Second rate shock brewing for Hamilton as water costs, debt pile on pressure

Monday, 19 February 2024

The cost of providing water services has changed the goalposts when it comes to rate rises, council documents say.

Suggested rate hikes that shocked many Hamiltonians won’t be enough now the council must keep funding water services.

That’s the word to city councillors, who on Tuesday will need to make decisions on the dreaded duo of extended rates rises and water meters.

A proposed 25.5% rate rise - which staff say is about an extra $14 a week for the average home - triggered shock around the city, and the possibility of further double-digit rises has since been flagged.

The burden of funding water infrastructure “extends the period over which double digit rates rises are required”, according to the agenda for Tuesday’s meeting, and staff have now re-crunched the numbers.

Keeping November’s rates rises but adding three waters services costs means that the council would “significantly breach our debt to revenue limit of 280%” in six of the next 10 years, council documents say.

Rate rises and water meters will be on the agenda when Hamilton City Councillors meet this Tuesday.

So staff recommend four consecutive years of 14.1% rises - about $8 a week for the average home - on the back of the 25.5% one.

Under what’s recommended, it’d be six years before rate rises got back to single digits - and then not by much at 9.5%.

However, one councillor claims the later increases may not be needed if the city can push up borrowing limits.

The water meter debate has also been resurrected. Staff say meters could be “a mechanism to further reduce peak water demand” and recommend doing a business case.

As potential rate hikes loom, Hamilton City Mayor Paula Southgate has held talks with Minister for Local Government Simeon Brown about “greater flexibility around debt to revenue limits”.

One cited reason to clamp down on water use is that the city looks likely to outgrow the current water allocation a decade before it’s due to expire.

Introducing meters is estimated to cost $53m, but a completed business case would need to go to councillors for “guidance and decision making” before that happened.

Hamilton City councillor Sarah Thomson said that she believed council was “stuck” with rates rises for possibly the next two to three years, but expected solutions for subsequent years.

The spectre of council debt - $723m at June 2023 - also loomed, with councillors told “large rates rises” were needed so the council could make repayments to stay within its debt to revenue limits, and keep current levels of service.

“Increased debt in our starting position compared to what we were projecting in November 2023, combined with reduced Development Contribution revenue projections, bring us closer to our Debt to Revenue limit in Year 1,” the agenda document said.

“This means that even if we weren’t seeking to balance the books under the government measure in Year 1, as per the November 2023 Council resolution, we would require at least a 20.4% rates rise in Year 1 to remain within our Debt to Revenue limit.”

Hamilton Mayor Paula Southgate has already been pushing for “greater flexibility” on debt to revenue limits, the document said.

She brought it up when she met with Local Government Minister Simeon Brown in January, during which she also “set out the case for ‘city -deal‘ type arrangements, rather than the current ad hoc arrangements”.

Hamilton City Councillor Sarah Thomson told the Waikato Times she thought council was “stuck with a large rates rise this coming year, or spread over two to three years, depending on what council decides”.

However, she was confident the council could find a solution to avoid additional hikes to follow.

“The most straightforward thing would be to increase the LGFA [Local Government Funding Agency] borrowing limits for councils so that we can spread out the cost of major projects over a longer period of time.”