Beware of Rates Saviours!

Beware of Rates Saviours this election period!

Like many local authorities in New Zealand, Hastings District Council (HDC) has faced inflationary cost increases. These financial pressures were exaggerated by Cyclone Gabrielle’s February 2023 visit.

HDC covers 5,229 square kilometres, in which Cyclone Gabrielle damage destroyed nineteen bridges and culverts, caused hundreds of major slips, with 161 additional bridges needing repair. This damage was said to be around $1 billion.

The Labour-led government signalled after the cyclone they required councils, such as HDC, to contribute to the infrastructure rebuild. For HDC this was calculated at $230 million, consisting of $50 million for the voluntary buyout programme of Category three houses, $170 million of transport network costs, and $10 million of three waters and other costs.

In 2024, HDC began formulating its Long Term Plan (LTP) for its next ten years. In view of these financial pressures, Mayor Sandra Hazelhurst created a LTP Working Group of five councillors (Crs Fowler, Schollum, Harvey, Apatu and Kerr) to work with officers on a financial strategy.

One of the big decisions of the LTP working group was the paying of the $230 million of HDC’s share of cyclone-related costs. The LTP working group recommended to HDC to repay the $230 million over 16 years – rather than the normal 25 years. This would save money by repaying quicker.

Cyclone Destruction

The roading network recovery would take place between seven and ten years, which would keep the cyclone recovery front of mind to advocate for more government funding. This work has been significantly undertaken by the Regional Recovery Agency.

I knew of one lesson from the 1931 Hawke’s Bay earthquake, that the further away from a disaster event, the harder it was to get support. Havelock North, for example, was still paying off its government recovery loan in the 1960s. While the details have yet to be finalised, it was pleasing to see an additional $219 million for roading recovery allocated from the May 2025 budget to the five councils in Hawke’s Bay.

After the local body re-organisation creating HDC in 1989, discontent in the rural sector led to the creation of urban rating area (RA1) and a rural one (RA2). While most of the cyclone damage occurred in rural RA2, the rates burden for this smaller group of ratepayers would mean financial hardship for many, if not all.

It was recommended, and adopted by HDC, that the cyclone recovery costs would be shared with the urban ratepayers. After the cyclone recovery costs, the LTP working group’s focus then turned to business-as-usual (BAU) for operational and capital expenditure. The increase in costs for BAU would be not insignificant due to inflation impacts and cyclone flow-on effects, such as insurance.

The LTP working group sought an independent review that HDC’s capital programme, particularly Three Waters, which averaged $67 million per year over the 10 year LTP, was justifiable. The LTP working group wanted to “avoid catastrophic failure of infrastructure of assets.”

“Sweating assets” to the brink of failure, not only involves service disruption, but also costly.

The HDC Three Waters capital programme got a tick from the reviewers. In addition the LTP working group requested from officers a savings from BAU expenditure. What was not wanted was to disrupt HDC as an organisation, but council officers to target specific costs or activities. This would involve $2.7 million of savings over the 24/25 year and 25/26 year.

Council reviewed any service cuts to save costs, and some hard decisions had to be made, such as closing the Frimley pool and shutting Splash Planet earlier than planned. Without these savings the rate increases would obviously be higher.

Frimley Pool

A resolution was also suggested by the LTP working group that any expenditure incurred outside the LTP must be approved by councillors. This would restrict any expenditure being made which made HDC’s financial position worse.

All the LTP working group recommendations were adopted by HDC, and the $2.7 million savings were found. After public feedback from the 2024 LTP consultation, HDC decided to reduce the proposed 25% rate increase to 19%. This would involve borrowing $22 million to bridge the gap for the lost rate revenue – in other words an unbalanced budget.

Calling for “bureaucratic waste; or “slashing wasteful spending” is an easy thing to do (especially in election year) to itching ears wanting a rates relief saviour. While each council is different, the number of activities performed by HDC is immense.

Those aiming to glide onto the Council table as capped financial super-hero’s, advocating radical cost-cutting, I believe, need to have a plan rather than making broad statements, and should clearly state how they will achieve this. We can then assess their sensibility, and any cuts to service levels.

Future councils may well ask should we be undertaking certain activities or in partnership with others, for example senior housing.

Can we form more partnerships with private enterprise to make ratepayer dollars to go further for city developments?

Creation of what are termed as nice-to-have projects, could be assisted by willing, resourceful citizens. Our history has plenty of examples of this.

I'd love to hear your thoughts.

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