It’s a chilly weekend morning. My wife and children are at home. I’m in my office, banging away on my computer. I’m here because Hamilton is a city on the brink.
Overseas, we’re witnessing the painful and disruptive effects of governments’ overspending, over-regulating and massive debt accumulation. The debt crises in Greece, Ireland, Spain, Portugal, France and elsewhere are played out most nights on our TV sets. Scenes of anger, violent protest, vandalism and disruption are all too common. It may be comforting to think that it’s all happening in the northern hemisphere, 20,000km away. But that’s an inaccurate assumption. What is happening in Europe is happening across the Western world. It’s happening within our national Government and, more specifically, it’s happening within our local government, the Hamilton City Council.
The council has laid out its 10-year plan. It’s a plan that will leave hard-pressed ratepayers bitterly disappointed if they were hoping for financial respite. The plan is a massive failure. Twice, in the first few pages, the council admits that debt has risen to an unsustainable level. It also confirms that losses over the past five years have resulted from the council spending more than it has earned. Then the plan confirms that spending will continue to exceed revenue for at least the next four years. Yet, despite pages of lame rhetoric and a promise to address the council’s dangerous financial predicament, the draft plan openly projects a decade in which debt, rates and fees rise to, then remain at, historic highs.
The plan lays out the financial challenges facing the council and ratepayers. It advocates a further decade burdened with about $440 million of debt every year and heavy rates increases.
In the 2011-12 financial year, the council slammed ratepayers with an 8 per cent rates increase. The new plan belts ratepayers with another 10 consecutive years of 3.8 per cent annual increases.
Annual inflation is projected to be 2.5 per cent. Every year, the council plans to increase rates 52 per cent more than the forecast rate of inflation. At the end of that dismal decade, our rates demands will be an eye-popping 45 per cent higher than they are now.
Council debt at June 30, 2012, is projected to be $400 million. This is an historic high. But it gets worse. For the next decade, the council expects to grapple with a city debt of about $440 million. This is roughly $8300 per ratepayer.
If the projected debt levels were not concerning enough, there are much greater risks. The council’s budgeting and projections have been notoriously unreliable. The list of blowouts is long, troubling and fiscally crippling. They include the V8 Supercars, Claudelands Events Centre, Waikato Stadium, Hood Street improvements, the never-ending Garden Place renovations, failed commercial property developments and the infamous “Floodgate” episode. Ominously, the council has been forced to backtrack on its development levies scheme. This throws one of the council’s main revenue streams into doubt.
The $440 million debt, high though it is, is not the end of the story. Should the council’s 10-year plan be as inaccurate as its previous plans, ratepayers will be at extreme risk. The council and ratepayers will face a fiscal calamity should interest rates rise from the current historically low levels, if proposed spending cuts don’t eventuate, if development levies fall below projections or if assets sales fail to meet budget.
This risk weighs particularly heavily on ratepayers because, under New Zealand law, the council’s debt is ultimately secured against rateable properties within the council’s area. In other words, the debt is secured over ratepayers’ homes and businesses. Indeed, local-body rates take priority over bank mortgages in terms of payment.
An historically high debt level needs to be funded by historically high cash flows. The council’s 10-year plan has ratepayers fair and square in the gun to fund its past and ongoing excessive expenditure.
Ratepayers are seriously at risk with the council’s proposed annual 3.8 per cent rate increases. Ending the decade paying rates that are 45 per cent higher than they are now is not a plan for growth. It’s a plan for financial disaster.
The latest news from Europe is deeply worrying. Much of it came about because of excessive government debt. Hamilton ratepayers are facing an excessive debt. Soon we could be seeing Hamilton faces protesting on our TV sets.
So here I am in my office on a chilly day thinking about my children. Hamilton’s debt won’t be repaid during the next 10 years under the council’s long-term plan. My children will have to face this debt. They didn’t run up the debt. They couldn’t even vote to stop the $440 million debt from accumulating. But they’ll be the ones who will be expected to deal it after the Hamilton City Council’s 10-year plan expires in 2022.
They have their own hopes and dreams for the future. But excessive rates demands and excessive council service charges could thwart some of those innocent hopes and dreams. That angers me.
If you feel the same way, register your details on the Concerned Citizen website. We need you to help us.