2.2% or 2.7% rate increase or something else the question for council

Council sits on Monday night to consider our annual business plan and budget. The focus will be whether or we adopt a 2.2%, 2.7% rate increase or something else. That is the question for council.

Rate CappingAs mentioned in my last blog post Council up to now at least seems divided on what this years rate increase should be. You would be well aware by now that we have been long considering a 2.2% increase. Coupled with that is an intent to increase loan funding by $ 3.3m to fund long term projects.

We are likely to debate on the night increasing the rate increase the rate by 2.7% and reduce the increase in loan funding we have been considering.

The theory behind this is we should not be diverting funding of today’s projects to future generations. Put them in debt so we can enjoy now. Sounds a bit like the spend the kids inheritance now statement we are all familiar with. Having said that much of what we are contemplating is to the benefit of the future generations more so than it will be for the coming generation. The challenge then is to determine how much should be paid for now verses how much the next generation should pay for given projects.

As I see it Council is no different to our rate payers. Council has an annual income, so do we. The method of creating that income and the control over how much income can be achieved of course differs but I am not going to talk about that here. Council owns “real” assets (property, roads, footpaths, parks). So do we.

When we need to improve or redevelop our property we will be faced with how to finance any such project. The larger the project the more likely we are to finance it by way of loan funding. This is because the larger the project the more likely it is we cannot fund it without loan funding. The same applies to council. Indeed I would suggest the longer the life span of a newly created an asset we purchase the more we should consider using loan funding for it, unless of course we have won the lottery and can afford to pay cash.

If we build an addition to our home the chances are we are going to use loans to fund it, assuming we can service the loan. If we cant service the loan we cant pay cash and we should not be undertaking the project.

So….2.2% or 2.7% rate increase.

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