Annual Plan 2023/24 Frequently Asked Questions

Consultation is open from 5.00pm Thursday 27 April and closes at 5.00pm on Saturday 27 May 2023.

View the Consultation Document.

This can be done online, or by picking up a copy of the Consultation Document in the Wairarapa Midweek of 3 May, or from any of our libraries or the Council office.

Rates are charged for the services you have access to and benefit from, and parts are based on the value of your property.

The cost of services the Council provides have increased dramatically (as it has for households and businesses).

We only have a small ratepayer base of a little over 7,300 compared to the size of our district, and these costs need to be spread across that small base.

Another factor unique to our district is the fact that we have three main towns, which means three sets of libraries, three town halls or venues, three wastewater and drinking water systems, three swimming pools, and so on.

We also have ageing infrastructure meaning that buildings, roads, footpaths, culverts, pipes and water systems need serious maintenance as many are past their use by date and at risk of failing.

Like our household costs, all these essential services now cost more than they did in previous years and that is why rates are going up.

The proposed increase is a change to the 3.19 per cent forecast in our 10-year Long Term Plan for 2023/24. The 2021-31 Long-term Plan (LTP) was written in 2021, when the economic environment we operate in was significantly different.

Some of the factors that have driven our costs up include the unscheduled cost of responding to seven major weather events last year, which have depleted our road funding reserves.

Other major areas of cost increases are:

• Inflation costs, which have caused an increase in total rates of 5.5%,
• Depreciation costs, which have caused an increase in total rates of 4.4%
• Increased demand for Council services, which have caused an increase in total rates for personnel costs by 4.3%
• Risks in the IT world, which have forced us to increase our IT budget, causing an increase in total rates of 2.3%.

Even if we did not add any other costs, uncontrollable costs such as inflation, depreciation and interest rates add up to over half of the 15.9% rates rise.

The $9.7m total surplus includes a gain from revaluation of our investment assets such as land and buildings that SWDC rent out, and carbon credits we received from tree plantations on council land. These assets have to be revalued annually for accounting purposes, and the gains contribute to total surplus, even though we haven’t received any cash from the gain, which in 2021/22 was $1.5m

The other gain Council has to include in the total surplus is the value of assets given to us, e.g. footpaths, pipes, and storm drains created by developers. These are known as vested assets. Council don’t pay the developers for them, but we do take on the maintenance of them after they’ve been vested. In 2021/22 SWDC received $2.4m of vested assets.

These revaluations and vested assets show that our assets have risen in value, pushing up the surplus. But it is an accounting surplus, in that we have not actually gained any cash for these, e.g. unrealised gains. It should be remembered that assets can also fall in value – again this could result in a loss – in other words, it would not necessarily make a difference to the Council’s cashflow.

So, ignoring the accounting gain from assets, if you take only the operating surplus from 2021/22 of $5.7m:

• $2.8m of contributions from development and subdivision are ringfenced in reserves for new infrastructure and green spaces caused by growth in the district
• $2.2m of rates income, and $1.2m of capital subsidy from Waka Kotahi goes into the depreciation reserve to fund future replacement of assets

None of this income is available to fund general council services, it’s held so that assets can be added or replaced in future. Once $2.8m, $2.2m, and $1.2m has been taken from income and ringfenced for these purposes, the operating surplus of $5.7m actually means that in 2021/22 SWDC received $0.6m less income than the cost of providing services and maintaining assets.

There are a number of additional costs that Council has had to budget for. These include legal fees, hearings, project management for the Long Term Plan, and work on changes to bylaws such as the Freedom Camping bylaw.

The budget under Governance also includes payments made to all elected members, Māori Standing Committee members, as well as the cost for all ceremonies and events such as the Featherston Incident or ANZAC Day commemorations. These costs have been more accurately estimated for the 2023/24 year so as to avoid unbudgeted costs incurred last year.

Operating expenditure is $2.75m in proposed 2023-24 budget, $0.53m (23.9%) higher than 2022-23, and $0.59m (27.3%) more than the LTP Year 3 budget. Some of the year-on-year increase is due to one-off projects such as the LTP, and Freedom Camping Bylaw. We are receiving a grant for the Freedom Camping work.

Our total current staff headcount is 71, consisting of full time and part time staff but not including shared services employed by the other councils.

This number and our total spend fluctuates (vacancies, projects, grants) and it’s not a Key Performance Indicator (KPI) that we measure at a point in time, so year on year comparison of staff numbers is not easily made.

However, the annual report notes the total spend on personnel year on year:

Total annual spend on personnel for the following years ended 30 June including employees, all elected and most appointed members:

• 2020: $4,566,000
• 2021: $5,210,000
• 2022: $5,783,000

Salaries of elected members are set by the Renumeration Authority.

Staff salary negotiations are conducted with the Public Service Association through a collective agreement, as is usual practice in the public service. The total annual spend also includes positions funded through external grants for specific projects and not passed onto ratepayers.

Any proposed new roles are part of long-term planning, and the chief executive cannot add a role that is not part of the Long Term Plan or Annual Plan without going to Council.

Staff increases are often due to the volume and complexity of work. For example, alcohol applications received by the Council increased by about 40% between 2020 and 2021 and by a further 4% the following year (showing it is a sustained increase). Similar workload increases can be seen across building and resource consents, Local Government Information Act requests, media enquiries, and many other areas of unseen work we do.

Pay bands are unable to be provided, because with such small staff numbers, they would risk making the salaries of individual staff public. We do advertise salary bands when we recruit.

Our organisational chart of roles is available on our website.

• Inflation impacts all areas. These inflation rates are split into different categories (eg. the roading, planning and regulatory) and are different percentages based on inflation estimates from suppliers and BERL Business and Economic Research Ltd.
• Depreciation has increased as a result of more assets being added or replaced, and revaluations of our buildings and infrastructure. This has a particular impact on areas with high asset values such as roading, water and community buildings.
• Insurance has increased
• Interest rates have increased, affecting any cost centre that has a loan
• Higher IT costs, which are spread across the organisation (see answer about corporate overheads).

We have made every effort to minimise our costs so that there is as low an impact as possible on our communities. At the same time, we have to maintain certain levels of service.

Council has:

• undertaken a line by line review of each cost area and critically assessed every need before recommending a budget. Proposed costs were reduced further including not funding new footpaths, only repairs; reducing communication costs to primarily using proprietary channels such as the Council website; reducing the roading and water budgets
• proposed reducing its water operating budgets by $679k, which represents a decrease of 3.2% on last year’s total rates
• proposed pausing repayments on water loans for one year, which reduces rates required by $1.862m, which represents a decrease of 4.7% on last year’s total rates.

As you will see below, the water budget is a bare basics budget, and one of our questions to ratepayers for submissions is whether this budget needs to be increased.

Council assets belong to us all and therefore there needs to be community consultation before one is sold. Selling Council assets is something that we weigh up very carefully. We have to consider whether those assets are needed for future generations. Other considerations include whether the proceeds of an asset sale are needed to fund a new asset or another activity in that space.
Most of our assets are used in providing council’s services, and therefore couldn’t be sold even if there was a market for them. Of our $596m of assets, only $16m (3%) are classed as investment properties. Some of these we keep mainly for reasons other than just the income they generate from rents, e.g. the Fell Museum, Pain Farm, and of course the rental income stops when properties are sold.

Additionally, when properties are sold, the net proceeds are ringfenced in a reserve for future asset purchases, not used to offset rates required to operate services.

We cannot speak to the Annual Plan 2023/24 budget of other councils, however there are a range of options that are available for reducing rates increases.

The Local Government Act 2002 requires that councils collect enough from rates to fund operating costs and servicing of assets, once other income has been considered. This is known as a balanced budget. Councils can choose to temporarily have an unbalanced budget, if they consider it financially prudent (i.e. responsible) to do so.

An unbalanced budget would need to be a temporary situation as it means not collecting enough to pay for services, and long-term maintenance and replacement of assets. Having an unbalanced budget also means rates will eventually have to rise significantly to catch up to a balanced budget situation.

Another term for having temporary unbalanced budgets is “smoothing” the rates increases. This relies on the prospect that cost increases will reduce in the future, or more income will be created to fund the costs. SWDC does not have a wide variety of income sources to fund part of the cost of services and assets.

Some Councils may have elected not to fund depreciation costs on their three waters assets, which indicates they have enough in their reserves to pay for their asset renewals. SWDC’s reserves have become depleted from successive years of replacing assets such as failing pipes. Depleted, or empty, depreciation reserves mean asset replacements must be funded by borrowing, which adds interest costs that is paid by ratepayers, and therefore increases rates further.

Some Councils may have chosen to reduce costs by not filling any vacancies. SWDC does not have the luxury of large teams which can absorb the work done by those who leave. This policy also tends to create more pressure and turnover for staff, which impacts on the services delivered.

Some Councils may have chosen not to inflate cost forecasts, which risks budgets being exceeded when suppliers increase prices. Although economic forecasts indicate that inflation is due to reduce in the coming years, SWDC has used inflation forecasts provided by Business and Economic Research Limited (BERL) as part of prudent budget planning.

Some councils may have chosen to take fund increased operating expenses with debt rather than rates.

All of these measures simply push the problem of increasing costs ahead to future years and generations to deal with.

Funding through debt means a shock for ratepayers when the normal costs have to be funded from rates in following years, plus the added interest costs kick in. Borrowing for operational costs is something SWDC tries to avoid, and ignores the balanced budget requirement.

Budgets have been kept low across the board – each area has taken a liny by line review, and worked on their budgets to minimise them as much as possible.

Corporate overheads are the costs of running the parts of the organisation that don’t deliver services to the public directly but support them indirectly (such as Finance and Corporate Support).

These include the operating, finance, personnel, and occupancy costs of the following areas:

• Customer Services and Administration
• Communications
• Human Resources
• Corporate Facilities and Equipment
• Information Technology and Management
• Finance

We allocate these to “external” activities so that we can charge fees, or collect rates, to pay for them.
Every cost centre has some corporate overheads applied: when the corporate overheads overall go up, so do those of every cost centre. The big increases in these internal activities have been:

• Inflation
• IT, particularly software licences
• Valuation and audit costs that only happen in LTP years

We review how these costs are allocated in every Long Term Plan. An example would be how the personnel costs of the above areas are split across the other activities.

All external Significant Activities get a share of the internal one, Finance and Corporate Support. Because Finance and Corporate support has gone up, so does the share of corporate overheads.

Overall, total rates income required is increasing by a proposed 15.9% or $3,376,671 (excluding GST) compared with the 2022/23 year. This amount is allocated across all ratepayers depending on the rates their property is liable for, and the land value of their property.

This allocation is done using a rating model, which is currently being reviewed by Councillors. This review is to understand whether the current allocation system remains a fair and equitable system, or whether it needs to change, and if so, how.

Urban rates were at a similar level to rural rates before Council applied the cost reductions by reducing water operating budget and pausing water loan repayments.

As water costs are primarily charged to urban ratepayers, reductions related to water costs therefore benefit urban ratepayers.

Their rates increase has been minimised as a result of these cost reductions while the rural rates increase remained at the original level.

Prospective Financial Statements will be included in the final Annual Plan. The Local Government Act 2002 states that they must not accompany the Consultation Document.

As the differential is applied to each dollar of land value, properties with higher land values will experience a higher impact in the change in differential.

As the costs of Council rated through the General Rate have increased, higher value properties have experienced a larger increase in their General Rate.

If the costs, and therefore differential, had decreased, the higher value properties would have had a larger decrease in the General Rate.

In the 2022/23 year, Council approved unbudgeted spend on Software as a Service (SaaS) licences rather than on-premise costs of replacing servers. Because these costs weren’t in the Long-term Plan, this is an increase in budget. BAU would have represented remaining on our own servers, which were failing.

Pain Farm usually makes a small surplus, which goes into the reserve. In 2023/24, the proposed budget is for a deficit, and the rates model allocates this to the UAGC.

The Rating Review is currently underway and will be consulted on in the second half of 2023. The ring-fenced savings from 2021/22 were offset in 2022/23; this reduced the rates in 2022/23 by the amount of the savings carried forward.

There are several components to our rates. The UAC, also known as the Reserves & Civic Amenities Rate, is a charge that is applied to all properties regardless of their size or value.
It pays for the district’s

• Parks and reserves
• Campgrounds
• Swimming pools
• Community buildings
• Public toilets.

This should not be confused with the Uniform Annual General Charge (UAGC) which pays for:

• Libraries
• Cemeteries
• Senior housing
• Economic & community activities
• Elements of public protection (building control, environmental health)
• some of Governance (52%)
• some of Refuse & recycling (40%).

The UAGC makes up 26% of the total rates proposed in 2023/24. If you exclude water and sewerage from total rates, UAGC makes up 35%; if you also exclude refuse, it makes up 38%. This is due to the way our rating model is set – tied to activities rather than a percentage or fixed amount of non-targeted rates. The formula for the UAGC is included in the review of the rating model currently underway.

Depreciation costs are funded by the same rate that funds the other costs of that activity , for example, depreciation on drinking water pipes are paid for through the Water Supply targeted rate.

The only depreciation costs that are paid for by the UAGC are those from the activities paid for by the UAGC, e.g. libraries, cemeteries, senior housing.

The General Rates is the only Council rate that is based on land value. It pays for the district’s:

• Roads & footpaths
• Urban stormwater (only levied on urban properties)
• the remainder of the district’s Governance costs
• elements of resource management (district planning) and animal control that are not covered by income from fees such as planning consent and dog registration fees.

For this rate a ‘differential’ is applied, to each dollar of rateable land value, to determine the cost per rating unit. This is where an above average increase in land value, such as during a revaluation year, would result in an above average increase in the General Rate applied.

The property revaluation completed by QV in September 2020 resulted in greater urban land values than rural land, except for lifestyle blocks which had a significant increase. The next property revaluation by QV is expected in late 2023.

Rural ratepayers are those who own properties in areas zoned as rural within South Wairarapa district. This includes properties that have been sub-divided as ‘lifestyle’ blocks within rural zones.

Rates are charged based on the services ratepayers have available for use and the value of their property. Rural ratepayers that are not connected to town water supply are charged for:

• Maintenance and extension of rural roads and culverts
• Access to pools, libraries
• Care of cemeteries, parks and reserves
• Community buildings, senior housing, and public toilets
• Governance costs and elements of resource management/planning
• Some also pay for the maintenance of water races on their properties.

Rural ratepayers also contribute to the Rural Road Reserve, set up to respond to emergency events. This was used to respond to the recent cyclone related events that caused major flooding and landslips on many rural roads.

The Consultation Document asks if this contribution should stay as is or be increased.

As stated earlier, urban rates were at a similar level to rural rates before Council applied some cost reductions by reducing the water operating budget and pausing water loan repayments. As water costs are primarily charged to urban ratepayers, reductions related to water costs therefore benefit urban ratepayers. Their rates increase has reduced as a result of these cost reductions ,while the rural rates increase remained at the original level. See the Change in General Rates graph for further detail.

In 2022 the Taxpayers Union found that SWDC’s rural rates were amongst the lowest rates in the country, 63rd out of 66 councils.

Rates are charged for the services you have access to and benefit from. While rural residents may not be users of town water supply or have their rubbish collected, they are users of the roading network and benefit from wider public services that are available to all in our communities.

The Land Transport operating budget is a key factor in rural rates. A cost of $7.34 million was proposed for 2023/24, that is an 19.3% increase on 2022/23.

Essentially the differences between the increase in the General Rural rate and the General Urban are:

• An increase in animal control and bylaws costs which is 100 per cent funded from the rural rate
• A nearly $800,000 increase in Land Transport costs on last year. Land transport (roading and other transport related work) is shared between urban and rural ratepayers (30% urban, 70% rural). However, the urban share of the increase is partially offset by a pause on urban footpath extensions.
• Urban ratepayers also benefit from a small decline in stormwater costs on last year, an expense which is solely funded by urban areas.

The targeted rates paid by rural ratepayers are different for each property, but can include:

• Uniform Annual General Charge, proposed to increase by 45% for all liable ratepayers, rural and urban.
• Rural Reserves & Amenities rate, proposed to decrease by 5%, compared to an 8% increase for the Urban Reserves & Amenities rate.
• Refuse Collection Levy, proposed to increase by 16% for all liable ratepayers, rural and urban.
• Water Supply, proposed to decrease by 3%.
• Wastewater Charge, proposed to decrease by 5%.

Each rating unit (property) has several components to the rates levied. South Wairarapa has a range of rates that it levies in order to fund services and assets:
General rates

• Uniform Annual General Charge (UAGC)
• General Rates (Rural or Urban depending on the property’s zone)

Targeted rates

• Reserves and Amenities (Rural or Urban depending on the property’s zone)
• Refuse and Recycling
• Water Supply
• Wastewater (sewerage)
• Longwood Water Race
• Moroa Water Race

Many rural ratepayers are not serviced by water and sewerage, or rubbish collections, and aren’t levied for those rates.

All areas of SWDC’s services have been impacted by increased operating costs due to inflation, increasing insurance premiums, interest rates, depreciation on assets, and IT costs.

Water, wastewater, and stormwater budgets have been reduced in the proposed Annual Plan, by setting the operating budgets lower than the previous year, and by not funding loan repayments for the year. These savings only impact the water, wastewater, and general urban rates as these are the rates that pay for those activities.

So, savings that have been made this year only impact urban ratepayers and rural ratepayers that can be serviced by water and wastewater.

Also, a recommendation to pause new footpaths will save urban ratepayers $205,000 but it does nothing to reduce rural rates. New footpaths are not paid for by rural ratepayers, so the saving only goes to the general urban rate. The decision to freeze work on new footpaths will delay our long-term goal of gradually ensuring there are footpaths on one side of the road for at least 90 per cent of our urban roading network, for the safety of seniors and those with disabilities.

The maintenance of existing footpaths come out of the Land Transport budget which is 70% paid for by the General Rural rates. The urban increase from Land Transport to the General Rate is only $33,000, but the rural increase is $555,000 because of the pause on new footpaths mentioned above. If there had been no pause to adding new urban footpaths the general urban rate would have increased by $205,000 more than is proposed.
Another factor affecting rural rates is animal control. The current rating model states that Animal Control and Bylaws is totally funded from the General Rural rates. Council is considering the split of funding from different rates as part of the current Rating Review.

The maintenance of existing footpaths comes out of the Land Transport budget which is 70% of paid for by General Rural rates. However, new footpaths in urban areas & developments are not paid for by the General Rural rates; these are either paid for by developers themselves, or half is paid for by the General Urban rates and the other half from financial contributions that are kept in the infrastructure reserve.

The current rating model sets 100% of this activity to be rated from General Rural. This could be reconsidered in the Rating Review, currently underway.

We look after a roading network of over 660km. With the exception of certain items like new urban footpaths, the remainder of the net costs of Land Transport, are divided according to the split of land value across the district. In South Wairarapa 30% of the land value is in urban properties, and 70% in rural areas. This is why 70% of the costs of Land Transport go to the Rural General rate, and 30% to the Urban. General rates can be divided and levied based either on land or capital (land plus improvements) value. The decision on whether to keep using land value or change to capital value is also part of the Rating Review currently underway.

South Wairarapa has an unusually large roading network (over 660km) to maintain compared to the number of ratepayers. While we may be reimbursed for up to half the costs by Waka Kotahi, we must first front foot the cost.

One of the biggest causes driving up roading costs is the damage done to our roads by so many unexpected weather events in the last year.

Slips and repeated emergency work have increased at vulnerable parts of the network, including Hinekura Road, White Rock Road, Gluepot, Tora and Cape Palliser.

These events have used up all the Rural Road Reserve that was especially created by the previous Council for exactly these sorts of events.

The geology of our district also means land movement is a constant.

The roading budget has also been affected by rising costs of supplies like aggregate and the difficulty of sourcing these materials. Our roading contractors have been stretched to unprecedented levels in the last year.

In addition, the roading budget must find room for routine work such as repairing footpaths, crucial maintenance work and re-sealing where budget allows.

Roading is covered under Land Transport – the total operating expense in the proposed budget is $7.34m, compared to $6.15m in 2022-23 (‘last’ year in terms of the AP), or $6.69m for LTP Y3. Not all of this is paid for by rates though.

• The proposed budget of $7.34m is 19.3% more than the 2022/23 Annual Plan budget of $6.15m.
  • So, 2023-24’s Land Transport operating expenditure budget is 19.3% more than the previous year
• $7.34m is 9.5% more than year-3 of the 2021-31 Long-term Plan forecast of $6.69m.
  • So, 2023-24’s Land Transport operating expenditure budget is 9.5% more than the equivalent year in the LTP 2021-31
• The rates required to fund Land Transport have increased by $714k since 2022-23, and are paid for 30% by the urban general rate, and 70% by the rural general rate, once subsidies from Waka Kotahi, and petrol have been applied.
  • for urban ratepayers the increase has been slightly offset by the pause on footpaths saving them $205k, so their increase is lower.

General Rates, split between Urban (30%) and Rural (70%) based on the split in land value across the district.

In the 2023/24 year the budgeted Waka Kotahi subsidy for operating programme is $1.6m, and capital programme is $2.1m. Subsidy is paid, up to Waka Kotahi’s budget, on actual costs, not on presumed forecast spend.

Any road outside of the town’s boundaries and through areas zoned rural are classified as rural roads.

The map from the Spatial Plan shows that the urban boundary, in orange, ends before Longbush Road therefore it is considered rural.

Similarly, Cape Palliser Road is outside of the urban boundary and is considered a rural road. It is also a special purpose road so all of its costs currently are subsidised by Waka Kotahi.

The Rural Road Reserve is an equity fund that is specifically for the purpose of works on rural roads. It is funded through the General Rural rate, and Council can approve its use on relevant works.

At the beginning of the current financial year (2022/23) this fund had just under $1.5m available, but nearly all of this will be used on the Hinekura Road realignment project.

Previous Councils set the rural roading reserve contribution level. There were no calculations involved, the amount was chosen by those Councillors at the time.

The Rural Roading Reserve is funded from the General Rural rate.

The need for safe and accessible footpaths always features strongly in community feedback and is also part of the Wairarapa Region Positive Ageing Strategy, which was adopted by all three Wairarapa Councils in 2019.

Older people and users of mobility scooters – as well as wheelchair users and people with pushchairs – need smooth, safe footpaths to move around towns with confidence.

Our footpath work can be split into new work, renewals and maintenance. In terms of new footpaths, the goal that Council set in 2021 was to gradually extend the urban footpath network so that we have footpaths on at least one side of the road down the whole street. These are streets where there is no current footpath access on the other side.

Our Annual Plan KPI is to have 90% of urban streets compliant with this goal. However, our current budget allocation is forecast to be completely spent. At current funding levels, it will take us more than 10 years to achieve the 90% target for urban streets.

In our most recent funding agreement with Waka Kotahi, no new walking or cycling improvements or extensions were funded. New footpath funding has been frozen in the upcoming 2023/24 year.

Footpath renewals, or resurfacing, is prioritised on the life of the asset. We have an independent condition rating done on all footpaths every two years as part of our Department of Internal Affairs obligations. Very few of our footpaths were found in poor condition, and most of those were metal surface. Overall, our rating was average to good, and we spend roughly $140,000 per annum on footpath renewals across the three towns. New footpath funding has been frozen in the upcoming 2023/24 year.

Our footpath repairs and maintenance budget across the three towns was only $25,000 in the last year and no new money is allocated for this Annual Plan. Council’s team generally prioritise on those that are known trip hazards or health and safety requirements or other such situations. The bulk of problems centre on tree roots and uneven service covers (for sewage and drinking water). If landowners don’t repay us for removing tree roots, Council has to absorb the cost. This further erodes the budgets.

It is not possible to comment on individual rates rises as each situation is different. In general, water related rates primarily affects urban ratepayers who are connected to town supply.

There are a few rural ratepayers who also have this service. Like many parts of the country, the cost of keeping rates low has meant under-investment in our infrastructure.

Since 2021, when we set our 10-year Long Term Plan, there have been some substantial challenges and our forecast budget based on the environment as at 2020/21 is no longer considered adequate for current service levels.

Factors dictating our current water budget include affordability, increased water standards by central government and unexpected weather and other events that have further impacted our plants and pipes.

Although we have pared our costs back to a minimal service level, we are asking ratepayers for feedback on whether this budget should be raised.

This year’s proposed water budget is considered a low cost, but high risk option.

Big projects will include progress on the Memorial Park Water Treatment Plant upgrade, an upgrade of Featherston’s Donald Street Pump Station, Featherston Wastewater Treatment Plant consent and the Martinborough Wastewater Treatment Plant compliance project.

These build on last year’s projects which included repairs to the Tauwharenikau (Tauherenikau) drinking water pipeline, upgrades to the Papawai wastewater pipeline and an expansion of the Waiohine water reservoir.

All this work will make our wards much more resilient in the water space, providing for us now and future generations.

Please read more about the water budget options in our Annual Plan Consultation Document.

Offsetting the increases for urban ratepayers are a reduction in water budgets (which will reduce the increase in total rates income by 3.2 per cent) and a one-year freeze on water loan repayments (another 4.7 per cent reduction in the increase in total rates).

Our Liability Management Policy states that Council sets aside deposits to accumulate progressively to prepare for repayment of loans, but is not explicit about collecting this in even amounts each year of the loan term.

As SWDC expects central government to pay us the funds to settle water and wastewater net debt within the next three years, pausing principal collection for water and wastewater loans was considered to be a prudent method of reducing rates increases in 2023/24.

The current Annual Plan exercise is for the 2023/24 year and no decision is being made, at this point, whether to resume collection of the principal in 2024/25 or continue not collecting rates for water and wastewater principal in the run-up to water entities going live.

If principal collection resumes in the 2024/25 year there will be an increase of $1.8m (15.4%) to total rates required plus any other increases, such as the additional principal collection for new loans taken out in 2022/23 and 2023/24.

The proposed deferment to water loans are for those taken out since 2015/16 to pay for Water Supply and Wastewater infrastructure, such as the Manganese Reduction Plant, and Wastewater Treatment Plants.

Water Supply loans total just over $2.6m, and Wastewater just under $18.3m, with further borrowing for both areas budgeted before the end of June 2023. The deferment is only for 1 year and would have added a further 4.5% to the rates paid by those ratepayers who are connected to water supply in 2023/24 if Council had not made this proposed decision.

In order to make up for the deferred water loan principal repayments, approximately $55,000 per year would need to be collected from rates for the remaining terms of the loans. These loans have between three and 34 years remaining on their terms.

These are loans specifically for Water Supply and Wastewater infrastructure, not connected to the 2020/21 Smoothing Loan.

However, if Council decide to resume funding loan principal collection in 2024/25 (the year after the Annual Plan currently under consultation) then it is correct that ratepayers who pay Water Supply and Wastewater rate will experience a significant increase as they will have that portion added back into their rates, and any increases in costs for that year.

Small district councils like South Wairarapa cannot afford to maintain rapidly deteriorating water infrastructure networks. This is an issue across most of New Zealand.

The Government has presented a solution in the form of Three Waters, now called the Affordable Water Reform.

Your elected members are waiting on the detail of the planned reforms to understand the likely impact on our region. Information available to date is shared on our website.