Soaring insurance costs are one of the “big factors” behind Christchurch City Council proposing a 13.24% average rate hike for the 2024/2025 financial year to cover higher expenses from insurance, inflation, and interest rates.
The Council is currently in the consultation stage of its draft Long Term Plan (LTP) for 2024 to 2034 and the LTP’s financial overview shows the cost of its insurance premiums for the 2024/2025 financial period are up 20% or $6.4 million compared to the 2023/24 financial year.
The Council says the “significantly increased” insurance costs are due to rising costs of construction and increased levels of risk in the New Zealand insurance market.
In the Long Term Plan, Christchurch Mayor Phil Mauger says the Council is operating in a tough environment “like every household and business across the city”.
In the 2024/25 financial year, the council is proposing to collect $788 million in rates from Christchurch.
“This Draft Long Term Plan proposes an average rates increase of 13.24%. I am well aware that rates rises have a big impact on your back pocket. It’s a familiar story at this point, but as you prepare your submission, there are a lot of factors such as interest costs, insurance premiums, and inflation, that we have little ability to control,” he says.
In the 2023/2024 financial year, council rates rose on average by 6.41% for existing ratepayers.
The council says in the LTP that it has only “limited control” over approximately 12% of the 13.24% of the proposed average rates increase because of factors like insurance, inflation and interest rates.
In its financial overview report, Christchurch City Council says inflation has added an additional $23.8 million of operational costs to the 24/25 financial year alongside higher interest costs of $14.8 million, due to increased interest rates on new borrowing.
New net borrowing has widened to $2.6 billion over the 10 year period, which is $66.8 billion higher than planned in the previous LTP.
“The servicing cost of the new borrowing is $9.7 million in 2024/25, increasing to an annualised amount of $24.2 million from 2025/26,” the council says.
Climate resilience
In the report, the Christchurch City Council says it wants to accelerate its climate adaptation efforts as well as open a Climate Resilience Fund.
The Council has provided the climate fund as one of its plan ‘options’ it would like to undertake that would speed up work on certain projects and programs – but it would lead to an increase in rates.
The Council says the establishment of the fund could reduce the financial impact of climate change on future generations if the fund is established now.
“During the current 10-year LTP period we could amass as much as $127 million, assuming we started the fund in year two of the LTP. This would have a 0.25% impact on rates (approximately an extra 16 cents a week for the average residential property) in year two of the LTP and then we would add 0.25% to the rate for each year it is implemented. If we rate this to the end of the LTP it will be a 2.25% rate increase,” the report says.
“If we don’t create the fund, the Council will need to consider how it funds future climate resilience actions alongside other competing priorities in future years.”
“Climate change is creating new levels of complexity for our infrastructure and capital projects such as roads, buildings and utilities. Responding to climate risks will be essential over the span of this LTP.”
Alongside this, the council says the Christchurch district faces “diverse climate hazards” from rising sea levels to more frequent extreme weather events.
“We propose to maintain the Coastal Adaptation Planning Programme at $1.8 million per year, which will increase by another $1.8 million (to a total of $3.6 million per year) in 2027/28 as adaptation planning work ramps up across the district.”
“We could bring forward to 2024/25 the additional $1.8 million annually that is currently proposed to start in 2027/28. This would accelerate the Coastal Adaptation Planning Programme and boost overall community preparedness and resilience. The early investment would result in a rates increase of 0.29% (approximately an extra 19 cents a week for the average residential property) from 2024/25.”
Public consultation on Christchurch City Council’s draft LTP is running between March 18 and April 21.
Billion dollar baby
Up in the North Island, Auckland Council’s draft long term plan for 2024-2034 has also recently been released and insurance is in the hot seat as well.
Auckland Council wants to set aside a minimum $1 billion portion of its proposed $3 billion to $4 billion Auckland Future Fund fund for self-insurance, meaning the council wants to set aside funds to cover potential losses rather than buy insurance cover for it instead.
Doing this will “support the council’s ability to better respond to shocks and to be able to fund more expenditure in response to climate change, to contribute to costs associated with a natural event, or provide liquidity in the event of a major financial disruption,” the plan says.
Auckland Council says its property insurance costs have risen more than 44% in the 2023/2024 financial year and going down this self-insurance route will save the council almost $25 million in annual insurance premiums.
“The majority of the council’s insurance premium spend is concentrated on the above and below ground property insurance policies. The best use of the Auckland Future Fund (to save the most premium spend) is assessed to be to provide a significant level of self-insurance on the above and below ground policies with more limited self-insurance coverage for some other insurance policies.”
Public consultation on the Auckland council’s LTP is running from February 28 to March 28. Feedback is then considered in April before all decisions being made in May.
24 Comments
Insurance (6.4m or 0.9%), inflation (23.8m or 3.4%) and interest costs (14.8m or 2.1%) only add up to a rates rise of 6.5%, less than half of the proposed 13.2% rise, so there is still plenty in the council's control. For example the new stadium contributes 2.2%
If they had not spent 10 years squabbling over it, it would have been built by now and for half the cost (and covered by the insurance payout). And earning revenue from events. Priority should always have been given to things that are productive and earn income for the Council and community, over vanity projects like cycle lanes, pedestrianisation of roads, and speed humps on every suburban road.
The rebuild was never going to be covered by the insurance payout.
The agreed global settlement amount of $635m is in addition to the $201m paid by LAPP to Christchurch City Council for damage to the Council’s below-ground assets in 2012 and the Settlement with EQC of $59.4 million (after excess was deducted). CCC was massively under insured, hence the billions in debt after massive taxpayer funding.
I for one use those "vanity projects" and am quite happy for my rates to go into them.
The return on cycling infrastructure is in better health outcomes and there is actually quite a healthy return on investment, As seen in european countries that have prioritised this kind of thing (a simple google search will yield many examples).
Perhaps the government of the day should subsidise them to that end, we know they could use some savings in the health system.
Gavjo, your comment is pure BS! Even in peak hours very few people are on the cycleways. The return on investment (Lack of) will be appallingly poor.
The cost to ratepayers for this vanity project fiasco is massive and the past and ongoing disruption to commuters and business owners is a disgrace!
Such loaded and fact-free language. I'm a commuter too, and thousands more are counted every day. Or do you want to build more car parking buildings to handle growth? Anyway, I'll keep enjoying better health and bank balances and you can keep contributing to the trade imbalance with cars and petrol. But I'm the economic type who has a spreadsheet for transport total cost of ownership... others are 100% dependent on their vehicles and can't imagine another way.
An experienced ChCh city councillor reportedly proudly proclaimed recently that they had been listening and they got it, the ratepayers wanted priority to be given to maintaining basic services to the community. Pity then that they hadn’t been listening to the same message a long time earlier instead of prioritising pie in the sky ventures such as an international jet airport 4 hours drive away from any local catchment and in the midst of their self righteous declaration of a climate emergency. When are ratepayers to be informed of how much debt that vainglorious project has incurred and what they will end up having to pay to relieve it.
They can stop installing speed humps on every single suburban street for starters. Driving to my local supermarket is now a 20 kmph crawl due to all the speed humps I now encounter. Even if the Govt reinstates the 50 kmph speed restrictions, we will not be able to travel at that speed ever again due to all the speed humps.
September quarter inflation always has a special mention for rates increases. You have to hate a system where rate increases are inflationary, and drives companies to increase prices, and workers to demand more salary. The central government has to rein these councils.
Stats NZ. Sept quarter 2023
"Housing and household utilities rose 1.7 percent, influenced by:
- property rates and related services (up 9.4 percent)"
This CCC council has wasted alot of money as I pay 7k a year in rates already in new subdivision , we cant even get the council to remove big lumps of weeds out of the road
The ccc paint the road all different colours ie bus lanes and cycle lanes
There is a road called sparks road in Christchurch that was wide and easy to use and now a great big dual cycle lane has been completed .
This has cut down road space put where 5 cylists an hour use this through a rent survey
The new stadium is adding 4% to rates
Looks like I will $1730 hike in rates
Not long ago a councillor, quite seriously, proclaimed that completing $ millions of expenditure of turning Harewood Road into a cycle way, was essential to stop the main street in Sumner flooding, 30 minutes drive time away. Notwithstanding that the three attempts at properly completing the upgrade of said Sumner main street had not allowed for requisite storm water adjustment to cope with the result of said upgrade. Only fools and horses. Yet they still keep getting elected and that is the root cause of the problem, afraid to say.
CCC are admitting to their poor management in this article. They acted as if the good times would continue for ever, and made no plans for the not so good times that were inevitable. Their only resort is rates increases to cover their bad decisions, but then they knew they had compulsory taxation powers to abuse and pull them out of the consequences of their poor management and bad decisions, so they do not care. "insurance, inflation and interest rates" and build cost increases can all be anticipated, sooner or later costs will increase, and you are vulnerable if you borrow billions and have non fixed cost contracts.
The "Climate Resilience Fund" is a slush fund that will be borrowed against, while they rack up debt. Strange concept, but that is how councils work. This slush fund will be siphoned off to other projects over time, just as the Earthquake funds were. CHCH ratepayers will have a new stadium before the rivers temporary banks are touched.
This council has squandered money. It is bloated, and needs a massive trim just as the public servants are. Evidence of the bloating is in the rates rises well above inflation. The squandered money, numerous underused libraries and pool complexes, land for airports, not to mention the compulsory taxation and giving of the money away.
Now for ECANS 24.2% plus GST increase. Equally unfit.
Silly question, why isn't the council self insured, big companies have worked for self insure, they just put money aside that you where going to pay for premiums into a fund to cover unforeseen events. You don't have to pay for insurance company profits that way.
The way I see it insurance is a scheme which spreads the risk over a lot of people so individuals can protect themselves from events that can ruin an individual, Christchurch is not an individual and should be able to spread the risk over its 390,000 population.
Only rate payers would pay, not the entire population. I cannot imagine babies and children paying.
Imagine an earthquake, peoples houses are damaged, jobs gone, and council demands you pay them 100K to cover the billions of assets they lost. Does not make sense does it, especially as the money from premiums they saved takes decades to accrue and assumes the council does not spend it.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.