'This isn't working': Gore's financial troubles laid bare
“I think there is a real conversation needs to be had about the future of Local Government and how we continue to fund this.”
Gore District Council’s financial troubles have been laid bare with it now at a “tipping point”. Amalgamation, asset sales, and a plea to the Government - amongst other things - have been thrown about as options to address the bleak situation. Logan Savory reports.
The Gore District Council is in a financial pickle. It only has about 6500 ratepayers, with next to no other income, and it is struggling to cover costs.
On Tuesday Mayor Ben Bell went as far as suggesting if he and other elected members were aware of the sort of rate increase they would be passing on to the community, they may have reconsidered their decision to stand for council.
Gore District ratepayers face an average rate increase of 21.4% for 2024-25. Bell acknowledged many in the community simply can’t afford that.
“We find ourselves in an unavoidable position where we can no longer afford to ‘kick the can down the road’,” Bell said.
“I think there is a real conversation needed to be had about the future of Local Government and how we continue to fund this.”
Outgoing Gore council GEO Steve Parry - who has been in the role since 2001 - said the current budget is the most challenging Gore has faced during his time at the council.
The proposed 21.4% rate increase was “abnormal”, he said.
“[It] is a reflection of a deeper problem which is the suitability of Local Government.”
“The challenges facing the council is considerable,” Parry said.
Rates are its main source of income. But Bell said for many years the amount the council has collected in rates has not truly reflected the cost of running the Gore District.
Gore has borrowed to fund investment in its infrastructure.
The problem is the Gore District Council is now close to its debt ceiling. They need to pay down debt and borrowing their way out of a financial hole isn’t an option anymore.
They can’t continue to borrow, and what’s more evident is the small Eastern Southland district needs to pay down debt despite experiencing the heightened effects of interest payments.
“We are paying more than ever in loan repayments,” Bell said.
Gore District Council’s annual debt repayments are projected to be up around $2.5m for the 2024-25 year. Its projected debt to increase by about $6m bringing debt up to about $61m.
Cr Robert McKenzie described the numbers as “mind-boggling”.
“This isn’t working. We can’t pass this on to our ratepayers,” McKenzie said.
“Do we go to Government and say people are going to be moving out of their houses because of these rate increases?
“Government is looking at letting councils increase debt, but that doesn’t do anything. We’ve just got more bills to pay.
“Prime Minister Luxon and friends need to come up with something better for Local Government.”
Cr John Gardyne said the “birds have come home to roost” for the Gore District Council.
He said the council had spent a lot of money over the past six years that he had been on the council, with a lot of it partly funded by central Government.
“But then the birds come home to roost because those assets are on our books, and we have to depreciate them. And then the loans come in and we have to pay interest on them.
“Sometimes we have to say no to some of these new assets… Councillors have to be very careful about what they pass on a monthly basis around the table. If it’s unbudgeted, look very hard at it.”
Gardyne suggested the council look outside the square to survive, which may include amalgamation with other councils.
He said the council had an income of about $20m to $25m and probably needed $50m to $70m coming through the books to pay for its IT requirements, planners, accountants, infrastructure, and so on.
“It might mean amalgamation; it might mean shared services, but we need change from the bottom up otherwise this will continue, and nothing will change.”
“Amalgamating one council for all of Southland could give us some scale. Is it the right thing?
“I think we are going to have to seriously look at it.”
Cr Keith Hovell said there was no way to sugar-coat it and described 21.4% as an appalling rate increase. Although he pointed out much of it was non-negotiable and out of their control.
Hovell acknowledged there had been a fair bit of backlash around rates on social media and he fully understands that sentiment.
“My rates [from Environment Southland] are going up 65%, from $600 to over $1000 and we are adding further costs to the ratepayer.”
Hovell said the current rating system was no longer fit for purpose.
“It isn’t helped by the fact that Governments over the past 20 or 30 years have added more and more to the responsibility and financial commitments of councils, without giving any money.
“At the same time, they have made it worse by actually cutting down on the subsidies that are available to councils.”
Cr Stewart MacDonnell said they were stuck with the 21.4% average rate rise for 2024-25 but added they need to look hard at the council business as a whole.
MacDonnell said levels of service and council assets all needed to be looked at. He understood the council owns 95 buildings in the small town.
“We’ve got to look at if these assets are worth having… We’ve got to look at these assets and ask if they are what the council need for the future.”
“Can we slowly reduce our asset base across the district? There is quite a few million there to be had and that would reduce our debt levels.
“We’ve also got to look hard at our levels of service in the future because we may get away with too much blood on the carpet with the 21.4% this year, but if we got back for a second round we’ll be in trouble.”
Cr Richard McPhail said Gore was at a tipping point and the council needed to tread very carefully.
“We can sell the family silver and we can sell land, but we can only sell it once, and we may have to do that.
“But when we do a price reduction in our rates, we have to cut deeply… Next time to get away from such a high increase we have to cut services and have to look at how far that knife is going to drive in, which is not the ideal situation, but that’s where we lay today.”
Cr Andy Fraser never imagined when he joined the council, he would be looking at a 20-plus percent rate increase.
He felt over the past six years of Government the council had had a lot imposed on it from central Government.
He was keen for the council to push back on central Government and ask, as a small council, how can it afford to keep running?
Fraser pointed out that if it got back the GST from rates over the next year that would equate to $4m and could offset some of the council’s depreciation.
Cr Neville Phillips apologised to ratepayers for what was facing them, in terms of a rate increase.
“But you can be assured we’ve done the best we can possibly do.”
The Gore District Council had initially been faced with a 31.1% rate increase before trimming the budget back to the 21.4% they are now proposing.
So, what has Gore done to trim costs?
Not funded 20%-30% of depreciation in some activities
Deferred all new positions
Deferred property renewals and maintenance
Deferred IT upgrades and projects
Delayed recycling rollout to 1 April 2025 or 1 July 2025
Realigned how we deliver community strategy activities
Trimmed the parks and reserves materials and contractor budgets
Deferred upgrading our customer service request system
Deferred Multisports complex capital projects
Discontinued the community awards
The Gore District Council is now calling for public consultation on the 2024/25 draft annual plan that includes an average rate rise of 21.4%.
Parry running for cover.
Amalgamation is sensible. There is too much duplication in a very small area for a small population between the SDC and GDC, so that's one move. Selling assets is another, as well as winding down non core spending on areas outside of water, waste, parks and reserves, core facilities and roading etc. Its not easy and its been a long time coming, but the rate payers cant be expected to take 21% + rate increases, that's untenable.