New debt to fund MDC projects
Masterton’s debt is projected to increase from $51 million to more than $110m in the next five years, its draft Long-Term Plan shows.
And ratepayers will bear the brunt of it with rates forecast to increase by 67 per cent compounded over 10 years.
Councillors approved Masterton’s draft LTP on Wednesday, which outlined three key projects for the district from 2021-31.
The town centre revamp project has a price tag of $35.4m, the civic centre has a cost of $30.8m, and $7.5m to build 25 new pensioner flats.
Over the next five years, rates increases are projected to range from 5.5 per cent to 5.9 per cent each year to pay for the council’s programme of works.
This is a stark contrast to that forecasted in the 2018 LTP where increases ranged from 1.9 per cent to 4.2 per cent over the same five years.
The average rates in Masterton are $2685. By 2026, they are set to be $3550. By 2031, they are set to be $4493.
The Masterton District Council document said it had scheduled some “high-value construction projects to address areas of community well-being” over the next 10 years.
“The proposed new civic facility, delivering our town centre revamp, and building more pensioner housing are all significant projects that increase the level of service to our community.
“We are funding the majority of these projects with new debt, and we will be increasing rates to pay for that increased level of service.”
It said rates increases beyond the limits in the 2018 LTP were required to fund the present and improved levels of service associated with the civic facility, pensioner housing, and town revamp.
“In addition, the council needs to catch up on the financial relief it provided to the community [through a reduced rates increase and lower fees] in 2020/21 in response to the impacts of the covid-19 pandemic.”
The council said the developments it had planned for Masterton would change the town in a way that “hasn’t been seen since the 1950s”.
“To achieve that, we need to be future-focused.
“Borrowing a phrase that resonated with us all last year, we need to “go hard and go early” – or in our case, go now.
“That means creating jobs and employment for our current generation and creating something special for those coming later.
“Or we can wait and see. But the longer we wait, the more likely it is that our kids will miss out.
“Our options will diminish as the cost of these projects escalate over time. And the longer we wait, the longer we go without.”
The council was planning to use loans to fund projects that had a long-term benefit for the Wairarapa community, spreading the cost over as much as 50 years for the civic facility.
“We are looking to combine some projects, like the civic facility and library, that will give us a bigger bang for our buck and enable us to tackle more than one challenge through a single project.”
The impact on the rates for the year for an average urban residential property of each project is:
- Civic facility: $101 per year by 2025/26
- Masterton revamp: $214 per year by 2030/31
- Pensioner housing: $11 per year from 2023
The different years reflect the completion date of the projects.
The civic facility has an endpoint where the council has stopped building it, and operating costs have kicked in. There should be no cost increases beyond that except for inflation.
The revamp project has capital spending every year, so more debt and additional rates each year right through the 10 years, hence the total increase over 10 years.
Debt will be used to fund much of the capital cost of these projects. That debt incurs interest and needs to be repaid over time [known as debt servicing], and that pushes up council’s costs and need for increased rates revenue.