Times are tough, Hamilton, and hard choices are coming - mayor

Saturday, 18 November 2023

Costs are increasing for the city council and the numbers in earlier budgets no longer add up, writes Mayor Paula Southgate.

Paula Southgate is the mayor of Hamilton City Council.

OPINION: In 2020 Hamiltonians were clear about their aspirations for our city. Based on this, the council created a shared vision with five priorities: - a city that’s easy to live in; - a city where our people thrive; - a central city where people love to be; - a fun city with lots to do; and - a green city. I loved this vision and I still do.

The 2021 - 2031 Long-Term Plan (LTP) was designed to bring this vision to life. We’re now in year three of that plan and we’re reviewing where we’re at. We’ve achieved a lot. The bridge to Peacocke - unlocking land for up to 20,000 future residents; community facilities and play spaces including Te Kete Aronui Rototuna Library; an upgrade to Hamilton Zoo and Waiwhakareke Natural Heritage Park; and being awarded $150 million from central Government’s Infrastructure Acceleration Fund (IAF) to help deliver infrastructure that unlocks housing in the central city.

“We cannot sugarcoat it; times are tough,” writes Hamilton Mayor Paula Southgate.

However, over that same period, the economic environment has changed significantly. Costs have increased on all fronts. The numbers no longer add up. If we retained the 4.9% rates increase forecast at the last LTP, we would be using debt rather than income to fund the everyday running of the city, not “balancing our books”.

This is the impact of higher interest rates, inflation and depreciation. For example interest rates cost the council an additional $19 million per year; inflation (including increased costs of concrete, steel, power, insurance, labour and more) cost the council an additional $18 million per year; depreciation (funding wear and tear of assets) cost the council an additional $17 million. Added to this is the pressure we face from unfunded Government mandates.

I have highlighted many times the significant impact that Government unfunded mandates have had on our work. In short, we have been having to respond to more with no more income. For example, higher water standards, the introduction of new National Policy Statements and greater expectations - including emission reduction targets - to name just a few. This cannot continue.

Essential infrastructure, such as water pipes, needs to be kept in good working order, Southgate writes. Pictured are the western bulk water mains for the city.

The current ad hoc funding models, in which councils compete for funding, has failed to provide long term targeted investment. The system just isn’t working.

We are not alone. Councils across the country are experiencing the same pressures as us - and you. Indeed across the country most, bigger councils, are discussing double-digit rates rises to meet costs.

We cannot sugarcoat it; times are tough. I am deeply aware of, and concerned about, the impact of increasing rates on our communities and businesses.

So, what can we do? Councillors, as your representatives, have been working hard to consider how we can get the right result for our city.

Potholes are a major frustration for residents, Southgate writes, and one of the reasons she doesn’t want to reduce core council services (file photo).

I remain committed to being financially responsible, continuing to invest in looking after the city that we call home - and delivering the services our community expects of us. This LTP I will propose a budget which prioritises more ruthlessly than we have had to do before.

Staff have been directed to bring a budget that represents the ‘base’ or minimum work we need to do to run our city while meeting community expectations and to look for significant savings from the capital budget.

My priorities are clear. We MUST look after what we have. I have always said we cannot run our city into the ground. I stand by that. We cannot be relying on ageing infrastructure (water pipes, roads, libraries, community spaces). We need to ensure that Hamilton’s critical infrastructure is in good working order and is resilient to adverse weather.

Council’s core services are vital. Potholes and weeds really upset the community. We have heard councils up and down the country consider closing libraries, pools, parks - or not fixing potholes in roads. I strongly believe that these services are core to the council’s work and what Hamiltonians value.

I will not propose a reduction in the levels of services this council provides.

We must also continue to invest in priority capital growth. Hamilton is a growing city. We cannot stop that. We need to continue to provide the infrastructure - water and roads - that enable and attracts businesses and affordable homes to our city. But there are some capital projects that I am proposing we cut or delay- including for example reductions to non-urgent transport upgrades.

There are simply things we won’t be able to do. There are groups we won’t be able to fund at the current levels. Targeted rates could fund some projects, but only if there is community support. This is up to you.

It’s “extremely disappointing” to have to propose a big rates rise, Southgate writes.

We have discussed many ideas to bring down debt and reduce the impact on ratepayers. This includes the sale of assets, and revenue collecting options. Unfortunately, the cupboards are bare - with previous councils having sold most of what could be sold. We also considered selling a portion of our airport shares. This is not wise at this time, although we have pursued dividends.

Other revenue options we are exploring- you may have seen in the news - include leasing vacant areas of the council building, and the return of parking charges in the CBD, although they alone will not solve the problem.

There are some Government sources of revenue that I will continue to advocate for. These are a portion of GST on rates returned, rating of Government owned properties, and City Deals. If the Government returned to council GST on rates, we would have an additional $40 million per year! We need active funded partnerships with government for projects that deliver win-win outcomes and set New Zealand and our city up for success.

There is no easy fix.

Councillors and I accept that a significant rates rise is required. This is extremely disappointing. No mayor nor councillor wants to propose large rates increases. What we all do want is a functional, thriving city not just today but for future generations. We have no choice.

We must tackle the increased costs we are facing, create a resilient financial future while considering affordability.

The question becomes - how quickly do we balance the books? I personally am of the view we cannot do this in the first year. It would mean a massive rates increase (more than 30% - or $19 per week for the median ratepayer) - at a time Hamiltonians are already struggling to pay for everyday expenses.

Instead, I will seek the community’s view on balancing the books across three years. This will mean three consecutive rates increases. It’s realistic, and it’s more affordable. People won’t like it. But we need to be honest and transparent.

As mayor, I cannot kick the can down the road - for future councils and ratepayers to deal with. It’s important we face up to these challenges and do what is right for the city.

The council will continue to work together and listen closely to the community to hear your views. This is just the start of hard conversations. There will be an opportunity to provide feedback through the hearings process in early 2024 and we are keen to meet with community groups and organisations over the next few months. Your feedback is important and will be key to our decisions.

I believe our city is going from strength to strength and we must keep pushing forward to create a thriving city for all Hamiltonians today and tomorrow.