Inflation causing challenges for rates affordability
The current inflationary environment is challenging Council in its efforts to keep the average rate increase and fees and charges as low as possible for the up-coming 2023/24 rating year.
Mayor Weston Kirton said that with the Consumer Price Index (CPI) being over 7% Council was very mindful of the cost of living issues confronting our communities and was working hard to find spending reductions.
“Unfortunately, many of the cost increases Council is facing are significantly above the CPI and in many cases completely beyond our control.
This includes such things as increases in interest payments, depreciation, labour market pressures and contracted supplier charges.
We are needing to increase spending just to stand still and maintain existing levels of service.
Increases in interest payments alone are demanding a 6% rate rise before we even start to factor in supplier contract commitments and other factors.
Many of our major contracts for maintaining critical infrastructure or services are linked to a relevant inflation index.
This means the contracts adjust in response to inflation pressures and we have no choice but to absorb and then pass on the increase.
By way of example the waste management contract has increased by 18% while inflation in the infrastructure area is up 15% both underpinned by significant jumps in operating costs such as fuel, materials and labour.
Another impact of high inflation is that it pushes up asset valuations and with it depreciation costs which has implications for areas such as roading which is a significant driver of rural rates,” he said.
Mayor Kirton said that the combination of these cost pressures on Council was a rate rise starting point of 25%.
“In response staff undertook a line-by-line budget review looking for potential savings and other mitigation options for Council to consider.
This work resulted in a recommendation to Council for an average 8.5% rate rise and a debt level of $61m.
Council has asked staff to find a further 0.5% of savings to get down to an average rate rise of 8% which is considered an absolute bare minimum because of interest rates and contract commitments.
At our next meeting on 22 February Council will decide on a proposed average rate rise which will go out for community engagement with a final decision on the 2023/24 rate increase made at our last meeting in June.”