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Growth outpaces revenue in New Zealand’s fastest growing city

Tauranga City Council’s Policy Committee will consider a range of options for the city’s 2020-21 budget and work plan when it meets next Wednesday.

The options involved aim to respond to Tauranga’s rapid growth and the need to invest in essential city infrastructure. 

Mayor Tenby Powell said the options reflected a legacy of under-investment in Tauranga’s future, which now needs to be addressed.

“The truth of the matter is that this has been coming for years and we need to have courage to face the issue and manage Tauranga’s financial position in a bold, but calm and professional manner.  

“It is also important to understand that we are not alone in this, as other growth councils are facing similar challenges,” said Tenby.

“We’ve reached a point where it’s crucial we make the right decisions to manage the extraordinary growth the western Bay of Plenty has experienced, and provide the lifestyle our people deserve.”

Tenby said the current local government funding model simply didn’t work for growth councils like ours. This was reflected in traffic congestion, pressure on water and wastewater infrastructure, land supply and housing issues.

”To put it simply, the funding model is broken. We have to maintain a balance between our revenue and our debt, so that we can continue to invest in the infrastructure the city needs. The revenue side of the equation hasn’t kept up with our needs and as a result, we’re now approaching a situation where our ability to debt-fund new infrastructure will be constrained.”

He said multiple approaches would be required to address the revenue and debt imbalance. These would likely involve:

  • rates increases
  • delaying or reprioritising some capital expenditure
  • developing a collaborative approach to financial sustainability with Government, regional partners and other key stakeholders – particularly the people of Tauranga
  • potential off balance-sheet mechanisms.

He acknowledged the ongoing and positive discussions with Government ministers and officials, which have assisted a common understanding of the issues and will enable the development of potential solution options.

The mayor explained that historically, the council had borrowed money to fund much of the city’s new infrastructure. However, under its borrowing covenants, the amount of debt the council could carry was capped at 2.5 times the city’s annual revenue. Essential capital project commitments meant that debt limit would be breached in the coming years, if no action is taken.

“Next Wednesday, we’ll need to make some key decisions to shape the draft annual plan and feed into next year’s long-term plan,” Tenby said.

“Those processes will involve significant consultation and an honest conversation with the people of Tauranga about the best ways to invest in a sustainable future for our city.”

Information on this year’s proposed budget will be detailed in the agenda for next Wednesday’s Policy Committee (annual plan) meeting. Options for rates increases will be clearly identified and focused on the key issues facing the city, such as transport infrastructure and planning for a growing city.

The agenda will be published on the council’s website by midnight tonight.

Posted: Feb 28, 2020,
Categories: General,

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