Rates & Council Empires
I was reading an article in the Waikato Times regarding the Long Term Plan for the Hamilton City Council (HCC) and it made me think about the rates we pay to the various councils around the country and the council empires that those rates support.
The current HCC Long Term Plan (2024 – 2034) is proposing to increase rates in the 2024 year by 19.9% and then a further 15.5% annually between 2025 and 2029 with a 9% rise in 2029/30 and 5% annually to 2033/34.
But why would anyone believe that fairy tale?
It is no different to the one that they gave us in the previous long term plan when ratepayers were promised that council would balance its books by the 2023/24 year. They were told in 2021 that council would no longer be borrowing for everyday costs. At that time council was proposing that rates would rise 8.9% and then 4.9% annually in the foreseeable future.
Given that we are now just three years on and they are proposing a rates rise of 19.9%, the foreseeable future did not go very far.
The HCC website page that explains the need for a rates rise of this huge magnitude states that; “the HCC proposed long term plan prioritises in its budget, the services residents and businesses receive now, paid for by a rates increase to cover the increasing costs to deliver these”.
This implies that the HCC can’t afford to do what they are currently doing without a huge rates increase. The council have suddenly realised that they are living beyond their means; in other words they are “trading while insolvent”.
They are only saved from being illegal by the fact that they can and do increase the rates for the ratepayers to fund their excesses.
The council is required to keep within a debt to revenue ratio of 285% in 2024 and then 280% in the following years. What this means is that for every $100 of income the council has they can borrow up to $285 in 2024 and up to $280 in the following years.
If we did that as a business model it wouldn’t be long before we would be trading while insolvent and likely end up in jail for doing so.
So who is ultimately responsible for paying the bills for the council spending?
The ratepayers of course!!!!
The elected councilors can either resign or be voted out of office and unless they have deliberately broken the law while in office, they then just disappear and the responsibilities for their decisions rest with their replacements.
But as in this proposed scenario when times get tough financially the council just passes the buck down to the ratepayers by voting for an increase in the rates and the ratepayers don’t have any choice they just have to pay or council can foreclose on their properties.
Councils have over the years accepted more and more tasks as being part of their role to provide with many of these originally being part of central governments responsibilities, and the councils have grown their empires to accommodate the workloads that go with these roles/tasks.
It is both unfair and undemocratic to expect the ratepayers alone to have to fund much of this when the non-ratepaying citizens get the same benefits without any of the costs. Councils should be required to trim their empires and focus their service delivery on those functions which are in direct relationship to the ratepayers needs.
Also given the extremely poor performance of the councils in keeping to their budgets as per their long term plans, it should be part of the management KPI’s that when costs go over the budget such that a rates rise is required then the management should get a corresponding percentage decrease in their salaries.
Of course the corollary to that would be that if they managed to save the ratepayers a significant sum then they should get a corresponding bonus in their salary.
I am sure that such a requirement would go a long way towards focusing the bureaucrat’s minds on ensuring that the long term plan requirements are successfully completed on time and within budget.
We never know, the empires may end up shrinking and the costs going down!!!