Costs being cut, and without 'chest - beating'

HARRY DUYNHOVEN
Last updated 10:03 23/02/2013
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FAIRFAX NZ
New Plymouth Mayor Harry Duynhoven

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In a recent Taranaki Daily News editorial New Plymouth District Council was described as 'chest- beating' about the $1.4 million savings in our preliminary draft annual plan for 2013/14.

Yes, we have published the fact that we have found some, and are proposing further, significant savings following a six-month review of all our activities and services. But we're certainly not 'chest-beating' about them.

Looking for savings and ways to operate more cost effectively is something we do all the time.

Our focus on doing things more efficiently resulted in a reduction of almost $50m in rates for years one to seven of our Long-Term Plan 2012-2022, when compared to the 2009-2019 plan. We didn't 'chest-beat' about these reductions either but it is important that people are aware of them and understand that we are not sitting on our hands while others are trimming their business and household budgets.

These savings of $50m - about $7m per year - resulted from a number of factors, the main one being an ongoing re-assessment of how we manage the community's assets.

By law councils have to put aside sufficient funds, collected through rates, for renewing assets such as roads, sewers and water pipes. We have to maintain a good understanding of the condition of these assets, which are worth around $2 billion.

To use a car analogy, we give the assets regular services to stop them breaking down and costing more to fix or replace. It's important we collect sufficient rates to provide enough renewal funding for such 'servicing'. Our reassessment of this area resulted in us reducing our renewal funding and shaving more than $20m from rates over the seven years.

In addition we also achieved significant rates savings from our aggressive procurement approach and policy of contestable tenders, which secured better prices in major spend areas like electricity, gas, cleaning and telecommunications. And the final piece in the $50m savings jigsaw resulted from lower interest costs as a result of our prudent borrowing polices and lower interest rates.

Our critics claim these aren't real savings because they haven't come from us reducing a service, cutting staff or closing something down. Views will differ but at the end of the day this is money we were going to collect from ratepayers over the next seven years, and now we are not. Another way to see it is that we have found major savings without a slash and burn approach, which would have a negative effect on the community.

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You might now be wondering why rates continue to increase, despite the major budget savings we have found in the last 12 months. On the face of it, it seems strange that rates should be going up when the council is working hard, and succeeding, in reducing its costs and improving its efficiency.

The answer does not lie in issues such as entry fees at the Govett- Brewster Art Gallery. While topical and controversial to some, this has very little impact on rates.

In reality it comes down to major infrastructural projects the council has undertaken, is doing now, or is planning to do in the future.

An enlightening example of this came about last year when the 2012-13 'business as usual' rates increase - for continuing to provide our current activities and services - was well under CPI (inflation) at just 1.84 per cent, or $1.19m.

New capital work - primarily the 15km Waitara to New Plymouth sewer pipeline and the upgrade of the New Plymouth Wastewater Treatment Plant - was responsible for the bulk of the rates increase, adding 2.96 per cent, or $1.89m, to the total amount we will collect in rates over 2012/2013 compared to 2011/12. The picture is likely to be similar for 2013/14, plus at the same time we are proposing to close a major gap between what we have been taking from the Perpetual Investment Fund and what it can sustain in future.

Achieving a sensible balance between the progress necessary to maintain New Plymouth as a great place to live, work and visit while keeping costs at affordable levels is not an easy task. Looking ahead this remains a challenge.

Harry Duynhoven is Mayor of New Plymouth District

- Taranaki Daily News

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