Administrator Rik Hart is calling on local politicians of all persuasions to stand up as community leaders to support Central Coast Council’s push for the 15 percent rate increase to be permanent.
Hart said he needed the leaders to help explain to the community why the 15 per cent rate rise needed to stay long term.
The Council’s Operational Plan and budget, adopted this week, includes a three-year rate increase determined by the Independent Pricing and Regulatory Tribunal (IPART).
The Council’s long-term financial plan presumes the rate increase will become permanent and Hart is seeking an urgent meeting with IPART to present its case.
Hart says it is irresponsible for the local MPs to argue against a permanent rate rise when there is no alternative.
“The die is cast,” he said.
The Council negotiated loans of $150M last year with commercial banks which wanted evidence the Council would have the revenue to repay the principal and interest on the loans.
Council says it needs the 15 per cent rate increase to continue permanently to provide the banks with that longer-term certainty as the loans amortise over 15 years.
Hart said that without the existing 15 per cent continuing, the Council will have deficits each year of approximately $25M which would be catastrophic.
“Whilst we expect some productivity gains, we would have to cut even more services and the business cannot afford to have any more cuts to it and be expected to maintain the existing level of service,” he said.
He said the Council was heavily indebted and caught between the State Government that said it had to go to the commercial banks for loans, which it did, and IPART, which said in order for Council to demonstrate its ability to adhere to the long term financial plan it will need to come back showing evidence of where Council is operating within its budget requirements.
The Council is also planning to submit to IPART increases to water and sewerage charges and revealed these increases are already assumed in the long-term financial plan.
IPART took $39M in water and sewer charges off the Council two years ago.
Hart said the Council didn’t help itself by submitting a poor application and had been over-penalised for that.
He said the water and sewer side of the Council was losing money and struggling to properly maintain assets, particularly proactive maintenance.
“We hope to recover a large portion of the $39M – which is already budgeted for in the long-term financial plan,” he said.
The Council has two lots of debt it has to control.
One bucket of debt is what Hart calls good debt and it is similar to a household mortgage.
This debt is about $350M and Council is paying that back in to principal and interest just the way a household pays back its mortgage.
The other bucket holds the bad debt.
This is the $200M of internally and externally restricted funds that the Council has to repay.
The plan to pay that includes writing off about $40M in internally restricted funds; selling assets of about $60M and paying off the rest – about $110M – over a 10-year period.
The increase in rates revenue was earmarked to pay that $110M over 10 years.
That’s the plan.
Hart says that it is important that MPs support the continuation of the 15 per cent otherwise the Council will be placed with no other option but to reduce its expenditure by a further $25M through further cutting of services and staff.