Wellington rates: proposed 14% increase, $ 2.7 billion for water infrastructure

The Mayor of Wellington is putting forward the most challenging budget he has ever seen, proposing a 14 percent rate hike for the city.

The capital faces myriad cost pressures including aging water pipes, insurance increases, seismic problems, transportation plans, and its portfolio of affordable housing.

They add to the economic consequences of the Covid-19 pandemic.

But possibly one of the most important and urgent problems is the water problems in the city.

Today it was revealed that $ 2.7 billion has been set aside in the council’s budget over the next 10 years for water infrastructure.

Long-term plan draft documents will be released tomorrow, but Mayor Andy Foster has outlined what to expect in what he says is an infrastructure and resilience budget.

“This is by far the most challenging budget I’ve ever seen, and I’ve seen a few.”

The themes that underpin the budget are making every dollar work, finishing the work the council has started, like the convention center, and focusing on critical infrastructure priorities.

Rates increase

The Herald previously revealed that councilors were facing a 23 percent rate hike as a starting point.

The proposed rate increase for next year is now 14 percent and could be lowered further, Foster said.

“Twenty-three was clearly the highest starting point we’ve ever had.”

But a 17 percent hike option will also be presented to the public, increasing the council’s debt repayment level.

The Covid-19 cost to the council includes lost user fee revenue and Wellington International Airport Ltd dividends, which will take years to recover.

The council has a loan-to-income ratio of 175 percent, and it is recommended that it rise to 225 percent, Foster said.

“The reason we hold it at 225 percent and we don’t go up is that we need to keep some margin if something goes wrong, like a major unexpected event like an earthquake.”

Foster said it was clear this was going to be a difficult year and future rate increases were forecast to be well below 14%.

“We walk a tightrope between the ability of the community to pay the fees, that is a challenge for me, it is not a comfortable place at 14%, but also the need to invest in critical infrastructure, which the community has been calling very strong for. “

When asked if his counselors agreed with what he was proposing, Foster said, “Our council is a broad church, there will be different people who care about different things, but we have a pretty clear focus. I think people she’s coming to the realization that this is a particularly difficult environment. “

Trimming the fat

About 4 percent have been cut from the proposed rate increase from efficiency savings within the council, Foster said.

Its revenue recovery is also slightly better than originally thought when it was launching a 23 percent rate increase.

Some projects will also be postponed, such as work at the Opera, Foster said.

The mayor is also attentive to whether the council needs to diversify its portfolio of assets, which are mainly land and airport leases.

Water

Foster said the council is proposing to spend about $ 2.7 billion on water infrastructure capital and operating expenses over the next 10 years.

More details on how that amount is allocated will be released tomorrow.

There is consensus at the council table that serious investment is needed to reverse the city’s water problems.

“There has been underinvestment in our pipeline network since the pipes were installed,” said Foster.

The total investment includes $ 40 million for two new pipes in the Wellington CBD and other improvements so that sewage can be diverted if existing pipes break.

Civic square

Wellington City Council has already agreed to strengthen the central library after an earthquake at a cost of up to $ 179 million, after it was closed due to seismic concerns.

Foster said the Civic Administration building and the City Office building will also be demolished at a cost of approximately $ 5 million each.

Their replacements will involve public-private partnerships, Foster said.

Transport

The council has made a significant commitment to the $ 6.4 billion Let’s Get Wellington Moving transportation plan.

But the slowness of the project has made it difficult to budget for city councils.

The government has agreed to pay 60 percent of the cost, leaving regional and municipal councils to finance 40 percent.

At this time, Wellington City Council has budgeted $ 220 million for the next 10 years, which is nowhere near the final cost to the council.

Business cases on larger projects like a second Mt Victoria tunnel and Mass Rapid Transit have yet to be published, making it impossible for advice budgeted for them.

Social housing

Wellington City Council has already spent the $ 220 million it received from the Government in 2008 as part of a 20-year agreement to upgrade its social housing stock.

But that was enough to update only half of the portfolio.

It was initially thought that the city council would invest additional money from its rental income.

But rising costs through insurance and a volatile construction industry have put the upgrade project short.

City Housing runs the risk of insolvency if problems are not resolved soon.

Foster said that between upgrades and renovations, the total cost was more than $ 400 million.

He said the council was talking to the government about how to deal with the situation and what funding levers could be used.

That may include a negotiation on the Government’s Income Related Rent Subsidy (IRRS) scheme.

The subsidy means that low-income tenants will pay no more than 25 percent of their income for rent, and the government will pay the difference between that and market prices.

But it is only available to new tenants entering the social housing of Kāinga Ora or the Community Housing Provider.

City councils are not eligible, even though Wellington City Council is the largest landlord in the country.