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Rates rise cap "feel good" only

Tauranga City Councillors have agreed to put a two per cent limit on future rates increases, but there are conditions.

The first is that it doesn’t include next year – the 2012/13 year, which is already expected to be a 5.3 per cent increase.

The second is that the cap is a statement of intent only.

The Tauranga City Council offices on Thursday were the scene of a lively debate among councillors as they determined a new rates rise cap of two per cent.

The Tauranga City Council offices on Thursday were the scene of a lively debate among councillors as they determined a new rates rise cap of two per cent.

While the cap is stated at two per cent, each annual rates change is based on the capped two per cent added to change for CPI inflation and a city growth percentage change.

Setting this target is a new legal requirement for the council, described by Councillor Bill Faulkner as the “Rodney Hide memorial clause”.

While it is a new legal requirement, it is not binding on the council, and is a ‘feel good’ thing, says Bill.

“With a couple of exceptions, most of us around here want to limit rates as we have limited our debt,” says Bill, “but when it comes to our own individual wheelbarrows all those things get turfed out the door”.

“With the best will in the world the limit we impose on ourselves is only going to be while it suits us.

“I don’t think it’s going to have any influence other than a feel good factor.

“All we are doing is fulfilling a statutory requirement.”

The two per cent, plus the consumer price index inflation level, plus growth, was moved by Councillor Rick Curach, who says it will help the council’s financial discipline.

“This is a notional number, but it does impose a goal to implement financial management,” says Rick.

“I’m not saying we don’t do it now, but it gives the community confidence that we are nailing it pretty tough.

“We are on the border of actually delivering it. It’s good, it puts pressure on us.

“In the first couple of years we probably won’t achieve it, but in the long term gives the goal that we do want to achieve – and it gives our community confidence that we are imposing a limit there.”

Opposition, as voiced by Councillor David Stewart, is that the level is naïve and unrealisable.

Council planners use Berl inflation figures instead of the consumer price index.

The construction price index is climbing because of Christchurch, an inflationary factor not recognised by the CPI.

“It is setting the council up to fail and it will come back to bite, providing great fodder for people who want to have bite at the council,” says David.

Rick’s motion was amended to come into effect in the 2013/14 year, after this year’s 5.3 per cent increase, which obtained the support of the mayor and Larry Baldock.

Mayor Stuart Crosby spoke against the original motion because of the conflict with this year’s rate.

“Some may have just been sitting around this table a bit too long,” says Larry.

“It sounds to me like Greece, Ireland or Italy.

“There’s been a major earthquake in the economics of the world and governments – that’s us – have to make some adjustments, tighten our belts.

“It’s not just a one off, this is the way forward.

“We have to stop continually increasing government spending because it’s destroying the private sector and we are all contributing to it.

“It isn’t hard and fast, but it’s putting accountability on ourselves.

“We have one year to work on it and we still have options. We will have ways of achieving this goal.”

Bill Faulkner’s opposition continued, saying there are factors involved that council has no control over, including Christchurch’s impact on building prices.

“There are lots of tradesmen rushing down here doubling their charges,” says Bill. “We’ve got the foreign exchange rate, which affects the stuff we do.

“We have got oil which is major cost as a lot of things are oil based.

“We’ve got from 2005 floods $18 million of stormwater.

“This is just pie I the sky stuff.

“All you will do is that you will set this limit and we will waste more days and days of debate while we justify and undo the mess we have sewn ourselves up in.

“I won’t be supporting it.”

It was passed by one vote with Bill, David Stewart, Tony Christiansen, Wayne Moultrie and Terry Molloy voting against it.

The previous Ten Year Plan, 2009-19, was prepared during a time when growth was still a major factor driving the city’s development.

That growth was predicted to continue at between 2-3 per cent per year – bringing increased population and demands on council facilities.

The council is still recovering from a significant weather event in 2005 that required over $15 million of unplanned investment in stormwater infrastructure and rehabilitation of heavily damaged areas.

Since then, due to the global financial crisis, growth in Tauranga and the Western Bay of Plenty has slowed down to about one per cent per year.

This level of growth is expected to continue in the short to medium term which is enabling the council to take a bit of a breather in terms of the speed of developments.

It doesn’t mean the council can cut back entirely from putting new infrastructure in and above the ground nor can it sit back and stop essential maintenance and replacement of existing infrastructure.

Population and business growth is still projected to increase – particularly as the Port of Tauranga assumes greater significance in the economy aided by the completion of the state highway network and the drive to bring more educational and corporate/governmental businesses to Tauranga.