Hamilton, February 8, 2024
Hamiltonians are in for a real shocker as the Council drops an unwelcome message about a massive hike in rates, which is higher than predicted earlier. Bringing the costs of water services back into council budgets has made a dramatic change to potential rates impacts for Hamilton City Council, and the people of Hamilton are not happy, to say the least.
Why the additional hike
In 2023 legislation was passed by the previous Government to remove the costs and responsibility for water services delivery from councils (and transfer to new organisations) in stages. Hamilton City Council was to join a new entity in 2025, and legislation prevented the Council from including water service delivery costs beyond Year 2 of the draft Long-Term Plan.
This meant the Council’s long-term draft budgets set in November excluded all water services costs from rates bills from 2025/26.
In December 2023, the new Government said it would repeal the reform legislation and instructed councils to include water service delivery in its Long-Term Plans, pending repeal legislation expected later this month.
This has added hundreds of millions of dollars in costs, and an urgent revision, to the previous draft budgets. It means the Council will now reconsider the plan, and the consequential impacts on rates, at its meeting on 20 February, 2024.
At a briefing this week, staff provided detailed financial modelling which showed bringing those costs into the draft budget, with no other changes, would mean sharp increases in projected rates in Years 2 to 5 in the plan.
Change in proposed hike
The rate increases originally proposed in November 2023 from Years 2 to 5 were 12.9%, 8.7% and then two years at 6.3%. Returning the costs of water services changes these figures to four consecutive years of 14.1% rises. Both sets of figures assume a 25.5% increase in Year 1.
Hamilton Mayor Paula Southgate said the impact is massive for the Council’s budgets, with water services making up around 30% of the Council’s operating costs and capital investment.
“The need to include water service delivery in our Long-Term Plan beyond year 2 significantly changes our financial projections, placing further cost pressure on Council. I have said for some time that the funding model for Councils, for the huge infrastructure challenges we face, is fundamentally broken and unsustainable. Adding the cost of water services back into the Councils’ Long-Term Plans brings this collective challenge front and centre. Waters infrastructure is expensive, especially for a fast-growing city.”
Debt to revenue ratio
The main driver for the rates projections is that the Council is required to maintain a debt-to-revenue ratio set by the Local Government Funding Agency. The council can borrow more to fund the infrastructure investment needed but needs to increase revenue (largely from rates) to remain within the limits set by the LGFA.
“We need new ways of working between Local and Central Government to support large-scale investment, drive economic development and growth, and better meet the needs of the community,” said Mayor Southgate.
“I will continue to raise this with the Minister for Local Government. In the meantime, my focus is on finding the right solution for Hamilton – this means finding a balance between affordability and providing sustainable and resilient water infrastructure for our rapidly growing city, but most importantly we need to have honest conversations with our communities.”
The council will be asked to adopt an updated draft Long-Term Plan at the 20 February 2024 Council meeting, ahead of community consultation in March-April 2024.
Pressure on households
Many households are clueless about how they will manage the extra hike in an ongoing cost of living crisis. Many have called the move unfair, claiming that a cautious budgeting from the Council is the need of the hour, instead of passing the burden on the people.
Manish, a business owner and a resident in Hamilton said, “It is unfair to simply ask the residents to pay for such a massive hike in rates. It would be better if the council stopped the wasteful spending and paid off the debt. Every year rates go up as we struggle with debt yet nothing is done about it. Where is the accountability?”
Mike Smith, another Hamiltonian stated on a social media post, “I guess we can sugar coat it all we want, but a proposed 25% rates increase is going to hurt people and families who are currently struggling already.”
Praneeta Mahajan is an Indian Newslink reporter based in Hamilton.