Wellington rates may rise by 17 per cent as infrastructure costs mount
Thursday, 11 February 2021
Wellington rates could rise by as much as 17 per cent from July, the biggest annual increase in a quarter of a century, as the City Council grapples with decades of under-investment in the capital’s infrastructure.
A double-digit increase would likely cause sticker-shock among ratepayers, but comes amid increasing calls for the council to properly tackle some of the problems that are now surfacing in the city – literally in the case of the sewage pipes.
“There are a lot of challenges that we are facing in a lot of areas, and we have to invest in and fix them all now,” Mayor Andy Foster said on Thursday, after presenting his proposed 10-year plan for the city to the council.
Notably for a council that has had its fair share of disagreements, there was general consensus around the table that rates needed to rise to generate the kind of money needed for this investment.
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“The investment in water infrastructure is necessary and urgent,” said Fleur Fitzsimons, a Labour-endorsed councillor often on the opposite side of an issue from Foster. She agreed a rates increase was required but said the council needed to ensure residents who could not afford to pay were provided with fair rates deferral options.
Rates are calculated every three years based on capital value – land value plus improvement value. The next valuation is due in September this year.
The median residential rate for 2020/21 is $3487, and a 17 per cent rate rise would increase this by $593.
However, Foster said even with a proposed 14 per cent rates increase, the council would still be about $600 million short if it wanted to fund everything on its 'wish-list'.
Full details of Foster's proposal will not be released until Friday, but city councillor Diane Calvert said details provided to councillors on Wednesday outlined where the shortfalls were.
There were gaps of $150m for sludge treatment, which could be paid for through other funding tools; $180m for the central library earthquake-strengthening project, which could be funded through divesting other council assets; and $267m for social housing upgrades, which could require central government investment.
Wellington faces rapidly mounting bills for infrastructure work, including earthquake strengthening in landmark buildings such as the central library, and transportation upgrades.
But the biggest and most pressing work is under the streets. Wellington’s wastewater network has been falling apart over the past 12 months, with Wellington Water recording more than 2000 pipe bursts – or more than 40 a week – in its latest annual report. Foster and Wellington Water recently announced a $40m plan to provide two back-up pipes.
To begin to meet these costs, Foster suggested a rates increase of 14 per cent to fund Wellington’s “biggest ever” long-term infrastructure investment. His draft 2021-31 long-term plan included $2.7 billion for upgrading the city’s water infrastructure.
Another $220m is for the council’s share of the $6.4b Let’s Get Wellington Moving transport programme. The council needs to pay $1.3b towards the programme over the next 20 years, so that figure would likely increase over time, he said.
“Capital investment in my 2021 LTP [long-term plan] is the largest we have ever made, by a significant margin,” Foster said.
Rates could go up by 17 per cent under a scenario in which the council quickly paid off debt incurred because of the coronavirus pandemic, which amounted to about $54m. It included things like the loss of its Wellington Airport dividend, deferred rates payments, and the loss of user charges because of closed council facilities.
If approved, that rates increase would be the biggest in 25 years, topping the 16 per cent increase imposed in 1995-96. But Foster expected rates increases to level off over the next few financial years.
Foster also proposed to increase the council’s borrowing cap through the Local Government Funding Agency, from 175 per cent of revenue to 225 per cent of revenue.
He said this year’s plan had been “by far the most challenging budget that I’ve seen”.
“We’re walking the tightrope between the community’s ability to afford rates, but also the need to invest in critical infrastructure that the community has been calling very, very loudly for.”
Calvert, who holds the council’s economic development portfolio, applauded the mayor’s proposals.
“It’s better for us to be transparent with reality than try and fudge it or push things down the track,” she said. “It’s now time for us to step up and deal with what we’ve got.”
Wellington’s big bills
Upgrading water pipes – $2.7b
Social housing upgrades – $400m
Let’s Get Wellington Moving – $220m
Central library earthquake-strengthening – $180m
Convention Centre – $179m
Demolition of Michael Fowler car park, Civic Administration Building, and Municipal Office Building – $15m