The briefing is part of the 2020/2021 draft Annual Plan process and gives councillors an early indication on what is being proposed for community consultation, ahead of the Annual Plan being finalised in June. Council will confirm options to be consulted on at its meeting on Tuesday 11 February.
At the briefing staff provided an overview of the state of council’s finances – outlining growth pressures, an historic deficit position, and the need to take into account sizeable unbudgeted expenses.
Lower Hutt Mayor Campbell Barry says the information followed his request for an honest and thorough assessment of Council’s financial position, ahead of councillors being asked to make decisions as part of the Annual Plan process.
“When I was elected Mayor I knew there were significant challenges facing our city – be it in transport, housing or our city’s infrastructure. Since the election the scale of those challenges has become more clear, and it’s long past time we face up to these and have an honest conversation with our community,” Campbell Barry said.
“While rates have been kept low over the past decade, this has come at the expense of essential services and investment in our infrastructure. The cost of new facilities, as well as unbudgeted policies like development waivers, has also put significant strain on Council’s bottom line. Overall these decisions have left our city, and the current Council with a significant bill to pay. We now need to have a conversation about how we pay it.”
“As Mayor, my priority is for our Council to get back to basics and invest in the services and infrastructure that support all of our people to thrive. For us to do this, we are going to have to make some tough choices, particularly about rates. I’m not prepared to put off these decisions – we need to urgently address our Council’s financial sustainability.”
Hutt City Council Chief Executive Jo Miller says that Councillors were briefed on what will be required to achieve its priorities.
“Our city is growing and as more people choose to live here, we need to put money aside to pay for the key things that help our city function properly,” Jo Miller said.
“In order to invest in key services and infrastructure, we have briefed Councillors on the need to change Council’s financial strategy. That’s why we’ve outlined options to increase borrowings up to a peak of $350M over the next ten years as well as a rates rise in 2020/21 of 7.9% for residential ratepayers to do the basics well.”
“While these figures factor in what’s needed to build a new pool in Naenae, the increases mainly address existing and unbudgeted expenses, as well as the legislative requirement for Council to deliver a balanced budget. Even with a rates rise and increased borrowing we’re still looking at a net operating deficit of $13.5M. The deficit situation will need to be eliminated over time. There has to be a better match between the scale of ambition and priority and the resources we have available to deliver them.”
“These are not easy decisions to make and I encourage everyone across our community to have their say during the draft Annual Plan consultation in April.”
“As the Chief Executive, I’ve also committed to making operational savings – of at least $1 million in the current financial year. This will be followed by a line by line review of Council’s budget for the Long Term Plan process next year. If we are to ask our residents to pay more through their rates, we need to be able to demonstrate we can squeeze the most out of every dollar we collect.”
“I have managed a major organisation through a very challenging financial situation. I’m confident that Hutt City Council can get to a place where we have enough funds to have our city running well and to be able to meet community aspirations,” says Jo Miller.
The other major change to the city’s rubbish and recycling to be paid for through an increase in a targeted rate has an indicative start date of 1 July 2021 and would be consulted on through the Annual Plan process which starts in April.
In the past twenty years Hutt City Council has had the second lowest rates rises in the country and very low borrowing levels compared to other councils.
Frequently asked questions:
How much is this going to cost me?*
How much your rates will increase depends on two factors – the revaluation of your home and the rates increase for this years’ annual plan.
We can’t tell you exactly how much you will be paying as it is important for you to have your say on what we’re proposing first.
But we do have some modelling, based off of the proposed increase and the revaluations, available here:
What’s a revaluation and why does it affect my rates?
Each year, in our annual and long term plans, we set the rates we need to collect to invest in our city and facilities. The amount you pay towards this amount is partly based on the capital value of your home (the building and the land).
Every three years ‘Quotable Value (QV)’ gives us a new valuation for all properties in Lower Hutt, including businesses. And in some cases this means that your home is worth more; however, it also means that you could be paying more rates.
Why are you increasing rates?
Over the past decade there have been relatively small increases in rates charges with Hutt City Council approving rates revenue increases ranging between 1.7% to 3.7%.
Since 2018 things have changed. We’ve identified multiple areas of increased cost like our water infrastructure, the seismic strengthening of our facilities and the development of Naenae Pool.
Basically, the costs of providing basic services have kept increasing and rates, user fees and other revenue streams have not.
Our current level of income is not enough to cover the basics, for us to continue to provide the best core services, we need to change how much we ask for in rates.
How much is Council proposing to put our rates up?
Council is proposing an overall rates revenue increase for 2020/21 of 7.9% together with an extra 1% of rates funded growth in rating base.
This means an indicative average increase for residential properties of $207 per year or $3.98 per week. This includes $71 for water and $25 for Naenae Pool and Fitness centre.*
What can I do if I can’t afford to pay my rates?
If you’re facing financial hardship and are have difficulty paying your rates, or you are 65 years and older and would like to postpone your rates, we may be able to help out with one of our rates policies.
Have a look at huttcity.govt.nz/rates or give us a call to discuss.
What does council spend my rates on?
We have done the following calculation. It’s based on every $100 of rates you pay. The proportions will change over time as we prioritise but this is how it looks currently.
Why hasn’t Council increased fees and charges to cover the additional cost of services?
While Council is looking across the business to see where efficiencies can be made, it is true to say that income from fees and charges have not kept pace with rising costs and outgoings.
There have been increases in fees and charges generally to reflect the rise of delivering services. However in some situations charges have fallen, e.g. at community libraries internet access charges have been reduced from $1 per half-hour to the first two hours free with a library card each day, then $1 per half-hour after that.
Why is Council asking for feedback on rates?
How rates are spread between different property categories and rate payers needs to be equitable. The message is good financial management and long term sustainability must underpin everything we do as a city.
Council must produce a balanced budget and keep in mind both the costs and benefits for all rate payers.
What is a balanced budget and why does council need one?
A balanced budget is a situation in financial planning or the budgeting process where total revenue is equal to or greater than total expenses.
By law Hutt City Council must produce a balanced budget and make sure we are managing our finances in a prudent manner so that we can continue to provide core infrastructure and services, for our growing city, well.
Has Council considered other options other than rates increases?
Yes, we are committed to financial sustainability and are looking closely at our spending and income sources. We are renewing our financial strategy and looking to increase borrowing and focusing on delivering our services in the most efficient manner, to ensure we get the best value from every dollar we collect.
However, these initiatives alone will not cover the deficit or balance our budget.
Information on the draft Annual Plan 2020/2021 and Long Term Plan Amendments – Financial Impacts.
View the presentation from today’s briefing (1.21mb).
*Figures correct at time of publishing - 05/02/2020.