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We have had to review our Annual Plan for 2020/21 in light of the effects of the Covid-19 pandemic. We have tried to balance our strong desire to make improvements to our water services and to finish the roll out of our new waste management system, while also considering our community’s ability to pay and helping to stimulate our economy to aid our recovery. We had identified a 5.1% increase in our Long Term Plan for this year, which increased to 6.5% just before the pandemic, but now, after a focused review of the budget, we propose an average rates increase of 4.8% per household.

Rates income makes up only 51% of the Council’s total income. The rest comes from our tourist operations, investments, and fees and charges. The effect of the Covid-19 pandemic on this other income means that we are forecasting an operating shortfall. Some of our costs will also reduce as we delay replacing vehicles and other equipment. With less tourism there is also less cost to run our tourism activities. For example cleaning costs are likely to be less because we anticipate fewer functions at our facilities. Even after these changes, we still have an operating shortfall of $5.2 million next year. We have also signaled $1 million for the recovery plan work and a rates and rental relief package of $543,000 – a total shortfall of $6.74 million.

We have some options of how we fund the shortfall in 2020/21.

When looking at the options, we did explore the option of a 0% increase but decided to create a relief package targeted to those who may be facing financial hardship as a result of the impact of the pandemic. It also means we can continue with our plans to improve water and waste services, while also supporting our community to recover. We could have increased the rates to cover the shortfall. However, we don’t think this option is responsive to the situation people in our community face at this time. This would have meant an average rates increase of 16% per household, or $358 per annum, and would compromise the affordability of household rates in Napier, despite some ratepayers being able to access rates relief (outlined below).

Our proposed option uses some of our savings funds to cover the shortfall – essentially using the ‘money we have in the bank’ rather than borrowing to cover our current expenses.

OPTION ONE (PROPOSED)Reduced rates increase – using our savings funds

Increase the rates by 4.8% and fund the rest by using some of the money from two reserve funds (savings accounts).

We would use $4 million from the Parking Fund, which would leave $5 million in this account for planned work to increase and improve parking facilities, and we would use $2.74 million from the Subdivision and Urban Growth Fund, leaving $5.4 million in this account, which is enough to meet any demands on this fund for the foreseeable future.

OPTION TWO - Reduced rates increase – by borrowing money

Increase the rates by 4.8% and fund the rest by borrowing the money. This option means we would pay the money back over 10 years with interest. We will have to increase the rates starting in 2021/22 and continue with this increase every year until the loan is paid. This is a more expensive way to fund our shortfall in the long-run, and means we will be paying for the funding shortfall for services provided this year for years to come. The cost to borrow for the shortfall would mean a 1.35% average rates increase ($31.50 per annum) per household in 2021/22 and every year for 10 years.

How would the proposed average rates increase of 4.8% per household affect your rates?
Check it out here: Rates Guide or phone our Customer Service team on 06 835 7579 who will access the rates calculator for you.

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