Interest debt puts pressure on Upper Hutt rates
Friday, 9 February 2024
Upper Hutt ratepayers look to be in for a hefty rates rise, with chief executive Geoff Swainson acknowledging the council is facing significant financial challenges.
An early draft of its long term plan had rates rising as much as 35%. Councillors had since held a series of workshops to look for savings and find a more acceptable figure, he said.
Earlier this week, he announced the council would be reviewing all aspects of its operation to find savings and produce a balanced budget.
“We will be reviewing our structure, systems, and processes to ensure they are fit for purpose and that we are as efficient and effective as we can be to deliver on the council’s priorities.”
Speaking to The Post, Swainson said Upper Hutt was in a similar position to many other councils and rates affordability was an issue that the new government needed to address.
High inflation and higher than expected interest on the money it had borrowed, was putting the council under pressure.
In 2020/21 it had been advised that interest rates would be around 2.4% for the next decade. “We had a lot of advice from economists, who all told us it was a good time to borrow.”
It is now paying three times that figure and, with high inflation, he could not see the situation improving for some time.
“An increasing proportion of our rates take is just going on servicing debt.”
The council is also coming uncomfortably close to its debt ceiling of $230m.
Earlier decisions to commit to a number of major projects, including the Maidstone Sports hub and upgrading its swimming pool also contributed to the financial pressure.
Other factors influencing his decision to hold a review included the rising cost of insurance and construction. The cost of repairing roads had risen by as much as 25% over a short period of time, he said.
The council had previously dipped into cash reserves and borrowed to keep rates low, and he said that option was no longer available.
He predicted a likely rate increase “in the high teens” but said that would be up to councillors to decide.
Although Upper Hutt had been in the spotlight for its response to Minister of Local Government Simeon Brown over Three Waters, Swainson said Three Waters was not a major contributor to the tough financial situation.
One factor that would increase rates was a central government mandate for councils to standardise kerbside recycling.
All councils must provide the service by 2027 and Swainson said that would result in a 2% increase in 2027.
Council staff had already suggested ways to save $1m and while that showed savings were possible, he noted that $1m would have little impact.
Although other councils in the region had largely discussed their long term plans in public meetings, Swainson said Upper Hutt councillors had used workshops to discuss the issues facing council.
“We got some pretty frank views on what is politically acceptable.”
Swainson said Upper Hutt’s situation was not unique and in the long term it could only be resolved by a greater contribution from central government. The government needed to share its tax take, as rates affordability was a major issue across the country.
The review will look at all areas of the council, including reducing service levels.
Its long term plan consultation would provide the community with the opportunity to comment about what service level reductions were acceptable, he said.
“We are navigating a complex financial landscape, and the input of our community to the upcoming long term plan consultation is crucial as we make decisions that impact us all.”
Swainson said that when he was appointed in November he was not expecting to have to undertake an organisational review.
As the chief executive, he had no option other than to look for ways of saving costs and producing a balanced budget.