From the Mayor

Headshot of Mayor Paula Southgate

Every three years Council must review its Long-Term Plan and set budgets and rates for the upcoming years. 

Costs to keep our fast-growing city running have increased on all fronts. This is the same for all councils across New Zealand. Increases in interest rates, inflation and depreciation are the main drivers - costing the city more than $50 million extra per year. There are also significant increased costs to comply with central government reform.  

This means we are facing one of our toughest ever budgets to run the city. We need more revenue to pay for increased costs. Our main lever is rates, which accounts for more than 70% of Council revenue. 

Over the past six months, Council has worked hard to deliver a budget focused just on the essentials. We have removed or deferred $130 million of projects over the first three years, and removed $100 million over 10 years. We have cut or deferred more than 40% from non-urgent transport upgrades in the first three years. We also supported the Chief Executive to save an additional $7 million in 2024/25 , and $8 million in the subsequent years by right-sizing the organisation.  

The budget proposed is lean. There are no pet projects, in fact many aspects that make city living nice have been put on the back burner.  

This budget prioritises looking after our existing assets. We cannot run our city into the ground. We cannot be relying on ageing infrastructure (water pipes, roads, community spaces), nor can we see these fall into disrepair or close. We must take care of what we have now. 

The budget also continues to invest in priority capital growth – water services and roads – that enable and attract businesses and affordable homes to our city. Our city is growing at pace – but it comes with costs – particularly around infrastructure. 

We have heard councils up and down the country consider closing libraries, pools, parks – or not fixing potholes in roads. We strongly believe that these services are core to Council’s work – and what Hamiltonians value. But we are open to all options. We want to hear from you on the types of cuts to Council services you would support to make further savings, or if you want us to keep delivering these services.  

Council has explored many options to bring down debt and reduce costs. This includes the sale of assets, and revenue collecting options. Unfortunately, the cupboards are bare - with previous Councils having sold most of what could be sold. We have included an option to remove free parking in the central city to generate “user pays” revenue. 

No matter what we do, a significant rates rise is required. No mayor nor councillor wants to propose large rates increases. What we all do want is a functional, thriving city today and for future generations.    

I am personally disappointed. I’ve heard how unhappy people are with the proposed rates rise. I hear you. This consultation process is your chance to have your say. What matters most for our city? What do you disagree with? How can we reduce the burden on ratepayers?   

This document sets out a proposal to keep the city running well while managing realistic costs. I invite you to read it. It is important that you take the opportunity to have your say.  

Paula Southgate
Mayor of Hamilton

Key dates

19 March - 21 April
Community consultation – when we want to hear from you

15 - 17 May
Verbal submissions – your chance to talk about what you’ve told us

4 - 6 June
Mayor and Councillors meet to consider all the feedback from the community

4 July
Mayor and Councillors confirm the 2024-34 Long-Term Plan 

A pie graph showing Councils revenue sources in 2022/23. Rates 70%, subsidies and grants 4%, capital revenue  3%, development contributions 4%, fees and charges 14%, interest revenue 3% and other revenue 3%

The city's costs are not being met by rates

For a long time, rates have not kept up with the increasing costs of running our fast-growing city.

Council has borrowed to build new roads, water pipes, to buy land for parks, playgrounds and other community assets. We’ve invested in new residential and industrial land, rolled out free rubbish and recycling collection, supported city safety, and much more. This investment has built the beautiful river city that we call home.

But we’ve been using the city’s mortgage (borrowing) to do so.

Of course, borrowing is not always bad. Large scale growth has driven Hamilton’s economic success. These repayments can be shared by not only current but future generations of ratepayers, who will use and benefit from these assets.

However, Council considers borrowing to pay for the city’s everyday costs is not an appropriate, or fair, use of debt. This is the situation we have found ourselves in – having only balanced our books in two of the last 20 years. Previous Councils have tried to balance the books, but subsequent events or decisions have prevented this happening.

If we increased our rates next year by the amount we planned to in our last Long-Term Plan (4.9%), instead of the proposed 19.9%, our operating costs would outstrip revenue by $76 million. And we would have to borrow to cover that deficit.

We recognise the proposed 19.9% is a dramatic increase. It is reflective of increased costs incurred from higher interest rates (on debt), inflation (everything costs more), and depreciation (the cost to renew and maintain our ageing assets).

This Council wants to adjust the way our city operates it finances.

By law, councils should make sure their income is sufficient to meet their operating costs. Our plan to tackle our financial challenges would achieve this, after more than 20 years of rarely doing so.

If everyday revenues aren't enough to meet everyday costs, it means we need to borrow to do so.

Operating costs are the day-to-day expenses to keep our city running. These include maintenance, staff costs, fuel, electricity, depreciation and interest. It is these costs that have the most significant impact on rates.

Capital expenditure is money the Council spends on its major construction projects or purchases - like land for parks, or laying down new pipes or roads. Council borrows (uses debt) to meet the cost of these.

A graph showing councils debt and revenue vs the costs to run the city

What we've already done to reduce our costs

We are committed to looking after the more than $6 billion of assets ratepayers have invested in to create a thriving and prosperous city.

We've made sure that what's in this plan will keep Hamilton's critical infrastructure in good working order. We do not propose cutting core services. But we have looked hard for areas where we can make cuts. Some examples include:

  • Significant reductions (more than $53 million over 10 years) to city-wide transport upgrades
  • 14% of the capital programme budget removed across the first three years of the Long-Term Plan
  • Reducing funding for external partners for a saving of $488,00 per year
  • Stopping funding for cat-desexing programmes – saving $100,000 per year
  • Reducing funding for community grants – saving $106,000 per year
  • Reducing funding for event sponsorship – saving $100,000 per year.
A crowd at a outdoor concert at Hamilton Lake domain
A bus stop and shelter

Reduction in personnel costs

Through an existing phased strategic restructure process, the Chief Executive has made $7 million in operating savings for 2024/25 (and $8 million per year ongoing) by reducing staff numbers and costs. In response to financial pressures the city is facing and to be financially sustainable, we recognised we need to change how we do business. Overall, we expect to reduce staff numbers by approximately 100 roles. The changes to our personnel count ensure we are as efficient and as lean as possible - before cuts to service levels to the community would be needed.

Further reducing our costs

Our budgets for 2025/26 (year two of the Long-Term Plan) and beyond are based on us further reducing the everyday costs to run the city, saving $104 million over the 10 years. This enables the rates rise in years two to five of the Long-Term Plan (2025/26 to 2028/29) to be 0.4% lower than would be the case without the reductions. This would likely mean reductions to some back-office functions and some community-facing services.

How Hamilton's rates stack up

The median home in Hamilton Kirikiriroa has a capital value of $830,000 and pays annual rates of $2838 this year. This is around $800 less on average than the other councils we looked at.

If our proposed rates increase goes ahead, our median residential rates will still be lower than most of the other big cities and our neighbouring councils – who will also be increasing their rates. Our rates need to reflect the true costs of running a big and growing city.

The average residential electricity bill in New Zealand is $2880 for just one service.  Source: MBIE, September 2023

Hamilton rates compared to similar councils

Councils across the country are facing increased costs

The services that local government provides for residents are costing more to deliver. Councils across the country are facing the same challenges – these are not unique to Hamilton Kirikiriroa or how we operate.

These increases we’re facing – inflation, interest, and central government compliance demands – are outside of Council’s control. And being a growing city means there’s more for Council to deliver – more pipes, roads, parks and playgrounds to build and look after, for example.

Person riding a bike along the Hamilton section of the Te Awa River ride

So what's driving the cost?

Looking after what we have

One of the biggest cost increases the city is facing in 2024/25 is depreciation ($17 million). This figure represents how much more it will cost Council in 2024/25 to look after the city's infrastructure compared to the current year.

Depreciation is a way of spreading the cost of an asset over its useful life, recognising that assets lose value as they age.

Council is responsible for 200 sports grounds, nearly 700km of roads, 1250km of pipes carrying drinking water from the treatment plant, 859km of wastewater pipes taking away what gets flushed and 83 play spaces – as well as thousands of other assets. All up, the value of these is more than $6 billion.

Hamilton's water assets – our treatment plants and pipe networks – are coming to a critical stage of their life where extensive - and expensive - work is needed to keep them running. Many older parts of our city sit on old pipes that are in poor repair or not fit for the future. To put this right we need to fund more renewals and replacements every year.

The number of assets we're responsible for is growing too. When development occurs around the city, to allow for more housing for example, construction companies will build the pipes and roads to enable the homes to be built. These pipes and roads (also known as vested assets) are then handed over to Council to look after and eventually renew. In 2022/23, Council was handed over an additional $60 million in infrastructure as a result of private development around the city.


The relationship between revenue and borrowing

Borrowing to fund much needed infrastructure is the best way to deliver for the city’s fast growth. This will have ongoing benefit for current and future generations of Hamiltonians.

Significant rates increases and the flow-on ability to pay off debt are also needed and important for another reason. The amount of debt we hold and the amount of revenue we collect are connected through what’s called our debt-to-revenue ratio. We have a cap of what this ratio can be, set by the Local Government Funding Agency (LGFA), which councils across the country borrow from.

Hamilton’s increasing infrastructure requirements, across all years of the Long-Term Plan, mean that we will need to borrow to fund how we look after these assets. In order to remain within our debt-to-revenue limit across the next 10 years, more revenue is needed in the earlier years of the Long-Term Plan.

To keep our debt at a level appropriate to the city’s growth, and maintain our ability to borrow, we need to start servicing debt as soon as we can.

Because rates have been lower than our costs – and because of the pace of our growth – we have not had the surpluses we need to repay debt. It’s like a household paying the interest only on a mortgage, and not the actual debt. This is why we need the level of rates increases in the earlier years of the Long-Term Plan, so we have the debt capacity to maintain our assets. We’ve seen in other cities what happens if drinking water and sewage pipes reach the end of their working life – and we don’t want to end up there.

The debt-to-revenue ratio looks at our level of debt and how much income we're getting.

The impact of interest on $1 billion of debt

If you have a mortgage, or any kind of debt, it’s likely that you are aware of the impact rising interest rates is having on households, businesses, organisations and councils around the country. It’s true that Council holds a lot of debt. As we’ve already mentioned, it’s the appropriate way to fund our capital projects – basically anything that Council builds. And we’ve been building a lot over the last few years, as the city has become one of the fastest growing regions in the country.

This means that any jump in interest rates comes with a significant increase in our repayments. We’re expecting to pay $14 million more in interest next year than previously forecast.

Running the city costs more than ever

Your household or business will also be experiencing inflation-driven price increases for the likes of food, fuel, electricity and insurance. We’re facing those increases too.

The impact of record inflation is forecast to add $17 million in costs to Council's budget in 2024/25 alone.

Rising costs have hit hard. The financial environment we all operate in has changed significantly over the last two years, and economists have said this is expected to continue to be challenging. The impact of record inflation is forecast to add $17 million in costs to Council’s budget in 2024/25 alone. Here are some examples of what this means for our city:

  • In 2023, the cost of construction of roads, pipes and other infrastructure increased by 15%. Site preparation for construction has gone up 27%, and civil engineering – the cost of designing infrastructure – has increased by 26%.
  • Structural metal products (e.g. steel for construction) increased by nearly 30% in 2022.
  • Independent forecasts are expecting concrete and quarrying expenses to increase by 12.5% and 10.7% respectively in this financial year.
  • Costs for contracted cleaning of our facilities are expected to rise by 13.2% next year. This is a combination of increased labour costs and the addition of new facilities to look after such as Te Kete Aronui Rototuna Library.
  • At Hamilton Pools, the price for water quality chemicals has jumped by 25% over the last two years.
  • Maintaining the city’s parks has become costlier due to hikes in the cost of sand (15%), fungicide (31%) and fertiliser (48%-57%) in the last year alone.
  • Costs to feed impounded dogs at Council’s Animal Education and Control facility have climbed 20% in the same timeframe.

This means that providing the same level of services as we have been and continuing to build the infrastructure we had planned in our previous Long-Term Plan will cost far more than was previously forecast.

There are many things that we wish we could do, but simply cannot afford.

Increasing expectations from central government

There are also additional costs for the city to meet increasing central government compliance demands. Central government is imposing increasingly stricter measures for Council activities such as capacity of our drinking water network, treatment of wastewater and stormwater, planning for housing development and traffic management. These greater regulations, which add costs such as construction, maintenance, and personnel, come with no funding from central government to deliver them.


The scope of local government

In 2018, the promotion of social, economic, environmental and cultural well-being of communities was added to the statutory purpose of local government, significantly impacting the role and scope of territorial authorities. This comes with increased expectations from central government for what councils should be provide to their residents, alongside increasing expectations from communities for what local government should be delivering. This has seen growth in the number of strategies, policies, and plans Council has made decisions to be responsible for, and with that an increase in the performance measures Council aims to achieve.

The increased scope of local government, and the variables that our city and this Council operates in - increasing demands, expectations, and compliance - means that what Council delivers (and what it costs) is not linear to our population growth (21% in the last 10 years). Over the last 10 years, Hamilton City Council has increased its capital programme by 398%. Our city's growth brings increased demand for consents, permits and inspections. Private developers hand over millions of dollars of assets like roads and pipes each year for Council to look after, while also providing for ratepayer growth that brings additional revenue. There would be very few Council activities that have been exempt from year-on-year growth. Our Long-Term Plan from 10 years ago (2015-25) forecast operating expenditure of $2.4 billion. This Long-Term Plan is proposing $6.3 billion over 10 years, a 162% increase. In that time, our staff costs have increased 70%, consultant spend has gone up 466% largely driven by the increased capital programme and Plan Changes. Over the same time period, fees and charges have increased by an average of 2.8% per year, and rates have increased by an average of 4.95%.

The benefits of a growing city

Hamilton Kirikiriroa is New Zealand’s fourth biggest city, yet we’ve got a footprint of just 110km2. We’re a thriving city located within the golden triangle where more than half of New Zealand’s population live and two-thirds of its recent population growth has occurred. Our prime location and accessibility enables key freight and transport links which bring opportunities for growth and means more people and businesses are choosing to make Hamilton Kirikiriroa home. 

We have strong population growth that is set to continue for a number of years. A thriving economy, relative housing affordability (compared to other big cities) and Hamilton's quality of life will continue to attract people who want to live here and businesses that want to invest here.

If we fail to provide for growth, we simply won't have the infrastructure our city requires. This could be disastrous – for example, if we don't have the water capacity for new classrooms, or a growing hospital, or the University of Waikato's planned medical school.

Growth doesn’t just benefit new residents or new parts of our city: by continually investing in good growth outcomes, we address infrastructure needs, enable jobs and industry, facilitate housing, and deliver community facilities that make our city a great place to live.

To ensure we retain these qualities, we need to balance our financial situation with investing to grow our city well. We need to embrace the opportunities growth brings, by investing in the right places at the right time.

Our city currently has around 60,000 homes for around 180,000 people. It's projected that over the next 50 years these numbers will roughly double to around 120,000 homes for about 310,000 people.

A family walking through the central city
Two water pipes

Implications of water services costs being retained by Council

Providing three waters services makes up 30% of the city’s operating and capital expenditure – and that’s before the introduction of new regulation and the resulting impact on budgets. The repeal of Three Waters Reform means Council remains responsible for significant essential work and the associated costs. 

This Long-Term Plan reflects policy direction from the new Government in relation to costs for water services delivery.

Three Waters Reform recognised that the costs and, in the case of some smaller councils, the ability to safely and effectively deliver waters services, would be better met by regional organisations that could access more borrowing power through economies of scale.

The new Government has retained much of the new regulatory and compliance requirements and has indicated further economic regulation will be introduced – both of which will place further cost pressures on Council.

Despite the recent changes brought about by the new Government, the additional costs to deliver water services remain but there is not yet clarity on how these could be funded.

As a result, the city’s water service delivery budgets face increasing pressure to maintain existing levels of service, address existing unfunded waters projects, provide increased funding for growth infrastructure, meet new regulatory and consenting requirements, provide resilience and respond to the changing climate.

Council is advocating to government and other partners on options to address the rising costs of three waters services including funding and financing tools, as well as investigating alternative delivery models. These changes may mean we would not need as high rates rises to fund these services in later years. However, to be prudent, this Long-Term plan is based on the situation as it currently stands.

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