I’ve heard from many of you in the last few weeks and there are a few things I think need to unpack. Why our lowest option moved to 19%, what we are doing internally to control costs, and what the Simplifying Local Government reforms mean for Waitaki.
Why have we moved away from the original 7% rates increase from the LTP?
Last year, when council set the long-term plan (LTP) the OCR was 3.25% and falling and inflation was around 2.7%. Based on a forecast for an improving economy, they estimated that a 7% rates rise would be needed for the 2026-27 financial year.
This still meant council ran at a loss; an operating loss ($5 million), and un-funded depreciation on water assets for the year ($9 million).
Today the economic situation is very different. Cost increases for fuel and materials since the end of February drove up your household costs and pushed the price of delivering core services for the council even higher.
It was clear to elected members that 7% was no longer an option that would keep the council financially sustainable for the 2026-27 year. Would it have been responsible for us to offer an option that wouldn't work?
We have a $57 million programme of projects — $37 million in water alone — which must be delivered. For our roads, waters and parks maintenance contracts we’re anticipating 30% rises for the next financial year.
These cost increases blow out the predictions made in last year’s LTP. Attempting to stick to a 7% rates rise would mean the council effectively runs out of operating funds and would be unable to borrow money well before July 1, 2027.
July 1, 2027 is important, as that’s when Waitaki’s water assets, debt and projects transfer over the Southern Waters — the new CCO we’ve set up under the government’s Local Water Done Well reforms.
That means the council won’t be receiving water revenue, but it also means the biggest cost and debt driver for the council in the last six years — water infrastructure — will not be a council function.
And yes, that means all our water debt will transfer, too. After that, the council’s biggest capital expenditure will be roading, which is 57% funded by the government.
Here’s what we presented for the 2026-27 financial year and why:
The 19% option covers basic cost increases, and the $5 million operating deficit. We’ll have enough money to deliver services for the next financial year.
The 27% option includes an additional buffer in case of further fuel increases, or supply chain impacts for materials drive the cost of pipes and road resurfacing materials even higher than now.
The 45% option covers all of that and the $9 million of unfunded water depreciation to transfer to Southern Waters next year.
And here’s what wouldn’t have worked:
The 7% option would have been the council pretending it is still July 2025, that we’re not facing energy and supply chain price squeezes, ignoring the reality of our situation.
By presenting financially feasible options, we’re taking responsibility for past decisions and setting Waitaki up for a sustainable future.
Our LTP consultation document, LTP, annual report and annual plans are all audited by Audit NZ on behalf of the auditor-general. Their audit opinion is published in each document as well, it’s required by law.
What are we doing to manage costs?
Last year the council went line-by-line through its budget and cut $7 million out of the LTP. We’ve reduced staffing by 9%, and we’re taking a more commercial and user-pays approach to services.
Next year’s LTP — 2027-37 — will be the first where water services are not part of the council — that’s a big change as we become a smaller organisation as a result. We will be looking at what we do, how we do it, and how it’s funded — including reviewing levels of service for everything we deliver.
We’ve had many submissions to this annual plan with suggestions, and we’ll be using them as a starting point for the 2027-37 LTP.
Simplifying local government
Our financial pressures highlight the need for something to change. That is why we welcome the Simplifying Local Government discussion.
The government has stated it wants fewer councils and wants to see amalgamations. The Head Start process (with a three-month timeframe) gives councils an opportunity to propose new arrangements themselves and has stated if councils cannot do this, then the government will propose amalgamations.
We have a number of options for what our future could look like, and who we could work with. We are in discussions with many neighbouring councils, and will be gathering data around our options. We want to carve out space for our community to join this conversation but need to make sure that includes some understanding of the financial, environmental and representation implications of each option.
The council will be looking to get the best outcome for Waitaki, and these reforms are an opportunity to make services more affordable and sustainable for our communities.
