The Queenstown Lakes District Council has found that the current funding sources available to it are not adequate to fund the programme contained in its draft 10-Year-Plan, publicly released today, QLDC Mayor Clive Geddes said.

“The Council thinks that years one (2009) to four (2012) are affordable (financially prudent) and necessary for the wellbeing of the District but in the later years of the 10-Year-Plan the programme becomes unaffordable,” Mr Geddes said.

Some of the key reasons why this had happened since the last 10-Year-Plan in 2006 were:

• Better knowledge: Over the past three years the Council has invested in a thorough understanding of our infrastructure networks. It is now clear that there is more work to do on our current assets to ensure they do not fail in the near future than was previously forecast.
• Goal Post Shift: In several cases new standards have been applied to Council activities by Central Government and other agencies. Water standards, and quality standards for sewerage discharge, are two examples that have resulted in substantial increases in the size of the capital programme compared to past forecasts.
• Growth: The single biggest impact is still due to economic growth. Council’s projections, which have been developed and proved accurate, over the past five years highlight that our current District average day population has risen from an estimated 35,777 people in 2006 to 68,305 in 2029. However the Council has to provide infrastructure for the peak day (including visitors). By 2029 the peak day population is estimated to be 137,404.
• New Facilities: The Council and the community have made decisions in recent years to invest in new facilities (Alpine Aqualand, Recyling Centre, Project Pure etc) which have been partly paid for out of debt.

“One of the biggest challenges for Council in this plan, especially in the current environment, is to make judgements about when capital investments will need to be made in order to secure our long term economic future, without imposing unreasonable financial burden on today’s ratepayers,” Mr Geddes said.

The draft plan forecast that by the year 2019 debt levels would reach $413 million.

“As a community we have a small rate base that cannot sustain that kind of debt level,” he said.

As expected by the Council the audit opinion for the plan agreed with the Council’s own conclusions.

“Although in all other areas the Council is delivering sound financial practice and the audit opinion shows confidence in our understanding of those matters and the assumptions that we have made in preparing this plan, the opinion has been ‘qualified’,” Mr Geddes said.

This was because the Auditor General had no choice but to find that the plan could not meet the ‘financial prudency’ test for the reasons the Council had already outlined.

“This opinion confirms the Council’s own view that in the last five years of the plan, debt levels are not affordable. For its part, the Council has chosen to reject a simplistic approach to this problem by slashing capital expenditure for the sake of obtaining a perfect scorecard. To do this without having a thorough understanding of the impacts that those changes might have on this community now and in the future would be short sighted,” Mr Geddes said.

The Council had also rejected the option of applying dramatically increased rates, user charges or property sales for which there is not a sound justification.

“Instead the Council has chosen to maintain rates at an affordable level, disclose the problem, have the conversation with the community and then get on with a solution,’ Mr Geddes said.

And there was a solution.

“We will have three more years as a community before we produce another 10-Year-Plan and our intention is to resolve the issues we have described in the next two years, so that we can approach the next 10-Year-Plan with a thorough, considered, and realistic set of solutions,” Mr Geddes said.

The Council’s intended response to this problem was:

1. The Council has already deferred a considerable portion of the capital programme as far as it considered prudent on current information.  As the Council learnt more about the current economic environment, it may be possible to further defer projects, or some projects may need to be bought forward in order to address changing circumstances.

2. The Council would, alongside other Councils (with similar growth issues), seek access to additional funding sources, and continue to debate with Central Government the justification for some new standards.

3. The Council would over the next two years, engage in a forward review of its current capital programme in regard to a broad range of matters including:

• the justification for projects;
• the scope of improvements proposed;
• whether the technical solution proposed is the best available;
• whether there are alternative funding sources such as private, public partnerships;
• whether the timing proposed is the latest reasonable date at which we can commit to these projects;
• and update project costs on the basis that the contracting environment has changed considerably.

4. Every capital project programmed to occur in the first two year period of this 10-Year-Plan will be subject to additional scrutiny by Council to confirm that the committing of these projects is essential to preserving service levels, promoting growth, and does not contain an unreasonable funding risk for ratepayers.

The Council would be asked to adopt the draft plan on Friday 17 April, pending that decision the draft plan would be open for submission on 22 April.

ENDS

For further information please contact Clive Geddes or Stewart Burns 03 4410499

By: Kiri