Cyclone and increased normal business costs contribute to deficit

Hastings District Council has reported a $11.6 million deficit this year, mainly due to Cyclone Gabrielle costs (65 per cent); the remainder the result of increased ‘business as usual’ costs.

The General Rate deficit for the 2022/23 financial year is $7.6m (all attributed to Cyclone Gabrielle). The Targeted Rate deficit is $4m, almost all resulting from increased costs for normal business, particularly for the delivery of water and wastewater services.

Council’s performance and monitoring committee considered a report on the deficit in a Draft Financial Year End Results paper at a meeting on Thursday [Sept 21] and approved the Council officers’ recommendation that the General Rate deficit be funded as much as possible from reserves ($5.5m), with the balance loan-funded.

The Targeted Rate deficit would largely be managed through loan-funding (for water and wastewater) and potentially through increased targeted rates (eg refuse, recycling), decisions on which would be made during next year’s Long Term Plan process.

The cyclone costs mainly related to Council’s initial response, while the increased normal business costs related to higher than forecast interest rates, insurance, IT and maintenance costs, planning and regulatory costs, and increased staff numbers.

The higher planning and regulatory costs and staff increases arose from the amount of increased business as usual work required by teams to manage the ongoing impact of the cyclone across almost all Council functions.

The reserves funding that would be used to offset the General Rate deficit was capital previously set aside for major projects and emergencies.

It is expected that the audited Annual Report, due in October, will also record a considerable drop in the value of infrastructure assets, likely in the “hundreds of millions of dollars”, given the damage the cyclone inflicted on Council’s assets, particularly roads, bridges and parks.

The effects of the cyclone, particularly on Council’s finances and assets, will have a major impact on the Long-Term Plan being prepared next year, said Hastings mayor Sandra Hazlehurst.

“There is no doubt that the impacts of the cyclone are going to take a long time to recover from, both for our many residents who were dreadfully affected, and in terms of the impact on all of us via the costs to Council and therefore our residents.”

The chair of Council’s performance and monitoring committee, Damon Harvey, said the overarching aim of the committee and Council would be to address the deficit as prudently as possible.

“Across Council we have ensured that all teams have interrogated every project that was not undertaken in the last financial year, and those they were planning on undertaking in the current financial year. We must take this approach to reduce, as much as possible, the impact on rates, while still ensuring that we maintain the level of service required by our residents.”

21 September 2023

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