Council warns of likely severe impact on revenue
Revenue modelling undertaken by Tauranga City Council indicates the ongoing effects of the COVID-19 pandemic are likely to have a severe impact on revenue, and potentially on the council’s ability to carry-out vital infrastructure investment projects.
Mayor Tenby Powell says the modelling data shows revenue for the 2020/21 year is likely to be between $53 million and $77 million lower than originally budgeted in its draft annual plan.
“The best-case scenario is that a revenue reduction in that range would halve our capital works programme.
"The worst-case is that our ability to deliver any of the vitally important capital projects on our books would be virtually non-existent, affecting our ability to renew our existing infrastructure, let alone invest in much-needed growth.”
He says Auckland, Wellington and Queenstown are facing similar issues.
“Fast growth councils like ours have no choice but to carry significant levels of debt to fund essential growth infrastructure.
"Our draft 2020/21 annual plan, which is currently the subject of community consultation, reflected the fact that the council urgently needs to increase revenue to avoid breaching its debt-to-revenue covenants, which would in turn affect our ability to borrow through the Local Government Funding Agency at a low interest rate.
“The first draft of the plan was prepared prior to the pandemic lockdown and proposed a 12.6 per cent average rate increase, to allow us to maintain a prudent debt-to-revenue ratio.
"That was pruned back to 7.6 per cent in recognition of the likely effects of the lockdown, but now we will need to look for new solutions, in collaboration with the Government, regional partners and the business community, so that we can play our role in the economic recovery and support local businesses and our residents, which will be so vital as we emerge from the pandemic.”
The council has acknowledged the positive and ongoing conversations with Government ministers around debt funding issues and the Government’s planned economic stimulus package.
Tenby says the council also has strong construction industry support, and the backing of the wider business community.
“The pandemic has had an enormous effect on us, as it has on communities around Aotearoa, but there are some significant opportunities open to us too.
"With Crown investment and support, there is a path that will help lift us out of recession and create the houses and jobs we will need to keep growing through the next decade and beyond.”
The council’s revenue forecasts predict significant reductions in all of its 2020/21 revenue streams, with the worst-case scenario involving a total revenue reduction of about 25 per cent.
Impacts include: revenue from rates down by up to $13 million; user fee revenue down by $20m–$34m; Bay Venues Limited (which runs swimming pools and community halls) external revenue down by $10 million–$16 million; and development contributions and other capital contributions down by $10 million–$14 million.
Tenby says council recognises the need to support local businesses through the pandemic recovery period, but must balance that with the ability to renew essential assets and invest in economic regeneration.
“Even while on a level 4 lockdown, we must lift our heads up and look to our post-COVID-19 future. Jobs and houses are key.
"Tauranga’s priorities post-lockdown are very much focused on the eastern and western corridors, together with residential intensification in existing urban areas, that will unlock thousands of houses and jobs and will enable the western Bay of Plenty to flourish over the next several decades. All of this has been in the planning for years; it’s now time to act.
“That will require investment in three waters infrastructure, transport networks and community facilities. Likewise, we see the state highway and rail routes to the port as critical to New Zealand’s recovery and we would now like to see an active partnership with the Government, Infrastructure NZ, NZTA, Kiwirail and the private civil construction sector, to take hold of this issue and map out the infrastructure needed to support and manage future city development and access to the port.”
Small and medium-size businesses will also be a particular focus and the council will be working with the Tauranga Chamber of Commerce and Priority One to develop and implement approaches which will support the sector’s recovery.