Inflation and new costs increase pressure on Hamilton City Council’s books


Hamilton councilors discuss proposed changes to council's draft 2022/23 annual plan.

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Hamilton councilors discuss proposed changes to council’s draft 2022/23 annual plan.

Rising costs and an appetite for new spending could force Hamilton City Council to use debt to help balance the city’s books.

After three days of protracted discussions, elected members have yet to agree on the final shape of the council’s draft annual plan.

Budget talks will drag into a fourth day, with runaway inflation, the rising cost of living and Covid at the forefront of many advisers’ minds.

Wednesday’s talks are also expected to reveal the extent of the rate hike Hamilton taxpayers will face in the 2022/23 financial year.

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The endless nature of the discussions was not helped by the fact that Covid restrictions required the board meeting to be held exclusively online via Zoom. Significant parts of the meeting were held offline – and shielded from public scrutiny – with a staff report saying several proposals and “the inflation assumption review” were commercially sensitive.

Hamilton Mayor Paula Southgate said inflation assumptions were the subject of considerable debate.

Hamilton Mayor Paula Southgate says the council's financial assumptions need to be as accurate as possible to give residents confidence in its draft annual plan (file photo)

Christel Yardley / Stuff

Hamilton Mayor Paula Southgate says the council’s financial assumptions need to be as accurate as possible to give residents confidence in its draft annual plan (file photo)

“Inflation is a very big issue, and it’s one of the things that we have to take seriously, and we have to be very careful in how we move forward in my view,” Southgate told colleagues.

Council staff will use an inflation assumption of 5% to establish the budgets for the draft annual plan.

Other factors weighing on council coffers include the rising cost of electricity.

Martin Lynch, the council’s energy consultant, said energy market assessments reveal far more risk than previously identified.

“What we’ve been told…the government and also our existing suppliers, and the prices I’ve seen…we’re looking at sort of a 50% increase in the energy component,” Lynch said.

Councilor Ewan Wilson has expressed frustration with the council's inability to complete its capital program in any given fiscal year (file photo).

CHRISTEL YARDLEY/STUFF

Councilor Ewan Wilson has expressed frustration with the council’s inability to complete its capital program in any given fiscal year (file photo).

At the same time, the council is moving away from the use of natural gas. At Waterworld, for example, electric heat pumps will be used to compensate for a gas boiler. This change will add one million kilowatt hours of electricity to the council’s energy bill.

“Natural gas is actually up 150%, so that’s one of the reasons we don’t use natural gas because it’s even more expensive than before…” Lynch said.

Another topic of debate was the work of works council staff around depreciation. In the council’s long-range plan, the city’s book balance figure for 2022/23 – a measure of how well the council is pursuing its goal of paying day-to-day costs with day-to-day revenue – was to be a deficit of $2 million. After two days of debate, the accounting deficit balancing figure had risen to $11 million, including $6 million in impairment.

The revised deficit figure prompted councilor Ryan Hamilton to ask staff if the council’s amortization model was ‘gold plated enough’?

A pilot program to help create a school travel plan for a cluster of Hamilton schools should be considered part of the council's response to climate change, Councilor Sarah Thomson (file photo) said.

CHRISTEL YARDLEY/STUFF

A pilot program to help create a school travel plan for a cluster of Hamilton schools should be considered part of the council’s response to climate change, Councilor Sarah Thomson (file photo) said.

“Nothing is gold plated in local government,” replied David Bryant, the council’s chief staff and operational performance officer.

“That’s really what we think we need to be able to sustain the assets.”

The board’s proposed capital program for 2022/23 is $316 million, but that figure is expected to increase once capital projects not completed in the current fiscal year are postponed.

Councilor Ewan Wilson, observing that projects worth $90.6 million had not been completed in 2021/22, asked staff if council had already completed all of the capital projects it had assessed over the past 10 years.

The staff’s answer was “no”. However, Bryant said the council’s rates aren’t just meant to cover costs.

Hamilton City Council is proposing to spend $50,000 on initiatives to encourage council staff to adopt "sustainable travel" such as financing 50% of their bus costs (file photo).

Christel Yardley / Stuff

Hamilton City Council is proposing to spend $50,000 on initiatives to encourage council staff to adopt ‘sustainable travel’, such as funding 50% of their bus fares (file photo)

“We try to focus on balancing the books, that’s true, but there’s also the goal…to create a surplus and that surplus then pays off the debt,” Bryant said.

Talking points from Tuesday’s session included a funding pitch for a $235,000 pilot program to create a school travel plan for a group of Hamilton schools, and a proposal to spend $50,000 to encourage council staff to embrace “sustainable travel” options. This latest proposal involves funding 50% of staff bus costs for one year.

Deputy Mayor Geoff Taylor said the idea that taxpayers should help fund the daily travel of staff was “crazy” and “crass”.

Board staff will present final budgets and work programs to elected members for approval at the end of May. The annual plan will be officially adopted on June 30.


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