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13.5% rates increase, more borrowing, and possible asset sales

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Wellington city councillors are being asked to approve a rates increase of 13.5 per cent when they meet on Thursday.

Also they’re being asked to approve a significant increase in borrowing, with an increase in the debt:income debt:funding limit from 175% to 225%.

The need for a considerable increase in spending is described in the papers for the meeting, in which councillors are told:

The significant increase in operational and capital costs is a considerable affordability challenge for the Council. . . Increasing our asset investment puts extra pressure on Council’s finances and results in increased debt. This is because we fund investment in assets to improve our infrastructure by borrowing – we then spread the cost (debt repayment) via rates across the years the asset is utilised – ensuring that those who use the asset pay for the asset. The increased investment in infrastructure to provide for growth is proposed to be recovered through development contributions over time as new lots are created and new houses and apartments are built across wellington. This means there will also be more properties to share the rates across, reducing the impacts on existing ratepayers.

Rates increase approved

Key building projects listed in the agenda papers for Thursday’s meeting include completion of the Town Hall and St James strengthening.

Regarding the needs of Civic Square, councillors are told that the council should be

progressing with remediation/development of the Civic Administration Building (CAB) and the Municipal Office Building (MOB) and the development of the MFC carpark (through use of partnerships and long-term ground leases)

Councillors are advised that significant cost increases could be addressed by

•Partnering with other entities (e.g. Government agencies, property developers) to either deliver outcomes without the full cost being funded by Council, or enabling commercial incomes to offset costs
•Use of an Infrastructure Funding and Financing Special Purpose vehicle to enable delivery of a capital project but not with Council funding, whereby beneficiaries still end up funding the project
•Divestment of risky or lower performing assets to reduce borrowings or enable higher performing investments

There’s more about Civic Square in the draft consultation document:

The masterplan for Civic Square is still being developed, but it is likely to emulate the self-funding model used on the Waterfront. Like the Waterfront, any developments that would happen would be done under the implementation of a framework that would stipulate the vision, goals and principles for the whole precinct and ensure that the Council and city have control over any developments that would happen in this key public space.

The council’s preferred option for the Municipal Office Building is to demolish and rebuild in partnership with private investment through the sale of a long-term ground lease for the site. And the council says, somewhat surprisingly, that it is continuing to negotiate with a developer about a new building on the Michael Fowler Carpark (once the temporary ballet building is removed.)

And also

Where we have assets that could realise more value, we can look at divesting (selling) these assets and use the proceeds to off-set our borrowings or reinvest in assets with a better financial return. This can help keep rates at an affordable level. Assets that may represent an opportunity for Council include our shares in Wellington International Airport, our portfolio of ground leases, encroachments and road reserve, and some of our buildings. These opportunities will be investigated and any decisions to sell strategic assets will need to be further consulted on with the community before any decision is made

However the DomPost reports this morning that last week’s vote for part privatisation of the Central Library may be reversed on Thursday. Damian George quotes Councillor Nicola Young as saying she no longer supports the part-privatisation proposal, and Councillor Laurie Foon as saying she is reconsidering her support for the move.

Deputy Mayor Sarah Free is also reconsidering her position. “I can confirm that I am working with [other councillors] to see if there is another way of managing the cost of the central library so that the council funds the entire build,” she said.

But the agenda papers for Thursday say that retaining full ownership of the building would come at a cost:

This option includes increasing rates by 3% above the proposed year 1 increase of 13.53%,so Council can pay off debt faster. This would create more borrowing headroom to deliver the high-level remediation of the library without partners and within the original timeframe.

And Councillors are told:

the preferred option is find a partner who will fund the non-library component of the building upgrade. This additional funding will allow the Council to progress the rebuild within the original timeframe for reopening in 2025.

Climate change also gets a mention in the agenda papers for the council on Thursday.

Climate change is already here, and its effects are just beginning. When it rains heavily at a high tide, or when the waves from a severe storm crash against the coast, we are already experiencing early impacts of climate change. In Wellington City about $7 billion in property alone is at risk from sea level rise according to the latest guidance from the Ministry for the Environment -and our cherished spaces like Civic Square, the waterfront, and Waitangi park are at risk if we don’t move emissions to zero. In response Wellington City Council has adopted Te Atakura -First to Zero carbon emmissions by 2050. This requires the reduction of city wide net emissions by 43% by 2030.

Councillors are told that there are seven big decisions (including on climate change) for them to make on Thursday.

The big decisions are:
•Increasing our investment in three waters infrastructure (3 options)
•The Council taking responsibility for wastewater lateral – the pipes connecting their property to the water main underneath the road (2 options)
•Building more cycleways (4 options)
•Implementing Te Atakura initiatives (climate change) -i.e. our response to the climate and ecological emergency (3 options)
•Te Ngākau Civic Square: Municipal Office Building (4 options)
•Te Ngākau Civic Square: Central Library building (3 options)
•Investing in sludge and waste minimisation (4 options)

34 comments:

  1. Horsing around, 2. March 2021, 18:14

    Do we really think if we move Wellingtons emissions to zero that it will prevent these events happening? Is our ego that big that we think nz or wellington alone can make that difference? And if these seaside places are at such risk why are we forging ahead with Shelly Bay?

     
  2. Developer, 2. March 2021, 19:15

    Let’s sell everything that our forefathers (any mothers?) built up for future generations. Privatise the lot … we need to look after developers not future citizens or even ourselves. Really Council are you serious?

     
  3. Claire, 2. March 2021, 19:16

    I would really like to see that rates rise go down. This is the highest rates rise proposal in NZ. Auckland’s is only 5%! I don’t have a problem with the divesting of buildings. That includes the convention centre. The library could have private offices on top. There has been a lot of misinformation on that. The actual library was not to be privatised, just part of the building for goodness sake. They are not proposing selling a POWER Station.!

     
  4. Ray Chung, 2. March 2021, 20:22

    This is so frustrating! Councillors must stop shoving more projects and ensuing costs onto ratepayers! Stop or defer any projects that haven’t started and this definitely includes new buildings and cycleways. Why hasn’t a freeze been placed on council staff and salaries? Why is the council permitted to continue hiring new staff and continuing with salary increases? Either defer the library reconstruction or let a private developer build this. Stop the introduction of new wards. Where else and in what other industry would an increase of 13.5% this year on top of the 5% increase last year be accepted with absolutely no increase in productivity or services?

    The councillors should vote against this increase and go back to trimming this wishlist and telling Barbara McKerrow to freeze staff levels and salaries for three years.

     
  5. Jamie, 2. March 2021, 20:34

    Haven’t seen the regional council’s rates yet. Ecan was 24.5% – climate change, transport and essential freshwater. Masterton’s is only 6.9% and we are building a white elephant Convention Centre as well.

     
  6. Andrew, 2. March 2021, 20:36

    Neoliberalism left us with almost no assets and crappy buildings in the eighties – why is the WCC proposing to finish the job off with what’s left of our city’s assets now? WCC should be taking advantage of historically low interest rates to grow the asset base, not strip it.

     
  7. Northland, 2. March 2021, 21:17

    No idea how to save money, reduce costs or pare back nice-to-have projects. Just look at the $200m they are going to throw at the Central Library, a building that has neither been damaged in an earthquake nor listed on the earthquake prone building list.
    If only we could link Councillor and senior execs’ remuneration inversely to the rates rise. Rates go up 13.5%, their salaries go down by 13.5%. Maybe that would concentrate minds!

     
  8. Dave B, 2. March 2021, 22:22

    @ Ray Chung, “Stop or defer all cycleways”, you say.
    I take it you are not a cyclist. But I presume you are a car-user and see no problem with costly road-improvements continuing to be ratepayer-funded. For consistency’s sake, how about you also call for all road improvements to be stopped or deferred. That will save heaps.

     
  9. Toni, 2. March 2021, 23:32

    It all seems very one-sided. The public are expected to carry the burden of budgeting and going without ‘nice to haves’ to pay their rates while WCC refuses to consider that they need to seriously prune their own budget, stop hiring, awarding pay rises, and considering new projects until they get rates down to a reasonable level. The rate-payers are not a bottomless pit!

     
  10. Kara, 3. March 2021, 8:59

    If WCC could keep the rates rise to less than 5%, then many Wellington residents would breathe more easily. To achieve this, WCC must identify the “must haves” for the city and leave the “should, could and nice to have” for when we can afford these. I would put the convention centre in the “nice to have” category.

     
  11. TrevorH, 3. March 2021, 9:37

    Such an increase is unacceptable. There seems to have been no effort made to prioritize. Councillors will have to do that job then. It’s easy because there is really only one priority: renewing the 3 waters infrastructure. Everything else is a nice-to-have and can be postponed or cut. While we are at it, a “razor gang” needs to review Council staffing. With a thousand plus permanent positions there appears to be plenty of scope for savings.

     
  12. Benoit Pette, 3. March 2021, 10:13

    I am confused about why the fact the City Council is still budgeting $75M towards the Airport runway extension, in a climate emergency, when the budget is so tight, does not attract more attention. Runway extension = more planes = more emissions.

     
  13. Local, 3. March 2021, 10:45

    Trevor H. Have you counted the staff in the plethora of CCO’s, Trusts etc.?

     
  14. I blame remuera, 3. March 2021, 10:51

    The hand wringing over the debt is incredibly dumb. Mostly it will be going onto pipes which is long lived infrastructure that needs to be done right now. Taking on debt to cover it spreads those costs out over more of the life of that infrastructure and interest rates are presently low.

    The attitudes about other spending will put us in the same position we are now with the pipes, with other infrastructure. The projects people point to as waste are usually in the tens of thousands to a few million. Even the glaring exception to this, the convention center, would not cover the billions needed to fix the pipes. Austerity is not the answer.

    The rates increase will work out as a few tens of dollars per week. Given reverse mortgages are a thing and most landlords are already charging all that their tenants can bear in terms of rent, I would like to know what anyone really has any business complaining about.

     
  15. Traveller, 3. March 2021, 10:53

    I sympathise with the concerns of city councillors who want to keep the Central Library building in public ownership, and who don’t want its non-library floors to be privatised. But if the cost of doing this includes increasing rates by 3% above the proposed year 1 increase of 13.53%, then the councillors need to think again. Very few library users could afford to pay a rates increase of more than 16 per cent.

     
  16. Helene Ritchie, 3. March 2021, 11:22

    There is an alternative to the expensive library strengthening – it is to expeditiously proceed with the less costly project costing $81.9m instead of then “nice-to-have” whose cost is put at $178.7m. However, the less cost option will not be included in the LTP for your comment unless councillors move on Thursday to have it included as an option.

    By the way, if their unaffordable library project cost blows out in approximately the same way as the Town hall has so far (three times the original estimate), then their “nice-to-have library will cost $500million..Imagine even half that on our rates.

    Councillors have to allow the public to comment on both the affordable library project $81.9m and the non affordable $178.7m project plus demolition costs and resource consent costs to demolish two more buildings in the civic centre in the context of this unaffordable rates increase that is being proposed.

     
  17. bsmith, 3. March 2021, 11:23

    @dave b …. kick the old car can down the road. NZTA mostly funds roads, and ratepayers don’t carry the whole cost. Unless you hadn’t realized, our economy is based on transport, and it’s about time cyclist were told enough is enough.

     
  18. Casey, 3. March 2021, 13:31

    I blame remuera: Tens of dollars per week may seem like a trifle to those not on the minimum wage, retirement income, or some disability allowance, but any extra dollars to find each week impacts this group. I don’t see how reverse mortgages are going to assist renters who effectively will be paying the higher rates cost in the rent they pay.

    Profligate spending on things not essential has to be put on hold, cycle lanes and airport expansion for example, until the core services are put back into the shape they would have been had the monies collected over the past 30 years for such been spent on them.

     
  19. I blame remuera, 3. March 2021, 14:14

    Casey if you are renting in Wellington you are realistically not going to be paying any extra. Many will kick and scream they will be putting rents up, but the fact is you will be being charged whatever they are able to squeeze out of you already. Do not listen to the hostage-taking of those who think their tenants’ finances are a fair bargaining chip. With interest rates at an all time low your landlord’s biggest expense, far bigger than their rates, will have gone down significantly. For a tenant in Wellington, the rates going up means more money going to essential infrastructure and services rather than to their landlord’s back pocket, that was coming out of their own back pocket either way.

     
  20. bsmith, 3. March 2021, 15:25

    I would have thought it was obvious. Turn the white elephant Convention Centre ( don’t see any conventionists anytime soon ) into the library, job done.

     
  21. bsmith, 3. March 2021, 15:28

    That climate change paragraph, surely has to be a wind up doesn’t it ? So what we are saying is: WCC goes carbon neutral, then the harbour won’t rise? Give me a break.

     
  22. Julienz, 3. March 2021, 18:04

    bsmith – the only problem I see with your proposal for the Convention Centre becoming the library is the accessibility which is terrible. [It can’t easily be re-purposed. It’s not a potential library.- PCGM.]

     
  23. Local, 3. March 2021, 18:15

    The Council has a closed mind. It invites us to consult but has excluded the affordable library option from the draft LTP. Now that we know the inevitable rates hike, we should be able to say whether ratepayers can afford it. Why are they consulting us at all?

     
  24. Ray Chung, 3. March 2021, 20:08

    Hi DaveB, sorry, I should have been clearer in my earlier comment about cycleways being deferred or cancelled until the WCC has more budget and not by increasing rates or borrowing more. I’m advocating not just against cycleways and new buildings but also new wards, Civic Square and building a new library. These two were just examples as they’re being discussed extensively and the council has generously added another $45 million into these when we’re in the midst of a financial crisis. As a matter of fact, I do have a bicycle and I average 3,000km annually in my car and rarely drive into the city. So yes, I agree with all the other commentators who say the council should stop all discretionary spending and focus only on getting the pipes fixed.

     
  25. TrevorH, 4. March 2021, 8:01

    Local: I took the figure of a thousand plus permanent staff from this WCC report for 2018/19, the latest I could find. They all appear to be in head office roles. I find this figure extraordinary.

     
  26. Bernard Hickey, 4. March 2021, 9:18

    The Wellington City Council should lift its self-imposed debt ‘lid’ from 225% of revenue to at least the Local Government Funding Agency’s self-imposed limit of 300%. Councils also need more revenue linked directly to population growth, potentially through GST rebates on rates and building materials, and forcing Government agencies to pay rates.

     
  27. Georgina Campbell, 4. March 2021, 9:22

    Bernard Hickey is in the line-up for public participation at the Wellington City Council’s LTP meeting this morning. Very much looking forward to it. [via twitter]

     
  28. Proverbial Creek, 4. March 2021, 10:40

    So we raise the debt limit to 300% and then get in to financial trouble again, then what? At what point does the city become bankrupt? WCC has a limited income stream and this was hampered by covid last year as well. Sure austerity is not ideal but spending on nice to haves can be stopped for the time being surely.

     
  29. Ray Chung, 4. March 2021, 14:45

    Hi Bernard, I disagree. The first thing anyone learns about budgets, (not the council because they obviously don’t have a clue what these are,) is that if you want to save money, the first thing you do is stop spending. Then the second thing you do is stop borrowing more money as this just digs the hole deeper. The third thing you do is start repaying the money that you’ve borrowed. Increasing borrowing to 300% is just continuing to get us deeper into debt and there’ll always be things that people want, so this money will never be repaid. By borrowing more, it’ll affect our ratings so then we’ll be subjected to higher interest rates.

    We need to start doing the first thing, that is stop spending. Yet, we still have councillors like Laurie Foon supported by more councillors passing a motion to spend an additional $45 million on cycleways. I’m not questioning the validity of having more cycleways but we should stop any new spending until we can catch up and have a balanced budget. In addition to this, we have Jill Day again supported by other councillors pushing to have additional wards in the WCC and getting unelected but paid members into council subcommittees against every democratic tenet. The money to pay for these has to come from somewhere so I’d push for austerity until we can afford these luxuries and maximise any rate increases to the inflation rate.

     
  30. Citizen, 4. March 2021, 16:33

    I heard Bernard Hickey this morning and was astonished to hear him say that we should increase the Council debt and that Local Government needs to spend and spend. Did I hear correctly?

     
  31. Ross, 4. March 2021, 16:53

    How can they believe the climate change paragraph and still proceed with spending $140 + million on a cycleway along the foreshore, out to Petone?

     
  32. Andrew Bartlett, 4. March 2021, 19:57

    G’Day Ross. The shared path to Petone is neither funded by WCC nor really a cycleway – much as I’ll enjoy to cycle on it. It is a much needed higher sea wall (needed due to the impacts of global heating) with a 5m wide emergency access road on top. It is protection for the railway against storm damage mostly. Very handy for Kiwirail to maintain the railway and the sea-wall itself, a practical alternative to access the Hutt Valley for emergency services in case of a big slip (imagine the damage if we saw something like the Kaikōura quake) etc. I’m told the bridge is weight-rated for a fully laden fire truck!

    Of course, it suits everyone, given that for most of the year people on bikes and on foot will enjoy it safely away from motorway traffic, that it gets billed to the NZ Transport Agency cycleway budget.

     
  33. Ralf, 5. March 2021, 8:52

    Privatize roads in Wellington! That should fill the coffers and also reduce Opex a lot since no maintenance work is needed anymore. (Only part of this is ironic, as a rebuttal to all the ‘no more bike lanes/PT/pedestrian improvements’ brigade; still a lot of roads in super low density suburbs are pretty useless).

     
  34. Andrew, 5. March 2021, 12:02

    Benoit Pette. It is not a given that a more capable airport will lead to a rise in carbon emissions. A good case can be made for the opposite (larger aircraft which tend to be more efficient and carry more passengers per flight). Despite the setbacks to the industry with COVID, air travel is not going anywhere, anytime soon. Progress will be made in reducing its carbon footprint through technology and/or alternative fuels.

    The shambles at the city council this week is an example of why the green party has never managed to move much beyond being a bit-player in politics, in spite of the importance of looking after our planet.