'Unprecedented financial hardship' - Southern mayors call for rates rise answers

Tim Brown, RNZ Senior Reporter

tim.brown@rnz.co.nz

Vulnerable ratepayers may be pushed to the brink of bankruptcy due to escalating rates rises to pay for Three Waters upgrades, Clutha Mayor Bryan Cadogan says.

He is among a group of southern mayors pleading for the government to offer solutions to a looming decade of big rate hikes, with the cost of Three Waters infrastructure back on their books.

The previous Labour government had suggested creating four mega-entities to manage the country's drinking, waste, and storm water infrastructure.

In the South Island, that would have meant almost all councils' Three Waters infrastructure being managed by a single entity.

Labour watered down its reforms following opposition and instead opted to create 10 entities.

The parties now in government campaigned against the changes, calling them an asset steal, and the National-led coalition government has promised to scrap the reforms.

Cadogan and other critics said that had taken away councils' only affordable path forward.

Labour's solution was the only one which offered the scale and efficiency to do the much-needed work, he said.

Clutha's ratepayers were facing a decade of high rates rises to fund the upgrades, starting with about 20 percent this year.

Even opponents of Labour's reforms were now starting to get it, Cadogan, who chaired one of the reforms' advisory working groups, said.

"Right across New Zealand, councils are facing unprecedented rate rises and the Three Waters issue is now manifesting into what it always threatened to be and what it actually always was," he said.

"It was never about Minister [Nanaia] Mahuta, it was never about co-governance, it was about councils being forced to meet ever increasing environmental standards at a pace that society can't keep up with. And we are now seeing that manifest in the rate rises that are coming through in the LTP."

The LTP, or long-term plan, was essentially a council's budget for the next decade.

If it was not for Three Waters upgrades, rates would be rising about four percent this year instead of 20 percent, Cadogan said.

Rates would continue to go up for the next decade and the cumulative effect would be disastrous, he said.

"At the moment, most councils [rates] are about one dollar in every eight of a single pensioner's income ... I look at our council's trajectory in our 10-year plan and somewhere about year nine or 10, we take them for one dollar in four.

"They can't hold on. That is inconceivable that a budget can be stretched that far. So when we talk about Three Waters, it is coming back to what it always threatened to be. If there is not intervention, if we do not find efficiencies, then we are consigning vulnerable families and our pensioners to unprecedented financial hardship and for many, unfortunately, bankruptcy.

"Society cannot go where Three Waters is pushing it."

Most councils in the South Island were in the same boat, Cadogan said.

Gore Mayor Ben Bell said his district's 13,000 residents would have to find $435 million over the next 30 years.

"It's looking pretty dire. We are, like everyone else, trying to figure out what the new direction of the government is going to be in terms of helping us out, but we can't do it alone," he said.

Central Otago Mayor Tim Cadogan said the bill was looking just as eye-watering for his district.

"We're looking at $100 million in Three Waters in the next three years - $389m over the next 10 years. That's among 26,000 people. And thank goodness, a population of 26,000 and growing because ... those figures aren't achievable anyway but they're worse in a low-growth district," he said.

He remained convinced efficiencies were needed to cover the bill and efficiency did not lie in 67 councils doing things 67 different ways.

"It is a tough pill to swallow but this stuff is complicated."

Financially sustainable model

Local Government Minister Simeon Brown said central government would be working with councils to find ways of paying for the work.

"There's a range of options. We'll be asking councils to put forward how they want to work to have a financially sustainable model and approach to water infrastructure. Some will want to do that by themselves. Others will look to work with other councils in their regions to have a financially sustainable entity separate from the council," Brown said.

However, the key was any collection of councils would be voluntarily opted into by those councils.

But what if there simply was not a financially sustainable model available?

"Councils in that region would work together to find a financially sustainable model for their region," Brown said.

The government had also proposed increasing council debt limits, but Bryan Cadogan hated that idea.

"Offering more access to debt is like offering a drowning man water," he said.

He also found the idea councils could sit "around the campfire" and sing kumbaya was fanciful at best.

Timaru council backs govt changes

But many councils were welcoming the government's moves.

Among them is Timaru District Council, which launched legal action against the previous government to stop its planned merger of water infrastructure.

Timaru Mayor Nigel Bowen said the council had now dropped that legal action.

He was pleased decision-making on water infrastructure would lie with local councils going forward.

"I think you've certainly got to have a national conversation around infrastructure, but I don't believe that was the reason [for Labour's reforms]," Bowen said.

"A lot of that was more control. I think the facts that were put up were wrong.

"The amount of investment councils had in their long-term plans meant they could do that work, and, yes, we understand that there are some councils with a lower ratepayer base that won't be able to and that was the thinking behind why some would need some support. But others won't. I don't think it's a one-size-fits-all."

Simeon Brown said he had spoken to many mayors who were pleased the government had promised to repeal Labour's reforms and return local decision-making.

Councils would have 12 months to find solutions for their districts, he said.