Rattling the Chains - Serious Season’s Greetings

It’s Christmas! And we are all looking forward to a bit of summer holiday in some shape, despite the challenges starting to creep into our households and businesses. Last week was our last Council meeting for the year, and despite the festive season, it was, to be fair, pretty serious. 

Early in the agenda was an item dealing with our Annual Plan, or budget – for Year 3 of our Long Term Plan (LTP) which will start in July 2023.   

Our projections tell us that increases to interest rates, insurance and contract costs will impact rates on top of the projected 6.5% increase for 2023-24 – up to 15% on average if we continue along our planned trajectory. 

So we need to make some changes, but we have time. 

When we built our LTP in 2021 - the 10-year work programme across all our business –we deliberately faced up to challenges of significant historical underinvestment in our infrastructure with year-on-year increases to rates investment. 

Through consultation at that time you were clear with us that although you don't like rates increases, you also don't want to continue “kicking the can down the road” on the required investment.  

Since then, in a very short space of time the economic situation has changed dramatically. 

New Zealand's inflation rate is currently at 7.2% pa. Worse, construction inflation (the cost to build) is actually more like 18% pa. The average cost of borrowing? While 2.5% per annum was a reasonable expectation in 2021, it’s now more like 5% per annum.  

We’re acutely aware our Central Hawke’s Bay community is feeling the impact of these things too. And for those facing the end of a fixed-term mortgage rate over the next year or so, for example, it’s looking downright scary.  

So what do we do? Councillors work through the hard conversations about what trade-offs between short term and long term outcomes could be. And we are acutely aware that we are already paying extra for delaying infrastructure investments in the past. So these are not easy conversations. 

With this new column, I have the opportunity to take you through our thinking and the steps in our process.

First step is that we have been presented these first, ungarnished, budgets. And we have been clear to our staff that they are unpalatable.  

In particular, there are large fixed-cost increases for urban households when it comes to rubbish collection, drinking water and sewer services which we want to see reduced.  

Our initial thinking discussed at last week’s meeting was to look at deferring the introduction of wheelie bins for rubbish collection, lengthening some loan terms, and take a pragmatic look at all projects within our water programmes which are big and complex with many moving parts.  

There are also some ideas about small and some not-so-small tweaks to the services Council provides and how we could be more cost-effective.  

 So, the next step is that we work to firm up the options for changes to come back to our next Council meeting in late January. Then we can share with you the next round of information.  

So while this is serious, we do have a strong basis to start from in Central Hawke’s Bay, and a positive and transparent attitude that will get us through. 

From the Council table, we wish you a very happy Christmas with your loved ones.

16 December 2022

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