Massive Rates Rise - Mayor Paula's Response

The Question:

A recent survey of Grey Power members identified that Rates or Rents (depending upon the situation of the respondent) come out as the second most important concern facing our members. Our membership is therefore actively engaged with Rates decisions. Given the recent vote by council in support of a 25.5% rate increase, Hamilton's high debt levels and S&P's credit warning, we would appreciate your thoughts on this decision.

Mayor Paula's Response:

Dear Grey Power members,

I write in response to the concerns you have raised, regarding the recent decision by Council to support a 25.5% rate increase.

I understand your concerns, and really feel for you and many others across the city already struggling with increased costs. I had originally put forward a lower increase to try and ease the pressure, however the majority of Councillors wanted to balance the books more quickly, leading to the higher rates rise.

I wish to be clear that no decisions are final. As Mayor, I am committed to listening closely to the community, and welcome your active participation and feedback during the consultation process early this year, as we collectively strive for a more prosperous future.

Unprecedented financial outlook

Over the past three years, the economic situation has changed significantly, and the financial outlook this Council is facing is unprecedented. There are three key drivers of our increasing costs. Two are international factors: inflation and interest. The third is a national issue: compliance demands by central government. To give you an example - record high inflation, rising interest rates and depreciation are costing our Council around $54 million extra per year, and expensive unfunded Government mandates means Council’s existing and planned work programmes are simply costing more to deliver. We are not alone in this challenge; councils, businesses and households across New Zealand, are grappling with the same financial pressures.

On top of this, we need to prepare for our growing population, which is forecast to rise to 237,000 by 2048. This means we need around 1,300 new homes to be built every year in Hamilton for the next 10 years, just to cope with our growth – not to mention the infrastructure to go with it.

However, it’s not all doom and gloom, growth also presents opportunities, and we will continue to balance community wellbeing and affordability, alongside Council’s vision to make Hamilton an even better place to live, work, and thrive.

Long-Term Plan Budget

Councillors recently turned over every stone to deliver one of our toughest ever draft budgets for the 2024-34 Long-Term Plan. This proposed budget focuses on delivering core services to levels residents receive now; we have not created lots of new projects or spending proposals. In fact, we have made some significant cuts across many programmes, including transport and grants to some community and business organisations - resulting in $130 million in savings, over the first three years, and $100 million in savings over 10 years. The CEO has also saved an additional $7m through a staff restructure. More information from the Council meeting where this was discussed can be found here.

Even after these hard decisions, we still have a $75 million deficit. If we do not cover the deficit, we would be using debt rather than income to fund the everyday running of the city (like using a credit card to pay for your mortgage). So, we need more revenue to cover the increased costs to run the city. 

Council has 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 administrations having sold most of what’s left. 

Rates’ rises in recent years have not kept pace with the increasing costs we face. So, it is extremely disappointing but we still need a rates’ rise to get our finances back on track. For example, rates are 72 percent of our income, and a 1 percent rates rise only generates $2.4 million. 

I am very conscious of the burden on rate payers; no Mayor nor Councillor wants to propose significant rates increases, especially during a cost-of-living crisis. What we all do want is a functional, thriving, and resilient city, not just today but for future generations. We can’t run our city into the ground.  

Balancing the books and rates’ increase

The Council had to decide how quickly to balance its books, with options having ranged from a larger rates’ increase in one year to a slower, phased approach over a more extended period.

At a time when everyone is struggling, we need to be mindful of how quickly we do this, so Deputy Mayor Angela and I supported a proposed budget to ease the pressure on ratepayers by spreading the cost across three years starting with an initial 16.3 % (at about $9 per week). However, after much debate, the majority of Councillors agreed on a proposed higher rates’ increase of 25.5%. This is democracy. 

Under this draft budget, to balance our books (meeting a government measure to ensure our everyday costs are paid for by everyday revenue), a rates increase of $14 per week is required for the median residential ratepayer in 2024/25. 

This proposed increase would bring Hamilton’s rates in line with other metro councils, and its neighbours. For example, Tauranga has a similar sized population to Hamilton, and its current median residential rates for the year 23-24 are $3,744 – compared to Hamilton’s current median residential rates of $2,838. With the proposed rates increase of 25.5%, the median rates rise for Hamilton will go up to $3,560.

Homeowners on a low income can apply for a rates rebate from central government, as well an additional rebate from Hamilton City Council. You can find out about rates rebates for the current year (1 July 2023 to 30 June 2024) on our website: hamilton.govt.nz/do-it-online/apply-for-it/rebates.

Community engagement and next steps

Through the long-term planning process, I want to continue to build a city where people love to live, while ensuring our city is fiscally responsible. In the meantime, I am committed to working with the new Government to bring down the cost of living and inflation for Hamiltonians. In my view, the funding partnership for how local councils are funded is broken, and this is something I will absolutely be advocating for in discussions with the new Government.

A comprehensive consultation on the draft Long-Term Plan budget is scheduled for March and April 2024. Final decisions and the adoption of the 2024-34 Long-Term Plan are anticipated in June 2024. I strongly encourage you to have a say.

You can find more information on the Long-Term Plan and consultation process here: LTP factsheet. I also encourage you to sign up to receive notifications about the public consultation process here: www.hamilton.govt.nz/your-city/share-your-voice/sign-up

Conclusion

I am clear that the best interests of our community must be at the forefront of our decisions, and I look forward to working with Grey Power on the future of our city.

In the meantime, best wishes and season's greetings for the New Year. 

Paula Southgate

Mayor of Hamilton