Waimate District Council Emergency Budget Response to COVID-19
Waimate District Council met on Tuesday 14 April 2020 to approve a plan and to progress an emergency budget in response to COVID-19 to reduce the impact on the Waimate District ratepayer.
Council agreed by majority vote to reduce the 2020/21 rate increase to 4.0% from a previously proposed increase of 7.7%.
Following budget workshops during December 2019 and January 2020, the draft 2020/21 Annual Plan overall rates increase was proposed at 7.7% (against a Long Term Plan forecast of 6.7%).
The draft budget includes investments in key infrastructure, including the upgrade of our rural and urban drinking water schemes, sewer and stormwater network, and a drop in income from our Alpine Energy Ltd investment.
The Commerce Commission is the regulator for lines companies and made a decision through its Default Price Pathway three (DPP3) review in late 2019, to reduce the maximum allowable revenue (MAR) Alpine Energy was allowed to make. The intention of this decision was to reduce the cost of electricity to consumers; this benefit will rely on the electricity retailers handing these savings on to consumers. Alpine Energy had to adjust its budget forecast down to include a reduction of circa $15M of annual earnings.
The reduction in revenue flowed through to a review of dividends for shareholders, including Waimate District Council. Shareholders have held several meetings with Alpine Energy and, as a result of these meetings, Council is anticipating a large reduction in rates-replacement income.
Mayor Rowley says“I have stated before that the use of investment dividends to mitigate rates is risky, and now my concern has been realised at the worst possible time.”
“We have spread some project costs over a greater time-span (smoothing) and some borrowings to lessen the impact of this; along with the other measures to minimise the financial disruption of COVID-19.”
“Council has submitted $11.4M of ‘shovel-ready’ water and wastewater projects to the Crown Infrastructure Programme. Any funding provided through this programme are funds we will not need to rate for; and we hope Government sets aside a portion of the funding pool for rural communities and our bid is successful.”
“Ratepayers may like the idea of a rates freeze but it would slow or could cripple economic recovery, because Council would have to borrow money to achieve a zero percent rates increase,” Mayor Rowley commented.
“Deferral of essential infrastructure projects and borrowings come at a cost, and rates would have to be higher in the following years to offset that debt.”
“To offer a zero increase would involve significant borrowings, and I think it would be counterproductive to be shifting that onto future generations, or not being transparent and honest with our community.”