On hearing increasing feedback in the community about the Gore District Council’s debt, The Ensign reporter Sandy Eggleston decided to chat with chief executive Steve Parry and chief financial officer Luke Blackbeard to find out what the council’s perspective is on borrowing money.
“If we don’t raise debt, rate payers will have to be rated through the roof to finance large projects,” council chief executive Steve Parry says.
The council’s debt currently sits at $19million, although each year $1.5million of debt is paid off.
The council income is $23million a year.
Mr Parry said the council was in a similar situation to many local authorities throughout the country that were faced with many challenges that required finance to fix and were borrowing money for.
“Rising debt reflects that councils are being forced to confront the replacement of aged assets and at the same time upgrade treatment processes in both water and wastewater to comply with higher regulatory standards,” Mr Parry said.
Prior to the late 1990s there was not much forward planning.
“There were no long-term plans, no asset management plans it was just .. if it ain’t broke don’t fix it, and you got by on that basis.”
One example of this was Gore’s 40-year-old water treatment facility which at present did not meet the new standard for water quality.
“We don’t comply because we don’t have the ability to say ‘we can remove protozoa from our supply’ so we need to upgrade our treatment process to comply.”
It was estimated to cost $8million to upgrade the system.
“You just can’t put that on rates,” Mr Parry said.
The upgrade had to happen.
“It’s going to protect public health, it’s not a frivolous activity. The government says we have to do it and, unlike the good old days, the government is not a funding partner.”
Up until the 1980s councils received subsidies from central government to help fund upgrades.
“These subsidiaries are no longer available, leaving ratepayers to fund upgrades on their own,” Mr Parry said.
Chief financial officer Luke Blackbeard said the debt was not out of control.
“The debt’s planned for in the council’s 10-year budget and so there’s plans to repay,” Mr Blackbeard said.
Gore Council Debt Key Points
- Council debt of $19million represents about $1500 per capita compared to Auckland City Council’s debt of $5000 per capita, Kapiti Coast $3800, Tasman $3000 and Hurunui $2000.
- Local government debt increased from 600% from 2000 to 2018 but the Gore District Council’s debt went up 46% in the same period.
- The council pays back $1.5million in debt every year.
- The council can get loans from the Local Government Funding Agency at 4% interest.
- The growth in rates for the district is about 3% per year.
- Council debt is rising because councils now have to replace ageing assets and meet higher standards for services.
- Up until the 1980s government subsidiaries helped pay for for water and wastewater upgrades but now councils have to fund these themselves.