Mix of more debt and higher rates

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

The draft Long-Term Plan consultation document released yesterday by Gisborne District Council presents an ambitious LTP that aims to address infrastructure deficits and major community concerns, but comes with plans to fund this that many ratepayers will likely object to. As well as hiking its rates-take progressively by up to 5 percent a year for the next decade, the council plans to add $45 million to its debt limit.

The document sets the scene by saying the council has been on an ambitious journey and while it hasn’t achieved all it has set out to, it better understands “where investment is now needed for our district to thrive”.

“Over the past three years we kept rates at 2 percent or less. This meant that for some projects we used reserves (savings) instead of rating or borrowing to pay for them . . . . continuing to use reserves to pay for these ‘big ticket items’ (particularly roads, wastewater, stormwater and water systems) is no longer sustainable.

“The most efficient way to pay for district-wide infrastructure is to borrow the money, and then to spread the cost of this borrowing over many years (paying it back through rates).”

The council’s debt limit now is $55m, which is equal to 67 percent of its total income. The LTP proposes changing the limit to $100m so council borrowings can rise to a peak of $98m in 2023, its “infrastructure hump”, when major projects like the wastewater treatment plant upgrades are due to be completed. At this time it would still be under 95 percent of income.

The LTP document indicates this would remain a conservative setting compared to Taupo and Western Bay of Plenty councils with debt around 200 percent of income, Hastings at 150 percent and Napier at 100 percent.

Regarding rate increases, the council proposes a maximum cap of 5 percent rises (averaged across the district) a year for the 10 years of the plan, which includes a buffer that could see rises of about 3-4 percent in many years — and also the flexibility to impose up to 5 percent rises and repay debt sooner.