Answers to Oamaru Residents and Ratepayers Group

Council documents have set out Financial details pertaining to the Events Centre. The $10m Loan is to be repaid over 20 years by 12,051 Residential Rating units (with a possible distance differential) but currently listed as $83.09 per annum. My Amortisation table computes that across 20 years that is a Repayment of about $20m, at an Interest rate of 7.95%. Is that correct?

This is correct. As it is a long-term loan, Council must budget for a higher average interest rate, than the interest rates Council currently incurs. Plus, Council is currently carrying a higher loan than the $10m forecast, hence why the current cost is higher than budgeted.

This has been publicly discussed in Council and PAR reports and is due to timing delays in grants and donations receivable meaning Council is borrowing whilst awaiting the grants and donations payments.

The Waitaki District Council has more employees per 1000 households; a higher number of employees on a salary above $100,000; and more Managers near the top end when compared to all other Councils in New Zealand.

2a. What plans does WDC have to bring down the huge cost of the Wages bill to the District's ratepayers?

The staff of the Council provide the services that residents use such as Libraries, Customer Services, Building Consents, Roading, Water and much more. They also deliver the programme of capital projects and initiatives, from new water treatment plants to road rehabilitation.

The Tax Payers Union provides a public comparison of all NZ Councils. Refer to the staff costs page at Welcome - Ratepayers Report Some of the  initial figures reported on this page were incorrect. We have provided the correct figures to the Tax Payers Union, based on our publicly available audited annual reports and they have updated their site.

In this listing Waitaki’s 16.37 FTE per household per 1000 sits around the middle of other District Council’s. It is below other similar Council’s such as Waimate, Gore. It is only slightly higher than the likes of: Rotorua, Invercargill City, Selwyn, Nelson City, Dunedin City,  Westland, Tasman.

It is felt that this level is reasonable given we are a District Council with a very low ratepayer base covering a large district, and a big programme of work, especially when compared to City Councils. Also, as publicly noted, Waitaki is currently carry additional fixed term roles for specific purposes, instead of incurring consultancy costs.

It is also worth noting that the Ratepayers report uses “household” as a common point for comparison. While a convenient approach, households reflect an aspect of a Council’s potential to distribute costs, not what actually drives costs, and the need for staff, contractors etc. Factors such as total asset value, number of facilities, tourism demand etc. drive Councils’ costs and the need for staff and contractors etc.

In terms of “managers”, once again Waitaki sits around the middle of this listing with 35 FTE managers and this appears reasonable compared to Clutha with 32, Hurunui 27 which are smaller than Waitaki and Ashburton 41.69, Selwyn, 98 and Timaru 64 which are all slightly larger than Waitaki. Note: The Taxpayers’ Union defines a manager as: any staff member who is responsible for a team of staff, or who has an employee/employees reporting to them and organises them to achieve their department’s or organisation’s specified goal.

The Chief Executive team is included in this definition. As Council has around 20 various services/departments there is typically a role that takes the lead on each one, who has staff reporting to them, but not all are classed as managers by WDC. We question whether some Council’s have not applied the Tax Payers Union  definition and have simply responded with the roles that have “manager” in their title.

2a Prior to Transformation, WDC was on a path of increasing staff numbers and costs as provided for in the 2018-28 and 2021-31 Long Term Plans. This was driven by the increasing capital programme together with new responsibilities placed on councils by governments. Council has worked through Transformation to bring down staff numbers and wage costs together with the costs of consultants and contractors. This has seen the number of permanent staff reduce by 8.9% FTE whilst also providing for the delivery of a significantly bigger programme of work – a programme over 4 times bigger than six years ago.

Whilst it is not a big driver of Council’s increased costs overall, staff numbers and costs remain an area of focus each year when setting our budgets, and we have strong oversight of these costs throughout the year. The key determinant of personnel costs is the levels of service Council provides, the size of the capital programme to be delivered together with the market cost of attracting the skills we need to deliver the range of services. For some key skills, what the Council pays will be determined by the market rate either in the South Island or across New Zealand. There is a strong relationship between a Council’s staffing (operational expense) and its service levels, quantity of assets and number facilities and services.

We will be considering our service levels during the production of our next LTP as we reshape the council following the transfer of water and in order to reduce personnel costs, some services levels, assets, facilities and services will likely need to reduce.

2b. If this is disagreed with, what reason do you give?

As above.

2c. Why did Managers need to become Directors, and Supervisors & Leads become Managers?

The terminology used within our Organisation Structure is not uncommon and was applied to more accurately reflect the roles that people undertake. Not all supervisors and leads have become managers but as above, in responding to the Tax Payer Union we have used their definition. In its management arrangements, the Council employs Directors, Managers and Leads.

In terms of “Directors”, these roles were referred to as “General Managers / GMs” previously, and is simply a change in terminology and reflecting broader responsibilities each role has with the reduction that came through Transformation (Prior to Transformation there were 6 GM roles but there are now 4 Director roles).

Many of the previous “manager” roles, prior to transformation,  were more clearly defined and the “supervisor” and “leads” terminology was introduced to reflect where staff were responsible for achieving a departments goal or had an employee reporting to them, but did not have the full responsibilities of a manager.

Please note, our Organisation Structure is and always has been quite flat. This is because of the large number of services we are required to provide often split between our various geographical areas, with limited staff allocated to each service.

Our Parliament operates with an adversarial system, the Government vs the Opposition, so as to question the decisions.
3a. Do we need such an Adversarial system to control Council?
3b. Is that what the Audit Office’s role is?

There are various processes in place that currently complete this role. Yes, the Audit Office plays a key part in this as they are required by the Local Government Act to audit our Long-Term Plans (strategic planning documents, long-term forecasts) as well as our Annual Reports (actual results, performance against budget). They must also review our various systems and processes, among other things. They are the public watchdog when it comes to appropriate use of public funds.

Part of the role of Councillors is to scrutinise the organisation in how it is performing. Much of this role is undertaken by the Performance, Audit and Risk committee.

In some councils there are more adversarial systems but these are typically in larger urban areas and tend to have political party involvement. Waitaki has traditionally not had party political involvement in the Council.

3c. Should they be identifying under-investment OR untoward borrowing levels to cover Rates revenue shortfall?

Yes. They have done so. Under investment in infrastructure within the Local Government sector is a well-known issue, and something we have been grappling with in recent years. It is a matter we have publicly highlighted in our various Long Term Plan and Annual Plan consultation documents over the past eight years.

All councils have been required by successive Governments to complete significant additional investment in our infrastructure, in a very short space of time, to meet higher standards and deal with ageing infrastructure. For example, we have 15 water schemes spread over a significant geographical area, with a very low ratepayer base, that needed to be upgraded to meet new standards required by the Government. In an attempt to keep rates affordable and to spread the cost over the life of the assets (not have all the cost covered by the current generation), debt has been used to undertake this work. This is deemed financially prudent. This is not considered to be “untoward borrowing levels”.

The cost of additional investment required in infrastructure – either to meet new standards or deal with ageing infrastructure and historic underinvestment - has been the primary driver in the change in the council’s finances in the past 8 years. Higher government standards have also come at a time of significant inflation, which for water and other infrastructure has been much higher than the Consumer Price Index (CPI).

Most of the council’s debt has been incurred by investing in assets – mostly water but also roading and buildings. This is not generally considered untoward debt. However, the Council is now at a point where if it does not put up rates sufficiently, it will be using debt to fund operating costs. Many would consider this to be untoward debt as it does not provide an asset and means future rate payers are paying for the costs of today's services.

3d. What is the role of the PAR Committee in raising concerns? Can that Committee proffer recommended direction?

Yes. This is the role of the PAR Committee, and they do challenge and make recommendations.

3e. Why is DIA overseeing and expressing approval of our APs & LTPs?

DIA has a role in overseeing all local councils. However, it does not have a role in approving council LTPs or APs. DIA is interested in the Annual Plan to ensure the Council is financially sustainable and to ensure the financial commitments in the Water Services Delivery Plan are met. These financial commitments are important in showing the Council can deliver the level of investment required to meet the Government’s Water Standards. As part of this process, the DIA has considered the consistency and impact of the financials included within the Water Services Delivery Plan with our overall Council budgets (included in the LTP and now the FY27 Annual Plan).

4a. With regard to the Transformation savings, are staff who resigned from the Library included in the quoted saving? It appears, looking at the last 3 or 4 years, that there is no saving from transformation when 4 or 5 years ago staff numbers were well below this year's figures.  

All staff, including those working in the Library, were part of a consultation and subsequent transition process during the organisation re-design. If a member of staff resigned from a role that was being discontinued, then yes, the role would not have been filled with a replacement and would have been included in the savings. However, where a role was planned to be continued, if the person occupying the role resigned, then the role would have been filled, and would have been included in the Establishment FTE figure.

4b. Where are the savings from Transformation over the longer term, not just the most recent year?

The Waitaki District Council took on the Transformation Programme as it realised the Councils’ trajectory was unsustainable. It was clear costs were climbing, including increasing staffing numbers to meet a growing programme in the 2018-28 and then the 2021-31 Long Term Plans. There was increasing use of consultants to meet the growing capital and infrastructure programme too. Technology opportunities to operate more efficiently were also being missed. The staff and Elected Members believed the Council could deliver more efficiently and effectively by making changes to how we work and several other changes to the organisations structure and processes, we could get ahead of the problem. The challenges facing local government aren’t only within the Waitaki, they are nation-wide, and while other Councils also recognised the need for change, very few made any changes. Central Government is also part of the situation, as the constant stream of evolving reforms places pressure on Council, as there is a cost to enable the reforms, and also the changes required as a result of the reform are often unfunded too.

In hindsight the Transformation Programme  was undertaken just as cumulative changes in central government resulted in a tsunami of reforms. The reforms have imposed additional work, complexity and cost on the organisation at a time when we were changing, including, for example, three different versions of Water Reform over the period of implementing the transformation changes.

While it is challenging to introduce broad changes to Council during this time, transformation was successfully delivered. The Transformation Programme has fundamentally restructured all of Council to ensure staff work collaboratively to deliver for the community, and that the work effort and related costs are visible to improve efficiency. While other Councils still have resources duplicated across departments, WDC has removed these silos and achieved savings by containing staff numbers and other costs drivers. Prior to Transformation, Councils FTE was steadily climbing from 152 in 2018 to 207 in 2023 (see Long Term Pland and annual reports). Following this trajectory, Council could expect numbers to have reached approximately 252 FTE by 2026/27 in order to maintain services, deliver new obligations from government, and deliver a capital programme 4 times larger than in 2018.

However, Council’s FTE is much lower, and Council is on track to meet its target of 191 FTE whilst delivering the much larger programme of work. Unlike cost cutting, which reduces costs while reducing service levels, Transformation is concerned with delivering the same or better services while freezing (or even reducing) costs. Council has improved service delivery in several areas and extended service offerings, for example access to customer services. Rather than adding consultants and additional staff to tackle reforms, Council is achieving this with fewer staff than previously, and scaling-up with fixed-term resources where necessary. Efficiencies from the Transformation Programme will continue to accumulate over time as new ways of working settle-in and performance management and continuous improvement practices mature.

5a. How much longer does our Water upgrade Loan have to run?

There are multiple loans in relation to water upgrades. As we have 14 water schemes and various other water related assets, every time a significant project is undertaken on one of these, that is loan funded, a new loan is taken out. So, they all have varying time spans, in line with the lifespan of the particular asset. The lives of our water’s assets range from 5-150 years.

5b. What is the explanation for the increase last year from $109 to $154, when prior to that it ranged between $90 & $109?

The increase is directly tied to the level of work completed. Council has had a significant increase in its three waters capital program in recent years in order to meet the Governments mandated requirements, and this is expected to continue. This is reflected in the level of borrowings the council has incurred to fund that work, which is then reflected in the increase in rates to pay for the borrowings and the new water infrastructure.

5c. Is there still a Lump sum pay-it-off option?

Careful consideration is made in terms of intergeneration equity and ratepayer affordability concerns. Thus, we have typically chosen to spread the cost of significant waters upgrades over the life of the asset, instead of paying in lump-sum as this means all the users of that asset pay a share of the cost over its life, rather than all the cost falling on todays users.

6a. Given that a significant number of staff live outside the Waitaki District, do these people pay for their travel or are they assisted with expenses and/or a paid vehicle?

The majority of council staff travel to and from work at their own cost. Due to the requirements of their role, some staff have access to a vehicle. Council has three categories of vehicles for staff use:

1. Pool vehicle: a Council-owned vehicle kept at council offices, available for any staff member to book and use for business travel during work hours. Returned to Council premises at the end of each day. (Through the changes in working practices as a result of Transformation we have reduced the amount of travel requyired and the number of pool vehicles the council has)
2. Take-home vehicle: a Council-owned vehicle assigned to a specific employee based on their role requirements that can be taken home, but is not for personal use beyond incidental stops commuting to and from work.

1. Private use vehicle: a Council-owned vehicle assigned to a specific employee based on their role requirements that can be used for private use. These vehicles are part of an employee's remuneration package - their salary is reduced by 25% of the vehicle cost (less GST) each year that they use the vehicle (note we keep vehicles for 5-7 years so the employee may pay 125% to 175% of what it cost the Council to buy the vehicle). These employees are also subject to Fringe Benefit Tax (FBT) on the personal use component. 

6b. How many Staff members do reside outside the Waitaki District?

39 staff or 14.29% of our total workforce of 273 employees (note this number includes full and part-time staff) live outside the Waitaki District. This includes those who live in Glenavy, the Hakataramea Valley, Waikouaiti or other townships close to the Waitaki District.

6c. If there are no extra Travel expenses then what alternative arrangements are in place (eg inflated Salary top-up) for these people?  

There are no salary top-ups for staff living outside the district. Council offers flexible working arrangements, typically up to three days per week to all staff, by agreement with their manager and subject to good performance of their role. While this is a standard employment condition available to everyone, it does provide practical assistance to those who live outside the district.

7a. Regarding the NOIC loan & the unfortunate KDIC loan; which Depreciation Reserve(s) were the source? We would be most upset if upon repayment of these Loans they were ‘ring fenced’ as Water Depreciation reserves and become Assets of the Waters CCO. Logic tells us that as Council had to borrow (heavily) for Water projects because there were no Reserves then the outstanding invested Loans when repaid would be used for LGFA Loans reduction. That would be off the Council debt, not the Waters debt which would now rest with the SWDW CCO.

Loans to external entities are not provided out of depreciation reserves. Depreciation reserves are only used for the assets that they relate to – thus waters depreciation is only used for waters assets.

7b. Can you please clarify the situation?

The depreciation reserves never had enough funds to cover the capital work required e.g. many of the waters assets we have been replacing are over 100 years old and we have only been setting aside depreciation for about a quarter of that time. Also, we are not simply replacing the existing assets like-for-like – we are required to meet new higher standards, at much higher cost – meaning that a significant portion of the new projects we are completing do not have existing assets or depreciation reserves to draw from.

The repayment of loans to other entities will be put against Council debt. Once the three waters debt moves to Southern Waters Limited, the Council will have circa $30-40 million of remaining debt (depending on the level of projects completed next year). This debt relates to various other Council projects and each of them will be proportionally repaid.

The $30 - $40 million is the gross debt, but taking into account Council’s external loans of around $18 million – the net debt position of Council will be between $12 to $22 million, depending on the final borrowing required in 2026-27.

8a. When did the elected officials become aware of the dire financial position our Council is in, going from an expected $7.265 million profit in the 2024/2025 year, to a $2.669 million loss, a $10 million difference?  

Like all councils, and particularly rural councils covering large areas and with low population & rate payer bases, successive Councils have been aware of the growing financial challenge. This challenge has primarily been caused by underinvestment in infrastructure in the past, new standards, particularly in water, growing demands (unfunded mandates) from government, and inflation in costs to councils that in recent years has run much higher than it has for residents. Many councils have put up rates significantly to deal with this, but Waitaki has in recent years tried to keep rates increases low, which has added to the challenge. Our current average rates are at the lower end of what councils charge across the country (49^th out of 65 territorial authorities).

As can be seen from the above table, most councils have increased rates significantly more in the past 12 years than Waitaki. Timaru by 102%, Central Otago by 120% whilst Waitaki has increased by 60% over the same period.

Council has discussed and consulted the community on the growing costs, work programme and affordability in successive Long Term Plans and Annual Plans since 2021.

https://www.waitaki.govt.nz/files/assets/public/v/1/files/our-council/consultation/2021/ltp-2021-2031/waitaki-ltp-2021-2031-consultation-document.pdf

https://www.waitaki.govt.nz/files/assets/public/v/1/files/our-council/plans-reports-and-strategies/long-term-plans/waitaki-district-council-long-term-plan-2021-31.pdf

https://www.waitaki.govt.nz/files/assets/public/v/2/files/our-council/plans-reports-and-strategies/annual-plans/waitaki-district-council-annual-plan-2022-23.pdf

https://www.waitaki.govt.nz/files/assets/public/v/1/files/our-council/plans-reports-and-strategies/annual-plans/annual-plan-2023-24.pdf

https://www.waitaki.govt.nz/files/assets/public/v/1/files/our-council/plans-reports-and-strategies/annual-plans/annual-plan-2024-25-enhanced.pdf

https://www.waitaki.govt.nz/files/assets/public/v/2/files/our-council/plans-reports-and-strategies/long-term-plans/waitaki-dc-2025-34-long-term-plan.pdf

This included:

1. in the 2024-25 Enhanced Annual Plan, setting out that the system of local government is broken and financially unsustainable as rising costs for councils are not affordable for our communities; and
2. in the 2025-34 LTP consultation, initially outlining an unbalanced budget for all 9 years of the plan
3. in the final 2025-34 LTP, Council agreeing to set an unbalanced budget for 2026-27 with a $14m deficit (having done everything possible to bring rates rises down including unfunding water depreciation accounting for $9m of the unbalanced budget)

In terms of this financial year, Council has always been aware of the situation. At all times Council is aware of the current financial position and the forecast 10-year position. The current financial result is discussed at the regular PAR Committee meetings. The long-term budgets were set, including the significant FY27 deficit, in the LTP by the last council.

This years budget included significant external funding in the form of grants and donations towards the Kakanui Bridge, the Forrester Gallery and the Events Centre. Whilst that funding is still expected, it will not fall within this year. It is the delay in receiving this funding together with the growth in depreciation costs as a result of the increased value of assets that are the main causes of the $10 million change in position. Operating costs of services, are at the same level as two years ago, despite big cost rises,  and overall are within budget.

8b. Who was responsible for supplying the elected Councillors with this financial position?

The finance team. The CFO regularly presents the reports to PAR and the LTP/AP budgets to Council. These are considered by the Executive Team prior to going to PAR and Council. The Chief Executive reports the overall financial position to Council in his quarterly report.

8c. Was this information clearly understood by Councillors?

Yes. Councillors have opportunities to ask questions and seek further information at the various meetings. Workshops are also held to delve deeper into the matters. Councillors also obtain further information or ask questions of the finance team to help aid their understanding.

8d. What significant event(s) happened between a Council Meeting when 9% was the proposed figure, and a subsequent Meeting where 19%, 27%, or 45% became the options?

9% was never a proposed figure. It was highlighted that the budgets had moved from a 7% to 9% rates requirement, due to cost increases experienced during the 9 months since the LTP was adopted. However, at the same time, Council was reminded of the $14 million deficit, along with the current financial position for FY26 being worse than expected. The main “significant events that happened” was that FY26 was not eventuating as planned and was expected to be $10-12m behind budget. That needed to be funded from somewhere – it was increasing the level of debt incurred by Council and pushing it closer to  the debt cap.

There was also the fuel crisis that was already adding direct and indirect cost increases to the business with a number of council contractors reporting that they would need support in meeting increased costs. It was highly uncertain how much costs would grow and with the already forecast $14m deficit for 2026/7 there was no capacity for an even higher one.

While the $14m deficit seemed acceptable 9 months ago pending the waters transfer – given the financial climate and results to date – officers recommended reconsidering this position. The only other income stream we have to cover these costs is rates. There is no opportunity to increase rates or find significant other income streams once the financial year has begun, so if rates weren’t reset now, there would be no other way to cover the costs of any fuel cost increases or unforeseen events during FY27.

Why are there no KPIs for the CE with measurable Financial goals? examples: Rates increases kept below 10%
or Project cost overruns less than 5% or At least 70% of Projects completed on time and on Budget.

The Chief Executive provides a quarterly report to Council which includes an overview of financial performance and a number of Priority Outcomes and KPIs. Within the KPIs there are a number of measurable financial goals that are reported on.

In addition, there are a large number of regulated financial goals. The Local Government Act sets financial prudence benchmarks (re rates increases, debt levels etc.), the LGFA has lending covenants in place, and the Council also has its own various rating and borrowing thresholds, that it must met. These are formally considered in the budget setting process each year and approved in the LTP/AP. The results are then reported against internally, to various agencies, and publicly in our audited Annual Reports.

As they are a Council necessity, it is not deemed necessary to also include each of these in the CE’s KPIs. There are various measures included regarding project performance. In addition to the Councils’ financial prudence measures, the CE reports on a suite of Priority Outcome and Organisational KPIs. The Priority Outcomes and Organisational KPIs include specific deliverables and specific measures, ranging from project performance, customer satisfaction to specific financial performance measures.

10a. How could the Council make many claims of efficiencies, yet still manage a 10 million dollar shortfall from forecast? We are told: “Behind the scenes, we are increasing efficiency and getting better value for money … through using technology to make our processes more efficient and ensuring more staff time is spent on delivering for our district and communities. This has helped us reduce costs.”

10b. How can this contradictory situation be possible?

As publicly reported and evident from a review of the financial forecasts, Council has made cost savings and efficiencies. The costs are the costs required to provide the services mandated under the Local Government Act and as requested by our community. Despite inflationary increases, Council has maintained its operating costs at levels consistent with two years prior and is overall on budget for its operating costs

The Transformation Programme has fundamentally restructured all of Council to ensure staff work collaboratively to deliver for the community, and that the work effort and related costs are visible to improve efficiency. While other Councils have resources duplicated across departments, Council has removed these silos and achieved saving by containing staff numbers.

Prior to Transformation, Councils FTE was steadily climbing from 152 in 2018 to 207 in 2023 (see annual reports). Following this trajectory, Council could expect numbers to have reached approximately 252 FTE by 2026/27.

However, Council’s FTE is much lower, and is on course to achieve the target of 191 FTE whilst delivering a significantly larger programme.  Changes to how Council delivers services, such as self-service, and changes to how Council operates internally, such as its customer service model, enable Council to contain costs. Efficiencies will continue to develop as new ways of working are refined and settled in, and as efforts towards continuous improvement continue.

The shortfall within this year is primarily related to income levels, not expenditure – being the grants and donations that were budgeted for in relation to the Kakanui Bridge, Forrester Gallery and Events Centre.

Council has a long history of not rating enough to cover its costs. Council has artificially kept rates low in an effort to maintain rates affordability for the community with rates increases being half what neighbouring councils have implemented in the past decade. This has led to many years of not having enough income to cover the basic operating costs, and thus many deficits. The rates increase now is simply to make up for the low increases in previous years and cover the deficit – there is no change to costs, just increasing income enough to cover existing costs.