GDC faces deficit of $5.1m
RATE increases of between 4.5 and 6 percent could lie ahead for ratepayers after Gisborne District Council ended its financial year in June with a deficit of $5.1 million and expenditure up on its budget by $10 million.
A $6.3 million increase in roading- related expenditure and additional expenses of $3.7 million are blamed for the deficit announced for the 2016/17 June financial year.
The shock was slightly mitigated by news that Gisborne Holdings Ltd will pay a higher dividend by $1.2 million than shown in its statement of intent.
Council chief executive Nedine Thatcher Swann says the deficit presents a challenge to the new council sworn in a year ago, as well as to her and her new management team.
“A lot of this expenditure is due mainly to roading maintenance,” she said.
“The council made changes to the roading service and contracts in 2015. While the initial business case was a move to provide financial savings, the actual expenditure has continued to be over budget.
“This was not a result anyone was wanting and we don’t want this happening going forward.”
“We have been working hard to understand how and why the deficit transpired and what we need to do to set the council back on track.
“Work planned in the 2017/18 annual plan will continue, however we will cease non-essential work.
“Our future focus is on ensuring that the council minimises the impact of the deficit for the 2017/18 year and resetting the budgets and service at the right levels through the long-term plan process.
“This includes revising our bid to the NZ Transport Agency, reviewing our operational expenditure, focusing on priority projects and changing how we fund our work.”
Ms Thatcher Swann confirmed that holding the rates increases at 2 percent in the next (2018 to 2028) long-term plan was not sustainable.
Early indications were that rate increases could be between 4.5 and 6 percent each year, depending on the infrastructure the community wanted the council to focus on and when work was programmed to start.
The council could also choose to pay back its debt over a longer period. These decisions would be made next June.
The council was seeking feedback from the community on what it needed to invest in infrastructure and wellbeing in the long-term plan.
Asked why roading expenditure was $6.3 million over budget, she said it had been an extremely wet winter and $3.5 million of the over-expenditure was related to unforeseen emergency works.
The remaining $2.8 million was spent on maintenance of the roading network.
Major contributors to the $3.7 million extra operational expenses were higher costs for rural fire callouts and increases in a number of accounting provisions and write-offs of bad rates debt.
Internal debt was $70.8 million in 2016/17, compared with a budget of $78 million.
The council’s debt level was considered to be low compared to other councils.
“Our external debt is well below the norm. We use all our available cash and raise loans only when we need. Over the next period this debt is likely to increase to meet our infrastructure requirements.”
Mayor Meng Foon says the community will need to carefully consider the balance between income and expenditure in the next long-term plan.
“The council continues to have relatively low debt levels compared to other councils, at $38 million. However, these levels are not likely to stay the same, given the investment required to maintain the district’s infrastructure,” he said.
“As we head into priority-setting to 2028, the community is invited to provide feedback on the significant challenges that lie ahead, as well as to let us know what things really matter to them across our district.
“Rates will not be an average of 2 percent in the new long-term plan. The final increase is going to be determined by councillors after careful consideration of your wants and needs and the ability to pay.
“Our future projected growth and further pressure on our infrastructure means we will need to increase our rates,” Mr Foon said.