Key Issue 03
What's the situation?
Ōpōtiki District is boasting a brand-new harbour (the first one built in New Zealand for the last 100 years!) and it will officially finish construction in 2024. We know the harbour will bring more opportunities and economic activity to the district, especially when paired with future business development.
When Council first started the harbour plan, Council agreed to pay from rates for the operational costs of the harbour once it was up and running. Those operational costs are for activities that keep it ‘running’ day-to-day, such as dredging. However, external circumstances have changed since that agreement was made and, in light of some of the highest rates rises being seen across the nation, Council does not feel our community is in a position to afford taking on this cost. Councillors expressed a desire to reduce the rating impact as much as possible and delaying funding the harbour costs from rates was identified as an area to achieve this.
Critical infrastructure that we expected to be in place has been delayed significantly due to forces outside of Council’s control – the revenue generated from this infrastructure is expected to offset the costs of running the harbour. As a result, Council is left with an upcoming expense, and we are more aware than ever that our community cannot afford to meet the cost.
In addition, as detailed on page 10 of this document, Council is in negotiations with Central Government to delay Council taking on the operational/maintenance costs of the harbour. However, exactly what this agreement may look like is not yet known. This issue, and Council’s preferred option, is therefore Council’s interim proposal to alleviate the cost that would otherwise be on the ratepayers in the 2024-25 financial year.
OPTION 1
Status quo. Begin paying for the operational/ maintenance costs of the harbour from rates in the 2024-2025 financial year.
How your general rates would change
The impact on your general rates under this option will be approximately as follows.
*These figures are based on low, medium, and upper valued properties in the district based on capital value and are approximate, average per annum amounts. The figures shown above are the estimations of the cost to each ratepayer of the proposed option for this activity/key issue.** This Key Issue shows no percentage movement as the Harbour operation/maintenance is a new activity under both Option 1 and 2. As such, there is no prior general rate contribution to this activity to compare these figures against.
Levels of Service
This option would see the costs for running the harbour funded by the general rate starting in the 2024–25 financial year (this year). The above table demonstrates the approximate effect this would have on rates, depending on the capital value of your house.
Some of the key maintenance activities will be semi-regular dredging, to ensure the channel passage is safe for use, and regular checking of the rocks and hanbars protecting to ensure they are up to standard (and organising the procurement and replacement of these if they aren’t). As well as this kind of technical engineering work, there will be the maintenance of the car park, tar seal, and walkways on top of the sea walls.
Advantages
- The Council and district deliver on its agreement to fund the maintenance and operation of the harbour.
Disadvantages or risks
- General rates will go up by an average of 6% - an amount Council is aware the community are unlikely to be able to afford.
Debt
Under Option 1, there is no impact on Council debt as the operating costs of the harbour are fully met by an increase in rates.
OPTION 2 - Council's preferrd option
Delay funding the harbour from rates until at least 2026.
How your general rates would change
The impact on your general rates under this option will be approximately as follows.
*These figures are based on low, medium, and upper valued properties in the district based on capital value and are approximate, average per annum amounts. The figures shown above are the estimations of the cost to each ratepayer of the proposed option for this activity/key issue.** This Key Issue shows no percentage movement as the Harbour operation/maintenance is a new activity under both Option 1 and 2. As such, there is no prior general ratecontribution to this activity to compare these figures against.
Levels of Service
This is Council’s preferred option. Although the harbour is open and operating, and Council has previously agreed to pay for the operations/maintenance, the reality is our community cannot afford to meet that cost right now.
This option is straightforward – Council is proposing to defer funding the harbour activity to until at least Year 3 of the 2024–2034 Long Term Plan and use our loan/debt funding to cover the interim years.
Under this option, Council would use debt to fund the maintenance/operation of the Harbour for Years 1 and 2 (2024-25 and 2025-26) of the LTP. The cost to the ratepayer will be smaller than in Option 1, but will not disappear completely, as Council will need to begin paying back the debt. Additionally, as this is not sustainable long-term, fully funding the harbour from rates will ‘come online’ in Year 3 (2026-27), and this is reflected in the rates impact for Year 3 of Option 2.
Advantages
- This approach contributes to keeping the general rate increase down.
Disadvantages or risks
- Council’s debt limit will be affected by this option. It is likely we will hit our debt ceiling, which will limit Council’s capacity to plan for and engage in other activities.
Debt
Under Option 2, Council will incur $800,000 of debt across Years 1 and 2 of the LTP.
