Possible 8.2 per cent rates increase for Nelson

Nelson ratepayers could be facing an 8.2 per cent rate rise next year, as well as a separate annual $330 charge for the next 10 years to help aid storm recovery.

Both have been proposed to be included for consultation in Nelson City Council’s draft Long Term Plan 2024-34, which will be considered by councillors at a full council meeting this Thursday.

The $330 annual charge per household would help cover the $59.8 million bill the council is facing for the August 2022 storm recovery and would be charged as a separate rate annually until 2034 - on top of regular rates.

Mayor Nick Smith acknowledged in his report to the council that this would be a “significant and additional burden for our community”.

However, he says the council has been working hard to find potential savings to reduce costs, and the charge could have potentially been $500 if the Government had not come to the party.

The current flood recovery cost estimate is sitting at $89.5 million, but this has been offset by recovery from insurance of $2.3 million and Government funding of $27.4 million, leaving a net cost to the council of $59.8 million.

Nick says the effect on households could be reduced by extending the payment period beyond 10 years, but this would increase the council’s debt and interest costs.

“The period of repayment is a balance between not wanting to impose an excessive cost today with the increasing risk of not having it paid off before the next natural disaster strikes.

“I do not think it is prudent to extend the repayment period out by more than 10 years, particularly with the known increased risks of weather events from climate change.”

The report states the council could choose not to create a separate rate but to include the cost of the recovery within the existing rates.

“The advantage of this would be a more straightforward rating amount for the community to understand and reduced administration -  it would not, however, acknowledge the significance of the event.”

This Long Term Plan has been described by council officers as “the most challenging in decades” with the council facing “a perfect storm”= of the highest inflation in decades, sharply rising interest rates, and significant policy uncertainty - on top of the extreme weather event.

“This is compounded by households and businesses being under acute financial pressure and unable to absorb the cost of significant rate increases. Council has struggled with these competing pressures and looks forward to constructively engaging with our community as we address these competing demands,” says Nick.

The council is proposing to complete flood recovery work over six years and fund them over 10. This work includes the cost of the emergency, repairs to the damaged infrastructure and facilities, and taking the approach of building back better to improve resilience to future events.

As well as storm recovery costs, Nick cites several factors contributing to the proposed 8.2 per cent rate rise - depreciation and civil construction costs, interest rates, insurance, salaries, and operational costs.

He also says council finances are being adversely affected by reduced dividends from their trading entities such as Nelmac, Port Nelson Ltd, and Nelson Airport Ltd since the last Long Term Plan due to the general economic downturn and difficult trading conditions.

Other councils around the country are also facing hefty rate increases -  a 25.5 per cent increase is on the cards for Hamilton City Council, and 16.5 per cent for Hutt City Council.