Hastings District Council has adopted their proposed 2009/19 Long Term Council Community  Plan ( LTCCP ), with what could possibly be one of the lowest rate increase in New Zealand for the coming 2009/10 year.

The rate increase of 1.68% is an improvement over the past average years of 3-4%.

What were some of the issues that needed to be addressed in the ten-year plan? To my mind, the key issues relate to maintaining well our physical assets (from footpaths to playgrounds) and constraining the District’s escalating debt.

Asset management

We have many areas where it appears required maintenance of Council’s physical assets has not occurred on the needed basis. Areas that stand out for me are (in part):

Footpaths

Hastings District has about 420 kilometres of footpaths. These should be maintained and  renewed out of the annual rates collected, and rightly so. However, in 2007 the Council undertook a survey on the condition of the footpaths. The results showed that 36% (or 150km) rated “poor” or worse (4% required major rehabilitation, 6% rated very poor, 26% rated poor). To bring these footpaths to a good condition (the same grade as the remaining footpaths) would cost some $11 million.

This situation appears to have arisen from past Councils’ desire to either save money or spend the funds on other projects they deemed more desirable or appropriate. This is  illustrated in comments by Ray McIndoe, General Manager, City Enterprises, Palmerston North City  Council (reported in the Local Government Engineering  NZ Newsletter, March/April 2009):

“It can not longer be acceptable that renewal or maintenance programmes are stopped or delayed to save money (eg. footpath  renewals ) without explicit implications being presented to the decision makers. Too often in the past Councils have simply stopped or delayed work without fully understanding the full consequences to the service potential of the assets.”

Unfortunately, no matter where the Hastings money was spent, the footpaths still need  fixing and renewing. The solution in the LTCCP is to fix the worst 40kms over the next three years at a cost of $ 1.0 million per year. These funds are to be borrowed. The impact of borrowing rather than rate funding is that only the interest cost ($70,000) is shown in the rate increase. However, the loan needs to be repaid over, say fifteen years with the associated cost of interest over that time.

Thus, borrowing the funds results in a Year One rate increase 0.14% (plus 0.21% each year for the repayment period), whereas if rate funded, which would be more appropriate for maintenance expenditures, the rate impact in Year One would be 2%.

Parks

During the LTCCP process, the Council was presented with a request from the Parks Division for an additional $300,000 per year, to be funded from rates, every year, to catch up on the deferred maintenance and renewals in the District’s parks. These funds are not included in the LTCCP on management’s recommendation. This deferred maintenance backlog appears to have arisen in a similar manner to the footpaths.

Community Halls

In the Hastings District, there are in excess of fifty buildings used by Local Community Groups, but that are owned by the Council. These  include Keirunga  Arts and Crafts, Guthrie Park Soccer Club, Guthrie Park Bridge Clubrooms, Girl Guide/Scout Rooms, plus many more.

As it stands, no provision for the maintenance of these premises has ever been allowed for in the Council’s budgets or plans. The reason given for this is that the organizations using the Halls are responsible for all the maintenance of the properties. Whilst this may be the case or not ( e.g., Keirunga Arts & Crafts’ lease clearly says that Council is responsible for all exterior maintenance work), it is very important that there is regular reporting and monitoring by the Council on the condition of these buildings and their maintenance. If this is not done, the deferred maintenance may well get so high that the value in the properties is affected and the impact on the community group using the Hall could become severe.

Toilets & Playgrounds

It is important to note that in surveys completed in 2007, Hastings District was ranked 27th of 29 Councils for public toilets, and 32nd of 35 Councils for playgrounds  (not sports grounds).

You would have thought that a lot of this type of expenditure would have been included in the rates charged and collected every year, and that the necessary upgrading and maintenance would regularly have been completed.

It would appear not.

Debt levels

 

2009/10

2010/11

2011/12

2012/13

Rate Increases

1.68%

2.05%

3.57%

4.0%

Debt @ 30/6/09 = $88.91 million

 

 

 

 

Net new borrowing each year (millions)

$6.36

$14.04

$11.75

$13.41

Gross debt @ year end (millions)

$95.27

$109.31

$121.07

$134.48

In the LTCCP to be presented to the ratepayers for their consideration, discussion, and hopefully submissions, rate increases and borrowings (debt) are projected as indicated in the accompanying table.

Some of the key points that I believe should be understood fully are:

  • What activities should be funded by rates?

  • What activities should be funded by loans?

  • What are the Council’s core activities and responsibilities?
  • Should Councils be involved in commercial activities?
  • What expenitures have been deferred or amended in this ten-year plan and what impact will this have?

Surely it would be nice to have such small rate increases for the next two years. However, if we are only gaining these by again deferring the true cost – and ultimately who pays – then there must be a better way.

The question may well be: What is the cost of operating the Council? And can this be improved? As with all households and businesses, Councils must operate as efficiently and effectively as possible, given the circumstances. This is what the public should expect from our Council and any other Central or local government agency.

If this is done, then low rate increases should be achieved consistently through efficiencies alone.

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