Increasing debt at the Rotorua District Council has forced a cutback on spending and warning that rates will rise. Senior councillors have told the Rotorua Daily Post they were unaware of the council's financial position, prompting the announcement of an independent review. Senior reporter Matthew Martin asked the nine councillors involved in last year's Annual Plan why debt issues had not been picked up until now.
The previous council employed a new chief financial officer because of concerns around financial sustainability, despite repeated green lights from the Auditor-General which were challenged during Annual Plan adoption. This has provided us with better forecasting data and stronger financial management systems, giving us a clearer picture of the implications of borrowing for capital projects and the cost of decisions affecting income, such as low rate rises and free inner city parking.
Debt remains within policy limits but isn't sustainable without decisive action.
While we could waste time apportioning blame, my focus is on the future and being open and transparent with our residents.
Yes. I have always been aware of the council's debt. During the election process I mentioned about debt. During the past three years the overall debt of the council has increased every year. Shows staff wages rose from $30 to $35 million. Debt interest charges of just under $10 million. Income of less than $120 million. With the increase in expenses of the council this council, in my opinion, could not proceed with Victoria Expressway at a cost of approximately $50 million. Information in the past year indicated the New Zealand Transport Agency will not assist with approximately 56 per cent of funding mainly due to the Christchurch earthquakes.
Last year I voted against the Annual Plan on the basis that the proposal of a .99 per cent rates increase lacked credibility and underestimated several obvious charges. Furthermore, I made a verbal submission targeting debt, high staff numbers and airport costs. Other than my recommendation of a debt reduction programme being implemented, I received little support from my colleagues. During the election campaign I promoted taking costs out of council - to become a more cost-effective, efficient operation. Consequently, I fully support the proposed structural changes to council as these are long overdue and in line with what I had suggested.
Council approved a policy to minimise rate rises, but no commensurate reduction was made in long-term capital projects. Financial reporting in place at that time predicted that increased borrowing would not be a problem. While some public submissions raised this possibility, the Auditor-General continued to approve our budgets, which remained within council debt policy limits. With the appointment of the new chief financial officer and a complete change in our financial reporting format, the unsustainable combination of low rates and continued spending has only just now been revealed. By taking action now we are in a position to limit significant long-term effects.
Yes, I was always aware of the impending debt issue and constantly asked questions regarding the sustainability of the level of that debt. As councillors we were assured by officers that the debt level was within permissible limits and that servicing of that debt was sustainable for the future. Upon the appointment of a chief financial officer in this term of council, that has been proven incorrect and what is a shock to me is the dollar value of capital projects that must be cut in this financial year, despite a clean audit from the Auditor-General.
Councillors have always been kept informed of debt levels through regular reports. However, we now have improved financial systems and better forecasting advice to understand the longer-term implications of borrowing decisions. We're acting decisively and making many changes to achieve long-term future financial sustainability. Low rates increases in recent years have been to support our struggling residents during difficult economic times but we did signal in our long-term plan that we would need to return to increases around 3 per cent. Right now my focus is on moving forward to build a solid and positive future for our district.
Low rates rises over the past few years were a temporary measure to help our residents through the tough times during the recent recession. It was always in my sights that we would need to return to more realistic rates increases in the near future. That time is here. In terms of our debt situation, councillors have always been kept informed by management and our debt levels have remained under maximum limits set in policy. However, it is now clear that we need to speed up the debt reduction programme we started when we set the current Annual Plan in June last year.
By mid last year all councillors were asking for more clarity around the council's financial position. Figures kept changing. Explanations were unclear and unsatisfactory. It got harder to see the true picture through the bulls**t.
In the last three years I was sick of the mayor [Kevin Winters] telling us we could have low rates increases and increased borrowing. I never supported the Annual Plan or Long Term Plan because I never agreed with the figures. I was also sick of the CEO [Peter Guerin] telling us our debt levels were low and manageable. The last few months we have been justified in our questioning of those figures. I have total confidence in Geoff [Williams] and Dave [Foster] that they have got this situation under control. Keeping us and the public informed about everything is also key to this process.