Loans and interest rates are biggest cost driving Whanganui’s rates rise

Interest costs are the biggest factor behind Whanganui's 11.2% provisional rates rise. Photo / Moana Ellis

By Moana Ellis, Local Democracy Reporter

The cost of interest on borrowing is the single biggest factor behind Whanganui’s 11.2% average rates increase.

“Borrowing money is more expensive at the moment and we’ve had to budget for that,” council chief executive David Langford said.

“We’ve also had more debt because of the types of projects we have been investing in – for example, the port redevelopment.”

Council debt is $158 million, or 148% of total revenue. That is $56m under the current debt limit.

The next biggest costs behind the 2024/25 provisional rates rise are former Three Waters and roads infrastructure, and introducing a new kerbside recycling service.

The council has pinned 2.8% of the rates increase on interest, 2.6% on water and roads, and 2.5% on collecting recycling from July 1.

Other top costs are insurance (1.5%), keeping the Whanganui East Pool open next summer (0.4%) and the port (0.3%).

The remaining 1.1% covers all other factors.

Rising costs of inflation, insurance and interest are putting pressure on council services to deliver the same or more services with less money, the council says.

A lot of work was done to cut costs to compensate for the increase in insurance and interest costs, Langford told Local Democracy Reporting.

Council insurance costs have doubled (up $1.9m a year) since the previous LTP three years ago and interest rates have pushed up interest costs by $1.6m a year.

“We’ve been diligent, looking for what we can cut, looking for efficiencies and prioritising what we do.

“If you take off the rates increase due to interest, insurance and the kerbside collection, the increase in rates for running the council and business as usual is small.”

The Whanganui port redevelopment is one of the council's most costly investments. Photo / Moana Ellis

The rates increase is provisional until Whanganui District Council adopts its Long-Term Plan (LTP) and rates resolution for 2024/25 on July 16.

Key spending decisions for the 10-year plan included canning a $55m proposal for council-led development of a hotel and carpark, and putting a $3.3m tram tracks project on hold.

The proposed sale of $16m of unspecified assets has also been ditched to allow more research and community engagement.

Removing asset sales from the plan means the council will not rely on selling assets to achieve the rates forecast in the plan. It has instead identified an extra $450,000 a year of investment income from its investment properties, including the recent purchase of properties in the CBD, to help offset rates.

Decisions on services:

• The Davis Library will close an hour earlier on weekdays and two hours earlier on Saturdays, from 1 July.• The Whanganui East Pool will open next summer ($340,000). Capital funding of $2m has been included while the council explores a long-term plan for outdoor swimming.• The Repertory Theatre will go up for sale with the existing tenants offered it first for $1. If a buyer can’t be found within a year, the council will move to demolish the theatre.• The aviary at Rotokawau Virginia Lake will be closed and the birds rehomed.• Mainstreet hanging baskets will stay as a summer-only display ($47,000).• The council will retain ownership of New Zealand Glassworks. Offers to buy it will be considered.• Gonville Library days and hours are unchanged.• Rural rubbish drop-off points are unchanged.• The Winter Gardens will stay open.• Contestable community grant funding will increase by $100,000 a year.

Long-term investment: Many of these projects will have no impact on 2024/25 rates.• Funding for roads, footpaths, and drinking, waste and stormwater will be increased.• The council will not invest in developing a hotel and car park, saving $55m, but will include $200,000 in the 2024/25 budget for a feasibility study to attract potential developers.• A new stage house and fly system will be put in place at the Royal Whanganui Opera House, subject to a satisfactory business case and external funding.• Grant funding of $3.5m will be provided for marae upgrades from 2028-2034.• $1m will go to the Whanganui Surf Lifesaving Service for a new operations centre and tower.• The proposed Pākaitore Historic Reserve crossing will not proceed, saving $830,000.• The Rapanui Road trail will not proceed, saving $1.9m, but $500,000 of provisional capital funding will help the community kickstart fundraising.• Youth initiatives will have a budget of $40,000 to make recommendations on the appropriate structure for a youth council or advisory group.

Other big projects:• A business case has been started to replace Dublin Street Bridge (estimated cost $69m). The council will seek NZTA Waka Kotahi funding of 62%.• $1.6m for Splash Centre improvements, including refurbishing the gym and retiling pools.• $1.4m to replace the running track at Cooks Gardens, improve drainage and replace lighting towers.• $1.6m for the North Mole, including a new carpark and amenities.• $4.1m for playground replacements.• $15.6m to maintain council buildings and housing.

LDR is local body journalism co-funded by RNZ and NZ On Air