Council financial strategy attempts to keep rates down

Christchurch City Council is rethinking the financial strategy for its Long Term Plan in a bid to keep rates increases to single figures over the next three years.

The financial strategy will be debated at a Council meeting on Thursday. It underpins the consultation document which will go out for public feedback in March, with a final decision made in June after public hearings.

Mayor Lianne Dalziel says the latest draft contains proposed rates increases of 10 per cent, eight per cent and eight per cent over the next three years, but the Council is determined to get that down to single digits.

“The financial strategy is a delicate balancing act and we will make every effort to reduce the burden on ratepayers while still meeting our share of the cost of the earthquake rebuild.

“We have an estimated shortfall of $1.2 billion over the 10 years of the Long Term Plan. We can solve that by carefully managing spending, borrowing and rate increases, and by selling shares in some of our commercial assets.

“However, all these components are interrelated, and changing one has a flow-on effect to the others. If we reduce the size of the rates increase, we have to find extra money from another source and there are limits to how much we can borrow.”

Late last year the Council agreed to release $551 million in capital through the sale of assets owned by its commercial arm, Christchurch City Holdings Ltd (CCHL), but it left the door open for further release of capital if necessary.

Since then the Mayor says the Office of the Auditor General has made it clear the Council must plan for a worst-case scenario, where it has to meet the full costs of replacing earthquake-damaged roads and underground services without further financial assistance.

“We are still awaiting the outcome of an independent review of those horizontal infrastructure costs, and are therefore considering the option of releasing up to $750 million in capital from CCHL.

“We have also been advised that our previous decision to retain at least 66 per cent ownership of shares in our companies could deter investors, limiting our sales prospects and the final price. We may therefore need to consider selling a greater proportion of certain assets in order to maximise our return, as well as attracting the right potential strategic partners.”

Under the Local Government Act, the Council’s financial strategy must present a range of options for funding its Long Term Plan. Mayor Dalziel says some of those options – such as retaining all current assets – would result in unacceptably high rates increases, which the Council wants to avoid.

“The financial challenges are huge, so we need input from residents to help us make some smart choices about what we do and how we pay for it.”

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