Last week. Whanganui Mayor Andrew Tripe revealed a medium rates scenario for next year of 9.5 per cent.
Fermor said that was likely to go up as a result of the insurance bills.
The council’s insurance premiums now total $4.55m, with infrastructure rising from $975,500 to about $1.6m and material damage rising from $1.55m to $2.49m.
Eight or nine other policies have gone up from a combined total of $364,800 to $473,000.
Fermor said increasing deductibles - “what the council pays before insurance kicks in” - and changing policies were options to reduce those costs, as was selling council assets.
“Do we say for some assets, we’ll replace for functional costs? If it burns down, we wouldn’t replace like-for-like.
“We may replace it with something different or we may not replace it at all - maybe we get insurance for demolition costs only.”
There needed to be discussions with brokers about whether the increase in premiums was a one-off to reflect events such as Cyclone Gabrielle or if it reflected a paradigm shift in costs, he said.
“Is $4.5m the new norm - that becomes the base and premiums go up from there?
“This is not a sustainable thing going forward.”
Tripe said the news was a very real example of the impact “the three ‘I’s” - inflation, interest rates and insurance - had on rates.
Whanganui Deputy Mayor Helen Craig said it sounded like the council had already accepted the increases and asked if there had been an opportunity to renegotiate before the invoices arrived.
Fermor said the council received an indication premiums were going up and had budgeted for that - “but not at this level”.
“We are really at the stage now where we need to pay these invoices because it covers from November 1 this year. We don’t have much choice over this.
“The choice will be going forward for next year’s premiums.
“This is an uncomfortable situation, so we will obviously take [a lesson] from this.”
Council chief executive David Langford said officers had been taken aback by the increase in premiums.
The invoices were received at the end of last week.
“At $1.6m, there is a 2 per cent increase to rates. $4.5m - the total cost of our insurance - is almost 5 per cent of our operating costs,” Langford said.
“It’s crazy.”
Councillor Rob Vinsen said his personal insurance had increased by 55 per cent, so he wasn’t surprised the council’s situation was similar.
He asked if the council could introduce “self-insurance” - putting aside money to cover costs instead of paying brokers.
Fermor said that would also require an increase in rates.
Despite the increases, the council was still well under its debt limit, he said.
“We are about to draw down some significant borrowings next week - $10m - to start paying the bills that are coming in.
“The additional cost here is unbudgeted expenditure, and it will be funded through loans.”
Mike Tweed is an assistant news director and multi-media journalist at the Whanganui Chronicle. Since starting in March 2020, he has dabbled in everything from sport to music. At present, his focus is local government, primarily Whanganui District Council.
