Share your views on our revised draft budget

Mayor Lianne Dalziel explains how the COVID-19 crisis has impacted on Christchurch City Council's finances and invites public feedback on the organisation's new draft budget.

The world has changed dramatically over the past few months and we have all been affected in some shape or form by the COVID-19 pandemic.

Many businesses and individuals have been forced to rethink their plans and finances as the impacts of the lockdown, the border closures and the worldwide recession have hit home.

Christchurch City Council’s finances have been hit as well. We lost a significant amount of revenue from the closure of our facilities during lockdown. And the income we were expecting to earn from our companies, like Christchurch Airport, has dramatically reduced.

We will probably end this year with a $33.3 million deficit. Initially we were anticipating a small surplus.

A balancing act

Against this backdrop we’ve reworked our Draft Annual Plan, looking at how we can support our city’s recovery, at the same time as tightening our belt so as not to put too much pressure on our residents and businesses. Getting that balance right is the challenge of this budget.

When we went out with our original Draft Annual Plan in February, we proposed an average residential rate rise of 2.74 per cent and an overall increase of 4.65 per cent.

The recommended budget option trims the average residential increase to 1.81 per cent and the overall rise to 3.5 per cent.

If you own an average-valued house ($508,000) the amount you would pay each week for Council services (such as water, wastewater, libraries, parks & roading) and community facilities would increase from $53.54 a week to $54.51.

We have capped spending on capital projects at $400m, plus $118m for the Metro Sports Facility and the Multi-Use Arena. We have also reduced operational spending by $23m and increased borrowing by $102m over two years.

The operational savings have been achieved through efficiencies across the organisation and new measures such as a recruitment and wage freeze, reducing our use of consultants and contractors, and reducing spending on travel and training.

We also propose introducing excess water usage charges for the top 20 per cent of residential users and resuming the use of glyphosate-based weedkillers, with appropriate precautions in place.

We also want to give a one-off $360,000 boost to the Strengthening Communities Fund so we can help community organisations cope with the challenges of the COVID-19 crisis.

In addition to the recommended budget option, we are consulting on two other budget options with proposed rate increases of 5.5 per cent and 4.65 per cent, respectively. All the options include the same savings on operational expenditure and the same spending on capital. Where they differ is on the scale of borrowing.

Why zero isn't an option

Some will question why we have not put forward a zero per cent rate increase option. If it were achievable in the context of an Annual Plan change it would be an option.  But it isn’t possible.

It is worth remembering we would have got to zero, if we were starting from where we were in February.  Then, we would have needed savings of about $24m.  But because of the losses I’ve highlighted, we would now have to find more than $40m in savings, which would severely impact on some of the core services we provide and a significant number of the projects we are able to deliver.

We would need to shut some facilities or significantly cut back their hours, reduce or stop services, and cut many of our capital projects.

Remember, it requires about $100m of capital expenditure savings to reduce rates by 1 per cent. So, people who say just cut the stadium, would not even meet the 3.5 per cent. And there is nothing on budget for the stadium next year either. I personally think the multi-use arena is essential. Businesses have invested in the central city with the promise that was made with the blueprint, and we have an obligation to fulfil this.

If we were to slash more work from our capital programme, the knock-on effect for our economy and our recovery would be huge.

The Council is a significant purchaser of goods and services from local businesses and provides an important pipeline of work for construction and contracting companies, including sub-contractors. If we literally turn the tap off, it will have a ripple effect that will lead to more job losses and significant economic hardship for the city.

It would also put us out of step with the Government’s approach to the post-COVID recovery, which is to support employment by continuing to build infrastructure. Much of what we do is co-funded by Government agencies, for example, maintenance and renewal of roads.

More work to be done

Another reason we have not included a zero per cent rate increase option is that the savings required would have a major impact on significant levels of service. Those levels were set in the 2018-28 Long Term Plan (LTP) and cannot be changed without triggering an amendment to the LTP.

We are due to adopt a new LTP next year. That’s when we can review all our levels of service and do a lot more belt-tightening if that is what our communities want us to do.

We have a short window to receive your feedback and would welcome your practical suggestions for how we can support our city’s recovery and keep the pressure off rates increases, while still delivering the required levels of service.

In the meantime, the organisation will continue to look for savings and ways of reducing the costs that impact on rates.