Outside Factors Driving Cost Increases

The Council acknowledges the growing cost pressures on our community, with essentials increasing significantly over recent years.

These pressures impact households as well as the Council. Specifically, our ability to maintain services and infrastructure, with growing insurance premiums and inflation making balancing the budget a challenge.

Local Government inflation continues to run higher than CPI. The Local Government Cost Index (LGCI) is 3.4% compared to the Consumer Price Index (CPI) which is now 2.2%.

Inflation over previous years has driven up the price and cost of essential construction and maintenance activities.

This increase affects assets like roads, bridges, and water systems, which are crucial for local communities and heavily funded by council budgets. For example, work commissioned by Local Government New Zealand found that over the past three years, costs have gone up significantly:

Bridges are 38% more expensive to build
Sewage systems are 30% more expensive
to build
Roads and water supply systems are 27%
more expensive to build.

As the value of assets increase, the Council needs to increase the amount we put aside for maintenance and future asset renewal. The council also needs to fund depreciation as a means of meeting its obligations to the LGA of keeping intact intergenerational equity.

As asset values have inflated, insurance premiums need to rise sharply — and this has been between 12% and 30% in the last few years.

This is due to higher inflation as well as more frequent severe weather events, such as Cyclone Gabrielle and recent regional flooding increasing the risks being faced by insurers.

These pressures require the Council to consider options like raising rates or lowering levels of service to balance the budget and manage debt responsibly.

However, it’s important when thinking about the Council’s borrowing that we put this into perspective. In 2023/24 Council’s annual operating revenue was approximately $127m, with net debt sitting at $177m.

This is a 1.3:1 debt to income ratio and well under the Government threshold for a growth council. This is also backed up by community-owned assets (roads, reserves, water plants etc) valued at approximately $2.8 billion.

For a household comparison, most mortgage borrowing in New Zealand is capped at a 6:1 debt to income ratio (for owner occupiers), many of whom have their home as their major asset. This common debt ratio is 2.4 times higher than Council’s self imposed limit and 4.3 times higher than Council’s debt currently.

Waimakariri District Council is financially in good shape. We know this because Council’s financials are audited annually by Audit NZ and credit rating agency Standard and Poor’s has confirmed its AA-/A-1+ with a stable outlook for the Council. For comparison, most major New Zealand retail banks have a Standard & Poor’s Rating of AA-.

It is important to the Council to balance affordability for residents, especially when we know households are under pressure, without compromising our position as a financially prudent Council that plans for growth as well as the maintenance and replacement of community assets.

For this reason, in the Draft Annual Plan, we have chosen to continue the direction set out in Year 1 of the LTP where we do not fully fund depreciation to ensure rates increases remain manageable. However, this is not a viable long term strategy which is why we are progressively funding depreciation in subsequent years.