Council Funding - Two Perspectives from our Elected Members

The following articles are not the opinion of Grey Power Hamilton. (HAVE YOUR SAY)

Councilor Mark Donovan

“Council must find sweet spot to ensure financial prudence”

(I like this one because of my chocolate background  )

The decision I made to run for Council two years ago ( I was elected through a by-election to replace Margaret Forsyth RIP) came from the encouragement I received from my peers who believe I have the necessary business, people and decision-making skills to help govern our city.

A closer inspection of the books left me somewhat astonished at the state of our finances, and looking back I can see this place we have landed now has been decades in the making. There are some fundamental issues with the way councils operate – the good news is we have a new government that is prepared to look into it. I am confident there’ll be a shake up on how things are done!

In the meantime, we can fight back against much of the rates increase. There is around $90 million that I believe can be cut from the budget.

My aim is to be part of the Council that turns our situation around and to leave a legacy of prudent financial decision making. I remain committed to this. For the good of current and future citizens of our city it is now more so than ever, vitally important that we strike a balance between providing essential services to residents and maintaining fiscal responsibility.

Councilor Anna Casey-Cox

Debt and Intergenerational Investment for a Flourishing City

Debt is an often misunderstood necessity that enables capital investments over generations. Debt, or borrowing, is central to the functioning and flourishing of our growing City. The primary way that our City funds capital projects (pipes, roads, playgrounds, libraries and sports fields) is through debt or external borrowings. There are many investments to be proud of in our City and many (clean water, parks and footpaths for example) that each of us enjoy and utilise on a day to day basis. 

I find it helpful to compare our City’s borrowing to a mortgage on a home. A mortgage for a family home is typically understood to be an intergenerational investment, providing immediate benefit as well as benefit over generations. It is much the same for our city. Debt enables us to spread the burden of capital expenditure across generations, so that the people who benefit from infrastructure investments now and in the future contribute to meeting the cost. 

Mortgages are provided on the understanding that the borrower has the capacity to service the debt and pay down the principal over time. The ability to service debt also applies to our city finances. We need to ensure that our revenue is sufficient to meet our everyday costs and service our debt. This is not an easy task, and for high growth cities like ours there are additional challenges. 

Our investment in capital infrastructure parallels our city’s growth. The costs of capital projects, funded primarily through debt, are listed in our annual reports. These reports are worth reading to get a good sense of what we are investing in and why. It is impossible to summarise all our capital investments in one article, but by way of example, in recent years, we have:

• increased the capacity of our wastewater system (investing approximately 15 million in 2019/20, 22 million in 20/21 & 14 million in 2022/23) and upgraded the Pukete Wastewater Treatment plant (13 million in 2019/20 & 8.7 million in 2020/21). This is vital, ongoing work, as our population and waste volumes increase;

• undertaken major roading investments, including the development of the Ring Road (15 million in both 2019/20 and 2020/21), Ruakura transport upgrades (32 million in 2021/22 & 9 million in 2022/23), and Peacockes transport upgrades and development (over 40 million in 2020/21, 56 million in 2021/22 and 55 million in 2022/23);

• invested in renewing and upgrading our venues, including FMG Stadium, Seddon Park and Claudelands (over 10 million in 2022/23), supported the development of the new regional theatre (25 million between 2020/21 and 23/24) and improved our aquatic facilities (2.5 million in 2021/22 & 3 million in 2022/23), and; 

• invested in a new library (Te Kete Aronui) and community facilities at Rototuna (3.7 million in 2021/22 & 12 million in 2022/24) and the development of the Zoo and Waiwhakareke Natural Heritage Park, including a new shared Entry Precinct (2.5 million in 2020/21, 4.5 million in 2021/22 & 6.5 million in 2022/23). 

All of our capital investments are primarily enabled through borrowing (external debt). We have also increased our borrowing substantially in recent years (a 400 million, or 75% increase between 2020/21 and 2022/23), primarily for roads, water infrastructure and parks in our city’s growth areas (Peacockes, Ruakura, Rotokauri, Rototuna and the Central Business District). Importantly, some of our recent borrowing (over 100 million) has been specifically for development in Peacockes and is in the form of a ten year interest free loan from central government. Upfront infrastructure investment in our city growth areas is critical for the provision of housing for future generations, for people new to our city and for all of us. The cost of critical infrastructure in our growth areas is typically recovered over time through development contributions and the rates paid by residents in new developments. 

We are unquestionably investing significantly in new infrastructure and maintaining and improving what we have. This is necessary because urban growth and expansion, without infrastructure investment, is a recipe for disaster. If our existing infrastructure doesn’t keep up with our growing population, our roads will become more congested, our housing increasingly unaffordable and our amenities (pools, libraries and event centres for example) crowded. 

There is no doubt that we have a huge challenge before us - to enable the infrastructure we need, while ensuring that we have the ability to service the debt we take on and maintain our growing pool of assets. Our city borrows money through the Local Government Funding Authority at relatively favourable interest rates. However, a portion of our borrowing is on a floating interest rate, and we, consequently, have been impacted by increased costs of borrowing. 

We all invest in the development of our city through rates and fees. I believe we should feel proud about the investments we have made. The playgrounds, libraries, pools, parks, cycleways, and natural spaces that make our city vibrant and live-able are all the product of our investments made over many years. Likewise, our reliable and efficient services, like water (supply, treatment and stormwater), road and footpath maintenance, waste collection and recycling, all have been enabled through our ongoing investment. That being said, our rates are currently some of the lowest in the country. And, over recent years, given inflation, the cost of borrowing and depreciation, our operating expenses have increased. Our revenue needs to keep up with our expenses including depreciation and servicing our debt. 

There is a balance that needs to be struck and we are working hard to strike it. Central government funding for water and transport infrastructure and climate adaptation is essential. It is critical that while we invest for the future, look after what we have and provide core services that we also balance our books and service our city’s debt adequately. There are tough conversations and decisions before us. Your voice is vital in the shaping of our city’s future and our Ten Year Plan. Our investment decisions are not easy, and they require all of our best consideration. Our ten year plan consultation document will be out in March/April this year: Please take the time to consider your perspective and have your say!