Hurunui District Council makes landmark decisions on its Long-term plan (LTP)

The Rate DebateAfter consulting with its communities, the Hurunui District Council has unanimously approved significant changes to the way it has historically rated for water and sewer services, and also to its debt management model.  These changes are “monumental to the council’s future”, said Chief Executive Officer, Hamish Dobbie.

Dobbie said the changes were made after months and months of council workshops, informal community events, attendances at A&P Shows, and formal consultation – all of which raised very little opposition to the council’s proposals.  The two primary consultation issues were focused on managing debt into the future and paying for water and sewer services in the face of very costly environmental and health government regulations, along with significant infrastructure renewals during the life of the Ten Year Plan and further into the future. “We had a problem”, explained Dobbie.  “Our current systems have served the council and communities well in the past, but changing circumstances mean that the existing policies are not sustainable.”

The council has now confirmed the 10 year budgets and the proposals to set a debt limit while at the same time still achieve the necessary capital projects. The changes will impact on local communities who will now fund depreciation of water and sewer assets through rates and also pay a global rate for these services instead of the former targeted rate for their specific water/sewer schemes.  This means that the rates for these services will now be spread across all of our communities (except Balmoral residents) which will make water and sewer services affordable for all.

Another essential component of the debt management shift is in how the profits from the Hanmer Springs Thermal Pools and Spa (HSTPS) will be used in the future.  Instead of spending all the profits to reduce rates, the council will ring fence $2 million of the net profit to offset rates. The remaining net profit plus the rating for depreciation will be used to repay debt.

Chief Financial Officer, Jason Beck, said, “Being able to use a portion of the profit generated from the HSTPS to pay back debt will enable us to replace HSTPS assets in the future with money we have set aside each year instead of borrowing the money.  This also means that we will be paying less interest.” Mr Beck said that the council had decided not to apply this from 2015/2016, as it would have resulted in around a 9% rates increase. The council has instead decided to stage the increases from 2018 rather than immediately, with 33% of the rating impact to take effect in 2018/2019; 67% in 2019/2020 and fully applying the increased rating from 2020/2021.

“To allow this staging in approach to occur, we will be reducing the retained profits that we have built up from previous years where we have not utilised all of the profits to offset costs. As a result, we are budgeting to record a deficit for the first three years of the LTP.”

The council have also decided to rate for the depreciation of water and sewerage assets. The funds generated by these rates will be used to reduce the debt related to previous water and sewerage asset replacements and will give the council the ability to replace assets when they need to be replaced. By funding depreciation, the cost of replacing an asset is met by those who benefit from using that asset.

Rating changes for depreciation for water supplies and sewerage schemes will also be staged. For the 2015/2016, there will be $440,514 of depreciation funding for water and $139,975 for sewer that is charged as part of the rates.  “The effect on individual rates will depend on the number of water units a rural property uses or the number of cubic metres of water that an urban property consumes,” said Mr Beck.

The other significant change in this LTP is to district wide rating (instead of targeted rating) for all properties that are served by the council’s water and/or sewerage schemes.

“We believe that water and sewerage are general services and should be affordable for all of our communities in our district. This change will insulate communities from sudden costly rate increases when capital works are required to meet regulatory standards,” said Mr Beck.

“This change does not impact either positively or negatively on the total rates we will receive for water or sewer. It will however, have an impact on rates for individual properties depending on the current targeted rate for that property.”

For properties on a restricted water supply in rural areas, their new rate is $656 per unit provided.  This is lower than what is currently charged for the Waiau Rural supply ($749) and the Hurunui Rural supply ($790), but higher for the Ashley Rural supply ($612) and Amuri Plains supply (equivalent of $396).

"Every year we grapple with balancing the budget and rate increases against investing in our core infrastructure and assets, and minimizing debt accrual," says Mayor Winton Dalley.

 “We have made our decisions guided by an objective to balance the budget, bring debt levels down and be mindful of rate increase impacts for our residents.

"In this LTP we have taken a hard line in addressing our financial challenges to ensure our crucial core services are provided and well maintained now and into the future.  We want to ensure our young people can look forward to living in a district that plans for today but with their future in mind too.”

As part of the development of the Financial Strategy for the Long Term Plan, the council determined that overall rates increases will be limited to 6% for the first five years of the plan and then 3% for the remainder of the plan. For the 2015-16 year, the overall rates increase is only 2.42%. This was due, in the main, to the introduction of a new user-pays waste collection service which resulted in the removal of the $156 cost of the previously supplied 52 x rubbish and 52 x recycling bags.