Residents to get a say on increasing debt to fund Hutt City growth
COMMENT: Do you want to see Hutt City grow and how are you prepared to pay for it?
Those are essentially the questions Lower Hutt residents are asked to answer in the council's draft annual plan.
Not since the days of Mayor Percy Dowse has the city faced such a big issue.
Dowse built much of the city we now take for granted.
* Hutt City proposes using debt to fund growth
* Big rates rise for Lower Hutt's poorest ratepayers
* New valuations for Hutt City
* Regional council rates to rise by 5.6 per cent
* Walter Nash Centre celebrates first birthday
He went on a spending spree that saw libraries, pools, sports grounds and council buildings spring up across the city.
After World War II, the population of the city grew rapidly as returning servicemen started families in suburbs like Taita and Naenae. In the 1960s there was a boom in Wainuiomata, earning the area the nickname Nappy Valley.
Growth was backed by large employers like Gear Meat and Ford, the Woburn Railway Workshop and Griffiths.
Since the 1980s, however, the city has stagnated economically and population-wise.
The current population of just over 100,000 is predicted to grow slowly over the next 20-odd years.
Mayor Ray Wallace is pushing the need to rejuvenate the city through projects like the $39 million Hutt River Promenade, the events centre currently under construction, and sporting and community hubs. Projects that have been built include the $12m Walter Nash Centre and $5.3m Avalon Park upgrade.
The only problem with such a strategy is that someone has to pay.
For a council there are essentially two choices, rates or debt.
Hutt City is now proposing to use debt to fund its growth.
By doing so, it can keep rates increases relatively low and spread the burden across generations.
It is a strategy, however, that has fish hooks.
As Max Shierlaw has pointed out ultimately debt has to be repaid and that can only come from rates.
In other words, there is no such thing as a free lunch.
The council's line is that rates are tagged to the rate of inflation, with an extra 1 per cent added to help fund growth.
That theoretically delivers an average residential increase of 2.3 percent but that is where it gets tricky.
Throw in recent revaluations to residential properties and changes to the business differential and the increase jumps to 5.1 per cent.
With some tinkering to the business differential, the increase falls backs to 4.3 per cent.
Politicians will argue the revaluations and differential changes are factors beyond their control.
The bottom line is that the rates increase is a large one, well above the Cost Price Index of 1.3 per cent for the 12 months before December 31, 2016.
Wallace believes that using debt as fund growth is a "bold" move that will have a similar impact to the strategy driven by Percy Dowse many years ago.
The council's 2017/18 Draft Annual Plan asks residents whether they agree with the mayor and if so, how they want to pay for the growth?