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Hamilton City Preparing For Revenue Drop


Hamilton City Council is forecasting a $33 million drop in revenue because of COVID-19.

Chief Executive Richard Briggs said the Council’s initial modelling shows under a best-case scenario, with business back to normal by July this year, the financial impact will be significant.

Under a worse-case scenario, with business back to normal by October 2020, financial impacts, would be ‘crippling’.

Either way, the impacts will likely see the Council breaching its debt to revenue ratio limits – meaning it could not legally borrow more money to make up the shortfall and keep the city moving. Nor could Council balance its books until 2025/26 at the earliest. This is despite Hamilton City being in a much stronger position than many other councils.

The Council, which turns over $378M each year, is forecasting a reduction in consent fees, engineering fees and development charges. It estimates money paid to Council from community facilities like pools and libraries and visitor destinations, such as the Waikato Museum and Hamilton Zoo, could drop by as much as $5M over two years.

The city will also be hit by a reduction in infrastructure operations and increased contract costs due to work shutdowns forced by the pandemic, Mr Briggs says.

Mr Briggs said Council would continue to actively manage its books and that other high-growth Councils, including Tauranga, Wellington and Queenstown would face similar issues. Tauranga has already estimated that revenue for the 2020/21 year will be down between $53-$77M and says it may be forced to halve its capital works programme.

Mr Briggs said decisions about capital works had not yet been made for Hamilton. Any decisions made by elected members would take the social, environmental, cultural and economic wellbeing of the city into account and that included the impact of a drop in revenue.

“This information is very new, so Councillors will need to digest it and factor it in to their wider thinking before they make their decisions. Decisions they make around our finances will be made as part of the Annual Plan process.”

“We have put 23 different proposals to Government to either fast-track or kick-start major infrastructure projects in the city and we’re hoping for co-funding on some of those. We will continue to do everything we can to work closely officials and decision-makers in Wellington as well as supporting the work being done by the wider sector.”

“But until the outcome of those discussions is clear, we can’t yet say what the impact of COVID-19 on capital projects will be. If we can keep those projects going – we need to. That’s what will drive jobs and keep the city moving and that’s what will lift us out of the coming recession.”

Mr Briggs said Council was already talking to government about setting debt to revenue at a more appropriate level for high-growth councils.

“We can’t be hampered by legislation that is simply not fit-for-purpose. We need to have the ability to pull whatever levers are necessary to help our city recover.”

Hamilton Mayor Paula Southgate said the figures were sobering but not unexpected.

“A big portion of the money we need to run the city is at risk. It will have huge impacts going forward,” she said.

“We now need to work through those impacts carefully and most importantly, do what we can to soften them. And that includes working closely with our partners and with Government to get major projects started.”

Council will approve the draft Annual Plan budget on 7 May.

© Scoop Media

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