate and to deliver our service levels have increased year on year, but the impact of those cost increases were held back.”

HBRC has identified a variety of ‘service levels’ that could be reduced to save money. These would need to be consulted in the LTP (now, Three Year Plan) process still to come. They include:

• Environmental Protection and Enhancement Programme
• Erosion Control Scheme
• HB Tourism
• Sustainable Homes
• Regional Parks (maintenance and new) and cycleways (new)
• Te Mata Park, and
• MyWay.

Reductions in corporate overhead and from holding staff vacancies open have also been identified.

Given that HBRC’s current annual rates income is about $40 million, funding the $10 million through rates would equate to a 25% increase, if no other savings were made.

Although everyone gets fixated on percentages (I’m wagering each council will be in the 20% range in their coming plans), in HBRC’s case $10 million is a rather modest amount by comparison to the amounts our territorial authorities will be seeking to raise.

Unlike fellow HB councils, HBRC does hold (directly and through its HB Regional Investment Company, HBRIC) significant investments that arguably could be ‘cashed’ to finance the extraordinary spending required in response to Cyclone Gabrielle. For example, ‘managed funds’ valued around $110 million plus property in Wellington.

Orchardist John Bostock threw a gauntlet at HBRC in a recent submission, arguing the Council should do exactly that – to fund one strategically overriding need, fully adequate flood protection in the face of future extreme weather events that are certain to come. He argues that nothing HBRC does remotely competes with that imperative.

As he put it in an email to BayBuzz: “HBRC urgently needs an overall comprehensive flood alleviation plan identifying for immediate action highest risks and solutions such as strengthening the critical sections of the poorly designed levees above Roy’s hill and elsewhere. However, predictably I disagree with raising rates as the funding solution. The growing community and much of the wider community is in recovery mode and simply not able to afford increases.

“In terms of funding there is a stark choice between holding onto low performing investments or risk the lives, businesses, and way of life of large sections of the community.” 

Other would note that, at present, these investments (including 55% of Napier Port) generate about $12 million in HBRC revenue per year. Without those returns, HBRC rates would need to rise another 30%.

So, in the weeks ahead, Regional Councillors will be juggling inter-generational investments against urgent near-term cash requirements, with ratepayers in the middle. The Corporate & Strategic Committee meeting on Wednesday should be interesting!

I interviewed HBRC Chair Hinewai Ormsby at length recently looking at the year ahead, including the issues discussed above, and will report on that next week. Exciting, demanding times for the HB Regional Council.