Running a city and balancing the budget: choices, costs and compromise

[This is an extended treatment of the first of my "Top Five Issues" listed on the vote.co.nz website, I'll post the rest over the next week or so]

“Council spending is influenced by many factors such as government legislation, the rate of inflation, community expectations and increasing costs for maintaining and building new infrastructure”.

Mike Reid, Governance Manager, Local Government New Zealand

"You can't please all of the people all of the time", perfectly describes the conflict we face in balancing the budget.  Running a city costs money, you may not personally use some of the most obvious services (eg the library, aquatic centre, museum or sports fields), but can you imagine a city that didn’t have these facilities?

Council is always balancing the competing needs of older ratepayers, families and young people.  One way we do this is build now and pay later.  You call it a mortgage, councils call it inter-generational funding.  For example, the Aquatic Centre has a useful life of 50 years, so payment should be spread over 50 years of rates (and ratepayers). The money is borrowed at lower than average interest rates and forms part of council’s debt.

The council needs to operate in a professional manner as a business, being accountable to you the ratepayers.  Council debt is often compared to a private sector business or a family.  However there are a few significant differences: Council can’t just close down, the kids never leave home and somebody else (central government) makes all the rules.  Unlike your mortgage, Council will continue to pay off debt and continue to borrow more for as long as people live in Rotorua.

Community expectations have risen and tolerance has dropped.  There is increasing demand for toilets to be cleaned, rubbish collected, leaves removed, graffiti erased, potholes and leaking pipes fixed and roaming dogs taken off the streets. When the frequency and demand for services is increased the costs go up.

Each year, the annual plan process requires a constant balancing act between our level of debt and keeping rate rises low.  Opinions often differ around the council table and I can assure you they certainly differ widely between the submissions we receive from ratepayers.

It is routine for all councils to borrow funds for capital expenditure like the replacement of water supplies.  If we don't borrow the money, we have to raise your rates.  For a full list of urban and rural capital works for this year please see pages 16-19 in the RDC Annual Plan 2013/14 www.rdc.govt.nz.

When I sit at the council table I am constantly aware of the need to maintain a city we can be proud of, while keeping rates as low a possible as well as minimising our debt.  This will remain a major focus for me while serving on Council.