Farmers and other Environment Canterbury (ECAN) ratepayers should be concerned about what New Zealand’s largest regional council is proposing as an increase for the next financial year.
At the moment the +24.5% increase looks to be locked in as all but 4 councillors (of 14) have approved the increase. It’s not as though ECAN has been holding back increases over the previous years as the ECAN graph below shows.
In the five years leading up to 2021 the average rate increase has been over 5.6% with the high point being +10.5% in the 2019 year. However, this year's +24.5% is in a different league.
The justification for the rise is to meet the government's Essential Freshwater package, reduce emissions from public transport, COVID-19 economic recovery, flood protection and climate change.
Judging by the response of environmental groups, there is a feeling that the programme is to target farmers. What is difficult to see is how the extra funding is actually going to make any real difference.
There is to be an increase in compliance officers and water monitoring but given the vast majority of farmers are adhering to the new regulations around stocking and fertiliser usage where the additional money is to be spent appears unclear.
Reading the ECAN documents, despite the fresh water initiatives receiving much of the blame for the increases, looking at the ‘bubble graph’ (compliments of ECAN) the large brown bubble relates to urban transport, a service which the rural sector receive very little benefit from.
The issues that have created the problems with Canterbury’s waterways have taken generations and it is going to take a similarly long time to get the situation cleaned up. ECAN is already receiving additional funding from central government in the form of $46 million from Waka Kotahi NZ Transport Agency to assist with public transport and another $23.3 million for the wilding pine control plan.
While the rates hike is not yet set in concrete and there is an Option 2 which dilutes the +24.5% down to +18% it is clear from councillors’ statements that the Option 1 is the preferred option.
The public do have the opportunity to put in submissions up until April 11th however whether +18% or +24.5% nobody except the most strident environmentalists will be happy.
Today the Otago Regional Council lifted the ante up a notch with their initial plan showing a +73% increase. No doubt this will (also) be pruned away at before they settle on the what the highest figure they feel the public will wear.
In its Long-Term Plan consultation document for 2021-31 it said its preferred option was general rates increases of +73% in 2021-22, +16% in 2022-23 and +7% in 2023-24. It was also proposing targeted rates rises of +29%, +18% and +14% in years 1 to 3 respectively. Overall rates are proposed to go up by 47.5% in 2021-22. The other option was using borrowing to pay for increased spending and to smooth the rate rises over the next decade.
A somewhat dated graph showing local government spending (local Government Cost Index LGCI) versus the Consumer Price Index (CPI or inflation) reveals that even back in 2011 projections were looking dire. Certainly, what has occurred with ECAN and most other Regional Councils shows that the forecasts have turned out to be too conservative with the gap between the two increasingly widening.
It doesn’t take a genius to realise that the world is getting more complicated, the public’s expectations are changing and certainly getting more aspirational. This inevitably means that councils need funding increases greater than just meeting CPI increases however the golden goose cannot keep pushing out eggs for ever especially when there don’t always appear to be any improvement in the services the public receives.
At least six Christchurch City councillors have waded in saying the rise is “this is a completely unsustainable rise and will further hit the back pockets of hard-working ratepayers - at a time when the Public sector should be looking to drive efficiency.”
A snap of other regional councils shows that most have been more constrained and several mention the constraints that COVID-19 has put upon ratepayers as at least in part motivation for trying to keep increases modest. Hawke's Bay Regional council though has also joined the big spenders with a +19.5% rise mooted. Auckland were the Regional council joined with the city in 2010 has kept to a modest +5% with neighbour Waikato Regional Council at +7.5%. Waikato which has similar water issues to Canterbury has managed to only need to allocate 2% (of the +7.5%) to the fresh water reforms.
One option that ECAN seem to have canvassed is borrowing. Given the supposed size of the deficit for Canterbury which is $46 million it would seem prudent to at least look at borrowing as a first option, as Otago RC seem to be considering.
If the amount was spread over a 20 year loan at, say, 4% for the term then the annual cost, including repaying principal comes to $3.38 mln a year. This seems on the surface at least to be a far more manageable option.
The other question that North Canterbury Federated Farmers president Cameron Henderson has asked is where has the 10 years work and $100 million already invested into working towards getting freshwater nitrate levels down to 6.9 micrograms of nitrogen per litre gone.