What lies ahead for the Christchurch City Council public purse?

Friday, 14 October 2022

A councillor who advises new Christchurch mayor Phil Mauger says “difficult decisions” need to be made this term to tackle significant expected rates rises.

But a rival warns that the mayor’s plans to defer projects could just push increased costs onto future ratepayers.

While Christchurch City Council is in a sound financial position, it is facing ongoing pressure with its budgets, chief financial officer Leah Scales said.

The council’s annual costs to pay for interest have increased this year by nearly $16 million, while inflation has bumped up operating costs by almost $7m.

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In coming years the council is set to get closer to its debt limits, and by 2025 rates are predicted to rise by 8.5%. Of that rise, nearly 2% is due to the $683m central city stadium.

But Mauger has declared: “[The stadium] must not be a burden on ratepayers”.

This term his target is to constrain rates rises in the council’s annual budget to between 3% and 4.5%. He will need support from fellow councillors to achieve it.

He definitely has the backing of councillors James Gough and Sam MacDonald.

In August, when Mauger, Gough and MacDonald met with council boss Dawn Baxendale, they outlined how they wanted to trim spending on council projects by about $100m and extract more income from ratepayer-owned companies.

MacDonald said he wants the council’s general managers to produce a list of operational savings and cuts that would have to happen to hit their rates target.

Stuff asked Mauger for an interview for this story. A council spokeswoman said that on finance, Mauger had suggested that Stuff instead talk to MacDonald.

‘Getting the house back in order’

MacDonald, who was previously deputy chairperson of the council’s finance committee, said the new council faced “difficult decisions”.

“The next three years … need to be about getting the house back in order,” he said.

“I think it’s going to be a pretty hard three years, but if we don’t change it now then the city will regret it for decades.”

The council was facing “a hard market” for delivering lots of projects, MacDonald said.

“We need to, as a council, have the conversation about whether some of the projects are still actually necessary.”

In the last financial year, the council budgeted $488m on capital spending, but only spent $371m.

Money that was not spent included $1.2m on the Lancaster Park War Memorial entrance, $3.2m on wetlands in the southwest, and nearly $1m on a tsunami warning system.

“We’re not being honest with the public, because we’re telling them we’ll do stuff then we don’t,” MacDonald said.

MacDonald, Gough and Mauger want to trim this capital budget down to between $350m and $400m.

The current budget this year is $501m, a figure which does not include the stadium.

Scales said the council needed to manage pressure from inflation, interest rates, labour costs and supply chains “by making decisions on what we deliver, when and how”.

Decisions on priorities would be required, she added.

Councillor Sara Templeton, who is left-leaning and often at odds with Mauger, said long-term investment to repair and renew infrastructure, and also build resilience to climate change, should be a priority.

The council needed to focus on efficient project delivery, she said.

“It’s difficult to comment without concrete proposals, but I know that cutting council services hits the lower income and vulnerable residents the most, so I’d be really wary of that,” she said.

“You don't save money by deferring projects, you simply borrow less now and push increased costs on future councils and ratepayers.”

What about operating costs?

This week, councillor Aaron Keown, another Mauger supporter, said the council was wasting money by giving him an electrical device.

“Here’s an example of why your rates just keep going up,” he said in the now-deleted Facebook post.

On current budgets, the next three rates rises for Christchurch residents are forecast to be 4.96%, 5.84% and 8.48%.

MacDonald, Gough and Mauger have a range of ideas for bringing those down closer to 3%.

They want to “streamline” resource consenting to grow the number of ratepayers and also enter into a “different relationship” with the council’s investment company, Christchurch City Holdings Ltd (CCHL).

On the latter, MacDonald said: “The new board, or however we have that structured, needs to look at how we can make more money.”

MacDonald said both he and Mauger were not interested in cutting community services to achieve low rates rises.

“Things like libraries and pools, all of that stuff is sacrosanct, they’re not going to move,” he said.

In 2021, a proposed $500,000 saving from cutting library hours was deeply unpopular.

People’s Choice councillor Jake McLellan said he was open to genuine savings if they could be found, but described huge cuts as “not actually easy to make”.

“I’m sceptical, but I’m open,” he said.

MacDonald said he also wanted the new council to discuss “making the dollar go further”.

“It’s just about going, ‘Do we need to fully spec stuff when actually we could deliver a lot more for less?’”

Mauger has been a vocal critic of the amount of money spent on cycleways in recent years and has suggested simpler designs to save on costs.

MacDonald wants the new council to challenge whether ideas offer “bang for buck”, and to send them back if not.

“You’ve only got to do that a few times and they will get a real sense of the new council’s appetite for spending or not spending.”

The new council will get an induction briefing on finance, debt and rates later this month.