Council battles a possible 5.5% rate rise sparked by sewerage scheme debt 18 December 2014 A possible average district rate rise of 5.5% was tabled at a Council workshop this week, as it looks at dealing with a $31m debt relating to the Eastern Seaboard Sewerage Schemes which were completed in 2009. The two-day workshop held for elected members was in preparation for our Draft Long Term Plan (2015 - 2025). The projected 5.5% average district rates increase was presented as a first cut to elected members as they wrestle with how to deal with debt from the sewerage schemes and peripheral works. These plants in Whangamata, Tairua-Pauanui and Whitianga, cost in excess of $93M. "It was the belief of council in the early 2000s that future developers would pay at least 66% of that cost, and that growth would take off in the Coromandel at a fast rate," says Thames-Coromandel Chief Executive David Hammond. "The developers didn't come and instead we were all hit by the recession". "Someone has to pick up the mounting unpaid bill and that now amounts to a 3.5% rate rise in itself to deal with this one issue. It should have been addressed in 2008/2009," says Mr Hammond. Council staff will now be looking at ways to lessen the projected rates increase, after also receiving input from all the Community Boards at the workshop, on priority projects and level of service for each ward over the next ten years. A final figure on the average district rate will be presented to Council early next year. Meanwhile Council's base position has been helped by its reduction of rates, which hit a remarkable -6% decrease in 2012/2013 from what was charged in 2010/2011. This has allowed Council to have a lower starting base to cope with future pressures and shocks, including dealing with the present debt on the Sewerage plants. Cumulative Average District Rates Why we need to deal with this now and not later "We knew that the servicing the debt of the Sewerage Plants would be coming down the track and so we've been preparing our finances to ensure we are in a better shape to face it," says Mayor Glenn Leach. "We have the responsibility to pick this up and deal with it," says Mayor Leach. "We will take this on the chin but also look at how we can be flexible so that at some point in the future when there is growth in some areas, we can review this." "Council and staff have done so much work over the last four years to bring out-of-control debt and rates back under strong management," says Mayor Leach. "We've had a reduction in rates. Without the sewerage plant issue, we would have been on target to deliver a rise of less than 2% again," says the Mayor. "On top of that we've successfully implemented our Community Empowerment model returning local decision making back to locals. This is a model which is starting to be emulated around the country and even gaining interest from Councils in New South Wales, Australia," says Mayor Leach. "We've also been able to make significant reductions in our Operating Expenditure and we've also reported the best level of customer service ever," says the Mayor. "Now is the time to deal with the Treatment Plants and I'm grateful that we can do it with some confidence," he says. The situation with the three Eastern Seaboard Wastewater Plants (Tairua-Pauanui, Whangamata and Whitianga). The Three Wastewater Treatment Plants were completed by 2009 to deal with future growth and peak summer population. We have completed more up-to-date modelling and testing that shows some parts of Tairua-Pauanui and Whitianga plants are near capacity over peak summer. With some fine tuning of these plants we can optimise capacity as well as doing some small capital works to increase capacity. The challenge is anticipated future growth. Based on 2015 projections the indication is these plants won't reach capacity within their asset life. So if future population growth doesn't materialise as projected, it means our Additional Capacity loan isn't repaid. A general health check of our finances. The two-day workshop this week also showed that our ten-year external debt position remains healthy. Our council has forecast it won't exceed its self-imposed borrowing limits, which has been helped by a focus on its capital programme over the last two years to proceed with new capital on demonstration of a case to do so. There is also a higher level of scrutiny on capital expenditure, which has led to significant reductions on the amount needed to be spent on capital. Along with that, we have relooked at Asset Plans which previously showed large amounts of capital being needed well before it actually is. That Asset Investigation Project to get better asset information is underway. About our Long Term Plan. Our Draft Long Term Plan (LTP) for 2015 - 2025 will go out for public consultation in March next year. From this week's workshop, as well as other workshops held in the past year, a draft Long Term Plan consultation document will approved by Council by the end of January to go out for public consultation in early March The Draft Long Term Plan will indicate what the priorities are and what level of service we can deliver over the next ten years. Other issues we're looking at in our upcoming Draft Long Term Plan. 1 -Development contributions New community facility projects can no longer be funded by Development Contributions. Government legislation has changed on what can be funded by DC's which reduces our sources of funding for future projects. We have just approved a draft Development Contributions Policy which will go out for public consultation at the same time as the Long Term Plan consultation in March 2015. Development contributions are charged for all residential developments, from a new house to a large apartment block, as well as non-residential developments, subdivisions, and for some changes of land use. You can read our draft Development Contribution Policy here. We want to encourage sustainable, affordable development which means we need to look at revising Development Contribution costs. 2 - Lower Growth Projections. Not only does our District have lower growth projections than in our last two Long Term Plans, but it's the fact that this projected low growth isn't consistent across the District. Even a small decrease to the growth projections would see no new development and therefore no increase in rateable units. So any additional projects or level of service would increase rates to existing ratepayers. 4 - Capital Expenditure and its risk. We're defining projects better than we did in the past, which means projects and risks are better understood before they are initiated. 5 - The New Zealand Transport Authority subsidy. The NZTA roading subsidy is to be calculated by a new method. Our NZTA subsidy is currently 43% (the lowest in the country) but is going to increase to 46% in Year One with 1% increases until it reaches 52% 6 - Bank interest rates are projected to increase Timeline of Draft Long Term Plan dates January 2015. Council approves Draft LTP consultation document for Audit NZ. March 2015. Council approves Draft LTP consultation document for public consultation. March - April. Public consultation period. Late April. Hearings. May. Deliberations. June. Second audit undertaken by Audit NZ. Late June. Adopt final Development Contribution Policy, Revenue and Financing Policy and final 2015 - 2025 LTP.