City signals 10%-plus rates rises for at least next three years

Tuesday, 17 October 2023

Hamilton is under tight financial pressure and city leaders are warning of annual double digit rates rises.

Hamiltonians face 10%-plus city rates rises for at least the next three years due to big cost increases, council leaders warn.

It comes as the mayor and councillors start grappling with budgets for the 2024-34 long term plan (LTP), acutely aware that big rises will likely rile residents.

Mayor Paula Southgate said she was “super gutted” to put this to residents but the council had no choice.

Previously, the council had forecast 4.9% rate rises for the coming three years in its current LTP.

A 10% rise would add $283 to Hamilton’s current median annual residential rates bill for a property with a capital value of $830,000. The top rated residential property would pay another $2933 and the lowest rated $131, all at a time when the community has been facing a cost of living crisis.

Mayor Paula Southgate spoke of a short-term funding “crisis” and says “the rates increases will be significant”.

At a briefing on Monday, mayor Paula Southgate said: “Rates will rise and the rates increases will be significant.” She described Hamilton’s situation as a short-term funding “crisis”.

Exactly how much rates should rise was still to be determined, she said, but “I think the council understands double digits are in order”, and this was likely for at least the next three years.

The rates warning comes with a forecast that the current $17 million annual operating deficit will balloon to $78 million in 2024-25, a deficit that would need to be funded by even more debt.

That is contrary to the council’s aim of revenue covering operating costs.

Council chief executive Lance Vervoort says hundreds of millions of dollars in government help will be sought for the city.

“We’ve got a revenue issue,” said chief executive Lance Vervoort.

Southgate said the new government would be approached soon to contribute more to Hamilton, with Vervoort confirming hundreds of millions in extra state funding arrangements would be sought for various costs over the life of the new LTP.

Councillors have started work on that LTP and are due to have a draft approved by the end of the year, followed by public consultation.

Costs had risen significantly for the likes of electricity, insurance, the price of raw materials and interest rates, Southgate said.

“We have to pay what we’ve always done and we’re going to have to pay so much more because of inflation, because of depreciation, because of interest rates.”

The only other choice is cutting services, says deputy mayor Anglea O’Leary.

Interest and depreciation, for example, were expected to be an extra $19 million and $17 million a year respectively.

Of having to warn of big projected rate rises, Southgate said: “To be honest I’m super gutted to have to present this news to the public because I understand the cost of living crisis, I do. I feel for the families and [householders] who’re going to pay this”.

She said she was aware there could be a public backlash to proposed big rises, adding: “We don’t want to do this. We have no choice”.

Deputy mayor Angela O’Leary chipped in: “The only choice is cutting services”.

Such cuts had been made in 2012 and this had made the community unhappy, she said.

Vervoort added: “We cut [the likes of] tree maintenance, lawn mowing… and the whole place was going backwards basically”.

Southgate said it was important to fund depreciation so assets were properly maintained. “We don’t want us to go backwards and get shabby, or close facilities.”

If rates increases were held too low “we’ll be able to do very little other than just sort of keep the lights on in the city”.

O’Leary said tight financial circumstances meant no “pet projects” going forward, while finance director Tracey Musty said: “It’s literally just doing what we’re doing, nothing extra, nothing more”.

New Hamilton East MP Ryan Hamilton - a former city councillor - is expected to be a useful voice for the city at Parliament given his local knowledge.

On her suggestion that finances were in “short-term crisis” Southgate said: “It depends how we tackle it as to whether it remains an ongoing crisis”.

Vervoort said councils all around the country were facing similar financial pressures.

Southgate intended to go to Wellington soon with the mayors of Waikato and Waipā districts to speak to the new government about more support, and would also work with the city’s National MPs.

“I feel very optimistic that working with this Government we’ll get some positive outcomes.”

On how receptive National and ACT would be to requests for more cash, Southgate believed they understood the “value we can add as Hamilton to New Zealand if we’re allowed to grow the way we should be growing”.

She expected any legislative changes for three waters and housing intensification rules under a National-led administration - and their timing - could make the job of developing the next LTP more complicated.

Meanwhile, the council is looking to hold an East Ward by-election as soon as possible following the resignation of councillor Ryan Hamilton after he won the Hamilton East seat in the general election. Hamilton knew the council’s situation “intimately”, making him a useful voice in Wellington, Vervoort said.