Rate increases are being flagged across the country as inappropriate at this time. The taxpayer’s Union has called for a rate freeze for all Councils.
Taxpayer Talk: Should local councils freeze rates?
April 01, 2020 Louis Houlbrooke
Despite the national health and financial emergency, most councils are still planning to hike rates – some up to nine or ten percent. Louis interviews Hutt City Councillor Chris Milne & Christchurch City Councillor Sam MacDonald on their response to our campaign calling for a nationwide rates freeze and ways councils can save money.
In the above interview, various options are discussed as to how Councillors and Councils should respond. All good ideas. One of them is about Councillors leading by example and taking a pay cut of say 10%.
Interestingly, a couple of our Councillors pushed to do away with Councillor “free” lunches earlier this year. This would be a saving in the vicinity of $5000 a year and would make for a great headline for the Councillor proposing it. However, it would also mean no more working lunches where staff update us on various issues, and it would mean no more short breaks where grab some food and drink and return to chambers on busy days.
I agree with Sam MacDonald in the above interview that we need to focus on real savings. The same Councillors that proposed the lunch break savings spent well over a million dollars in unbudgeted spend in the last two council meetings alone. If the meeting on the 26th of March 2020 had not been canceled for the lockdown it is likely they would have agreed with the staff reports that would have increased that unbudgeted spend to almost $2million. I haven’t gone back through all the meetings this year to see the total tally of unbudgeted spend for this year, but it is eye-watering. Especially knowing that the Dam has already blown out another $25million with the likelihood of more to come.
I did suggest to the headline grabbing Councillor that if they wanted to really save the ratepayer money they would do away with travel allowance which costs the rate-payer significantly more each month (and like their argument about rate-payers having to make their own lunch, rate-payers also have to cover their own transport costs). I did not get a positive reaction because I am guessing this Councillor is claiming significant amounts and they do not take the most direct route to public meetings in the more remote parts of the ward.
But I digress.
The problem that this Council has is the actions of the previous administration who over-committed this Council well in excess of what would be a “prudent” measure as our council policy stipulates. This is why I would not sign off on Long Term Plans that stated we had a prudent financial policy – it was (in my opinion) a lie.
Back when the previous Mayor was casting voting his way to building a monument that our irrigator partners said was unaffordable for them, I was highlighting that we were overcommitting Council.
Cr Dean McNamara said he did not believe any councillors were against the dam but were against overcommitting the council at this stage of negotiations, with the quote and construction stages still to come.
Once we had made this absurd commitment on behalf of the rate-payer to borrow upto our $200million debt cap, to underwrite irrigator loans, to pre-spend 10 years of commercial revenue, and to take all the overrun expense (except for $1.5 million), I began to question all other non-essential spending. This Council was from that point in a vary precarious position of having no reserves for anything.
Already in May last year we were seeing engineering projects being pushed out because of lack of funds. Previously, these projects would likely have come before Council with a cap-in-hand we need more funds and likely have been approved. Now there was no extra budget to allocate.
It was not long before we were spending money that seemed to materialize from somewhere. Such as with the waste minimization strategy.
While the plan was accepted unanimously by the NCC works and infrastructure committee, it was not approved by everyone around the TDC engineering services committee table where some councillors were concerned about the potential cost of reaching that 10 per cent target. Estimates in a staff report range between $1.5m and $5.6m a year – between $750,000 and $2.8m annually for each council.
Cr Dean McNamara, who was on a joint council working party delegated to review the plan, said he was concerned about the affordability of the reaching the target.
Some Councillors pushed for a 10% reduction in waste being formalized. I had no problem with us working toward waste reduction, but once a number is inserted it then requires us to meet performance targets.
So with no idea of what waste we would reduce or how much it would cost to do it we signed it off. It is possible that 10% will be easy and we could have achieved 20%. It is also possible that we will get near the end date and not have achieved it so will then have to spend copious amounts of rate-payer funds to find ways of meeting our level of service targets.
When I went out to the community for election last year I campaigned with the message:
Local government is becoming a runaway rates locomotive. Before it derails completely we need to learn to do more with less. But this will require working very differently with public services, communities and users to achieve better outcomes.
Unfortunately, the rate-payers elected a more-of-the-same administration. And more of the same is exactly what we got. Despite another $25 million blowout on the dam we have been spending unbudgeted money like it is water in a post dam world.
The overall rates increase across Tasman district is tipped to be 2.97 per cent for 2020-21 – up from a projected hike of 2.46 per cent outlined in the council’s Long Term Plan.
Net debt, too, is expected to be slightly higher than anticipated for 2020-21 at $199.7 million, just shy of the council’s self-imposed cap of $200m. Debt was forecast in the Long Term Plan (LTP) to be $199.6m in 2020-21.
Councillor Kit Maling says the changes made in the proposed Annual Plan are not big.
Then along came COVID-19.
The biggest disadvantage that New Zealand has on a world stage is our isolation.
The biggest advantage that New Zealand has in a COVID-19 world is our isolation.
Observing the spread around the world before the virus officially landed in New Zealand, and knowing our health service is a shambles that would not cope, we should have locked down our boarder sooner. That way we could have at least carried on as normal for most sectors. Our Government did not choose that approach so it was clear that we were heading for chaos.
I began telling Tasman District Councillors weeks ago that not only do we have a dam blow out to fund, we are also heading into an environment where people are going to be struggling financially and as such we needed to curb spending.
Councillor Dean McNamara was also concerned about the cost particularly in light of the coronavirus pandemic.
“Perhaps three to four weeks ago, I might not have been as concerned,” he said. “However, I think we’re living in a different world and I absolutely don’t believe this council has a full grasp on it yet.”
Even if the funding was raised via a targeted rate, “I’m not sure that the Bay would be in a position to pay it … if this virus has the impact that it’s having overseas”.
“So, purley on a financial basis this council isn’t in a position to commit more money,” McNamara said.
Niether Councillors nor staff paid any head. As I say we were on target to spend almost $2million of unbudgeted spend in the last three agendas alone – as per staff recommendations. The Mayor’s response was:
Mayor Tim King said he believed he had a “pretty good grasp of the challenges that we’re confronting as a council and a country” over the spread of virus.
A week later we were in lockdown. I can assure you that our Council did not have a “pretty good grasp of the challenges” that we were about to face.
There were plenty of warning signs along the way that as a Council we have not been preparing in a fiscally prudent manner. Loading Tasman rate-payers up with debt was always going to be a disaster. We are already one of the highest-rated regions in the Country, partly because of our comparatively low population base and large challenging geographic area, and partly because of a previous mayor with no financial wherewithal.
Another factor we should have been considering is the makeup of our rate-payers.
The number of older people (65+) will almost double and will make up more than a third of Tasman’s population
One in five Tasman residents will be 75 years or over
Younger age groups will decline
There will be over twice as many older people as there are children
Tasman will be the second oldest population in the country
This may mean:
Slower population growth
Labour market shortages and more people working past the age of 65 years
A growing consumer group for products and services preferred by older people
Demand for smaller, accessible houses
More residents on limited incomes
More residents with disabilities and health issues
Demand for more accessible footpaths, seating and toilets
An increasing number of volunteers
A need to adapt the way information and services are provided
Is a rate freeze the answer?
Some Councils think so. And I suspect a lot more are about to follow. Tasman will consider the option this week. Which is interesting because staff advice only days ago was that it would not be possible.
While I have been an advocate for reduced and rational spending I will be interested to see how we can “freeze rates” rather than just kick the can down the road with compounding issues in following years. Remember, part of the dam sign off was locking rate-payers into a series of rate increase over coming years to pay for the originally priced dam. Now we have overruns. Once it is complete it will add in the vicinity of $1 million dollars a year, every year, in running costs.
Raising the debt cap is not an option I will be voting for. This Council should have been living within it’s means and there has been no appetite for that to date. Remember we are in this situation because we do not have debt headroom.
It will be interesting to see if my blurb features in the next issue of Newsline, I submitted it weeks ago but it is yet to be published. It is no longer relevant but it highlights the spend warning I have been trying to get across. I hope the rest of Council gets the message as we move beyond the lockdown and back to “business as usual.”