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Group chief financial officer Grant McKenzie, speaking to councillors at the start of yesterday's annual plan hearings, said the extra costs meant there would be a rates increase of 3.5% if no changes were made to the draft annual plan.
The extra costs of about $1.8 million were offset by savings of about $1.1 million - including a reduction of debt servicing costs of $518,000 - which left a shortfall of $689,000.
Dunedin Mayor Dave Cull emphasised at the hearings councillors needed to balance the services provided against the cost.
‘‘We have had pressure on our budgets this year, so there will be some decisions to be made about how we allocate that funding proportionally,'' he said.
Speaking after the hearings, Mr Cull said the council's self-imposed 3% rates limit was important and it was his preference rates increases be kept within the limit.
‘‘Personally, I think we set that limit and it's good discipline to stay within it.''
It was his preference cuts should not involve dumping whole strategies, and instead the council should look at spreading savings across multiple areas.
He did not believe the extra costs identified by council staff qualified as ‘‘exceptional circumstances'', which under its financial strategy would give it reason to go above the 3% limit.
The extra costs identified by council staff were:
●$891,000 for staff resources, including three full-time equivalent staff for water and waste services.
●$360,000 extra to go towards City Care's water and waste services contract to cover more essential maintenance, including additional sewer checks.
●$200,000 towards parks and recreation for Ocean Beach resource consent requirements.
●$176,000 cost as a result of reduced revenue from parking enforcement.
●$96,000 covers the funding of Mosgiel-Taieri Community Board, which the council had earlier proposed getting rid of ($56,000) and pay increases for elected members.
●$33,000 from increased Otago Regional Council rates.
Mr McKenzie said the increased costs for water and waste services were not in response to issues raised by last June's flooding.