Ruapehu mayor says inflation causing challenges for rates affordability

High inflation is pushing up asset valuations and, with it, depreciation costs which affects areas such as roading.

Ruapehu ratepayers can expect to face a rates increase of around 8 per cent for the 2023/24 year.

Mayor Weston Kirton said the current inflationary environment was challenging Ruapehu District Council in its efforts to keep the average rate increase and fees and charges as low as possible for the next rating year.

With the Consumer Price Index (CPI) being over 7 per cent, the council was mindful of the cost of living issues confronting its communities and was working hard to find spending reductions, Kirton said.

“Unfortunately, many of the cost increases council is facing are significantly above the CPI and, in many cases, completely beyond our control,” he said.

“This includes such things as increases in interest payments, depreciation, labour market pressures and contracted supplier charges.

“We are needing to increase spending just to stand still and maintain existing levels of service.”

Increases in interest payments alone required a 6 per cent rate rise “before we even start to factor in supplier contract commitments and other factors”, he said.

“Many of our major contracts for maintaining critical infrastructure or services are linked to a relevant inflation index. This means the contracts adjust in response to inflation pressures and we have no choice but to absorb and then pass on the increase.”

For example, the waste management contract had increased by 18 per cent while inflation in the infrastructure area was up 15 per cent, both underpinned by significant jumps in operating costs such as fuel, materials and labour.

“Another impact of high inflation is that it pushes up asset valuations and, with it, depreciation costs which has implications for areas such as roading, which is a significant driver of rural rates,” Kirton said.

The combination of these cost pressures on the council was a starting point of a rates rise of 25 per cent, he said.

“In response, staff undertook a line-by-line budget review looking for potential savings and other mitigation options for council to consider,” Kirton said.

“This work resulted in a recommendation to council for an average 8.5 per cent rate rise and a debt level of $61 million.

“Council has asked staff to find a further 0.5 per cent of savings to get down to an average rate rise of 8 per cent, which is considered an absolute bare minimum because of interest rates and contract commitments.”

At its meeting on February 22, the council will decide on a proposed average rate rise which will go out for community feedback, with a final decision on the 2023/24 rate increase to be made at a meeting in June.