Council has assets with a replacement value of about $2 billion that are big enough to cope with significant city growth.
Council has been increasing its investment in asset management planning and is progressively obtaining better condition assessments of its infrastructure assets. This information has led the Council to conclude it needs to increase its investment in both asset maintenance and asset renewal. See pages 8 and 52 of the consultation document for more about this.
The Council’s current debt levels are moderate for a regional New Zealand city (especially given the range and quality of services provided).
Rates levels are comparable with other districts of our size.
Council is planning for medium population and household growth as forecast by Infometrics, plus a margin as required by the National Policy Statement for Urban Development.
Palmerston North has adequate appropriately zoned land or land identified for rezoning to cope with the first 10 years of growth.
Council believes it needs to invest in new and better catalyst projects to meet its vision and goals for the city.
The requirement to find a new, future-proofed solution for how the city manages and treats its wastewater (Nature Calls) provides the greatest single challenge to Council's long-term financial sustainability. At the present time it has been assumed that an acceptable option can be obtained for $391.7 million ($350 million plus inflation) but there is a high level of risk it could be more or less than this.
In order to fund existing Council services and key projects being proposed in the 10-Year Plan, including new capital expenditure of $1,147 million, Council’s rates and debt levels will need to increase – rates are proposed to increase from $101 million in 2020/21 to $188 million in 2030/31 and debt proposed to increase from a forecast $164 million to $860 million.
These projected levels of debt would mean Council’s own prudent borrowing ratios would be significantly exceeded and it is highly unlikely lenders will be prepared to lend to the Council in such circumstances.
The government is proposing major reform which would include the transfer of water and wastewater (the approach to stormwater is yet to be determined) to a small number of regional water entities. Like all Councils our Council is required to plan on the assumption this change will not occur. However, the forecast borrowing required for the Nature Calls project is such a significant component of the Council’s debt projections that the Council is not in a position to develop a credible, sustainable long-term financial strategy.
It is proposed that once there is more certainty about the waters proposals and the favoured option for the Nature Calls project, an updated strategy will be prepared.
Based on these assumptions total rates will need to increase by 6.9%1 in 2021/22, 8.3% in 2022/23, 8.2% in 2023/24, 9.2% in 2024/25, 11% in 2025/26 and increases of between 2.6% and 6.5% in each of the following five years.
Proposed new BID rate
The Council proposes to fund a central city Palmy Business Improvement District (BID) group and to set targeted rates to collect the $250k plus GST to fund the programme. The proposed rates will be charged on all commercially rated properties in a defined area of the central city.