Loan to cushion rate rise cops flak

New Plymouth's former mayor Harry Duynhoven
New Plymouth's former mayor Harry Duynhoven

The former mayor of New Plymouth has labelled the council's moves to reduce rate increases as "extravagant" and "extreme".

The New Plymouth District Council announced last week a proposal to borrow money in order to reduce a forecast rate increase for the coming year from 6.6 per cent to 2.8 per cent.

It is proposed that $2.8million will be borrowed to top up the significantly reduced amount of dividends released from the perpetual investment fund (PIF) of $9.1m.

"I am really surprised at the council proposing to borrow money to lower rates," Harry Duynhoven said.

The former mayor said if the council were to artificially keep rates low, they would eventually jump up more dramatically.

"Future ratepayers, perhaps our kids, will be picking up debt because the current council wants to hold rates low."

He said that under his mayoralty the council had never borrowed external funds to keep rates down.

"It's like borrowing to pay for the groceries, not for the mortgage."

New Plymouth Mayor Andrew Judd yesterday said the funds would be borrowed from an internal cash plan held by the council.

Mr Judd said the plan was put in place by the council in its 2013-14 annual plan. He also said there was no interest charged on the borrowing because it was an internal transaction.

He also said the borrowing would not correlate with PIFs because it was a short-term measure.

The average rate would rise to about $360 a month if rates increase sat near the 6.6 per cent mark instead of the proposed 2.8 per cent, Mr Judd said.

Cr Len Houwers, an advocate for reducing council debit, agreed it seemed odd to be borrowing money to reduce rates.

He said he was unsure of where the money would be borrowed from.

The amount taken from the PIF was reduced because the amount of $16.1m that was originally intended to be taken was not sustainable, he said.

Because of the reduction, he said more money needed to be taken from somewhere else.

Cr Houwers said he would know more about the proposed changes after today's council meeting on the 2014-15 annual plan, but said it sounded "counter-intuitive" to borrow money to offset reduction of rates.

"At some point we'll have to pay it back."

He suggested in order to pay the money back the council would have to reduce costs elsewhere and budget for a surplus.

A preliminary draft of the council's annual plan said as part of rebalancing the PIF and reducing the release payment further the council would run a deficit in 2014-15 of $3m.

It also said as part of the review of the PIF, the annual plan for 2013-14 made a substantial reduction in the dividend release from the PIF from $16.1m in the long-term plan to $9.1m for 2014-15.

This is year two of a three-year plan to reach the new target release of about $8.5m from the fund.

The district council is holding its first public meeting at 2pm today to discuss the preliminary draft annual plan.

Mr Judd said he looked forward to hearing the community's views.

Taranaki Daily News