Cr Bill Faulkner Faulkners Corner www.sunlive.co.nz

It looks like the council rate revenue requirement to run your city at the level of service set out in the annual plan will be around an 11 per cent increase.
With an allowance for inflation and new ratepayers who have come on stream during the year, this will amount to an eight per cent or nine per cent increase for most. The rate requirement is around $99 million of an expected expenditure of around $156 million. The balance of $57 million comes from user fees and development contributions. Total debt is expected to be around $391 million or 247 per cent of debt/revenue ratio limit of 250 per cent set by credit rating agency Standard and Poors. If that is exceeded then our credit rating could drop and interest rates on future loans, including those that are maturing, will attract an increased interest rate. That's an interesting concept isn't it? As debt increases then you increase the interest rate making it an even bigger risk until eventually it becomes impossible to repay the debt. Witness the financial debacles surrounding third world debt where this happens and the debt gets written off. Can't see that happening here though. I would rate Tauranga as AAA credit risk, notwithstanding the highly complex world of credit rating. As I've noted before, getting the $58 million debt of Route K off council's books would provide the financial relief we need – provided future councils don't borrow more for nice-to-haves as has contributed to the present situation.
Behind the scenes negotiations continue as a priority. A number of scenarios are being explored, but due to the fact that Route K does actually exist, your council does not come from a negotiating position of strength. In fact, it's more like a vulnerable relative holding out for a favour.
Christchurch earthquake repairs are soaking up future financial resources, and government borrowing around $300 million a week to keep NZ afloat financially, are some of the extra factors being introduced. But there is hope, albeit laced with compromise. We remain confident of a Route K debt solution in the next 12 months, but maybe not one that will make everyone happy.
Budgeting for leaks
Council has left $250,000 in the budget for leaky homes. We are waiting for the final details of the government's package designed to take legal fees out of the equation. I have been informed from a legal source that out of a leaky home action of $220,000, $80,000 can go in legal fees. There are some bottom feeders out there feasting on this disaster and some protract the issues to generate more legal fees. It is worthy that if these costs can be eliminated then the victims will be better off. But it is also to be considered that if there is no legal input then some could jump on the bandwagon at government and ratepayer expense.
It's hugely complex and as with everything in dealing with central government the devil will be in the detail. And usually in these situations local government is the fall guy and can come off second best.
The present proposal is for central government to pay 25 per cent, local government 25 per cent and the homeowner 50 per cent of proven negligence damage in a leaky home. Where some victims will get their 50 per cent is not explained and nor is the matter of GST and income tax that central government stands to gain from this misery.
It's almost in the same league as the critics of the legal expenses issue. And of course participation is voluntary. In some cases homeowners might be better off staying with the existing legal process. And seeing it was central government which changed the tried and true rules in the first place, there is a case for a significant increase in their contribution, but don't hold your breath. In the final analysis it's you and me who will pay anyway – through rates and taxes.
Then there was a further proposal to waive building inspection fees for repairing leaky homes. Again this is a potential Pandora's Box of tricks. As Mayor Stuart Crosby said, this leaky homes disaster is a real hearts and minds issue – you take from someone to give to someone else. ‘The Robin Hood Syndrome' is how I see it, except there is no discretion with rates that ensures that you only take from the rich. And who is ‘rich' anyway?
Passing the buck
Rick Curach did his trick of smoke and mirror financing by moving that the chief executive (CEO) be set a savings target of $3 million. This motion was made despite Rick being privy to all expenditure proposed and voting and agreeing with most of it.
It is in fact not the CEO's role to set expenditure levels, nor levels of service or the annual plan budget, that's the sole domain of elected members. The proposed resolution had just been tabled when new CEO Ken Paterson walked into the chamber on a brief familiarisation visit. (Ken starts on July 11). The new CEO kept his composure and listened to the debate intently. No doubt more than a little relieved the resolution was soundly kicked to touch, with only Rick and Catherine Stewart voting for it.
Meeting the cost
There is little call for reductions in levels of service again this year. In fact, there are many requests for improved services. So that's another reason how rates get to how they are.
The voluntary rates account languishes – almost forgotten – as a memorial to the ‘wants, needs and deserves' brigade's demands that we all pay for nice-to-haves. From memory it has around $4000 total in it. From a personal point of view I'm not happy with this financial result. But in view of the circumstances and how they were arrived at, there are no options. Wishing and hoping doesn't work.
A relevant mindbender this week: 'There are only two zones in politics: the high ground of leadership and the low ground of pandering to popular reaction.” From that sage of time – anonymous.