Rates rises were less than expected. How did we get here?

The Manawatū District is celebrating after the council rose rates by 2.4% less than expected this year. But amidst this relief, we must ask: How did we get here?

On Wednesday, June 17, the Manawatū District Council adopted a 4.9% rates increase for the 2026/27 financial year. That is lower than the 7.3% increase forecast in the Long Term Plan, a difference that will no doubt be welcomed by many ratepayers.

In the days following the decision, commentary attributed the lower increase to council efficiency and responsible financial management. While those factors may have played a role, there has been relatively little discussion about the specific changes that contributed to the final figure.

This letter takes a closer look at how the rates increase was reduced by 2.4%, examining the decisions and financial adjustments that shaped the final outcome.

The following are the different ways in which this favourable outcome has been achieved. The information contained in the two main points following has been given to me directly from the Manawatū District Council in an OIA request.

Increasing Debt

The first way this rise has been made less than expected is by an increase in borrowing. The Annual Plan contains a net increase in debt of $13,830,000 to fund capital projects. This is a large increase, aiming to ensure ratepayers do not have to fund capital projects immediately out of pocket. The change will be seen as concerning for some ratepayers. While this is for capital projects, and we cannot expect the ratepayer to fund capital projects within the same year, we might consider having higher rates to get the debt paid down quicker and pay less in interest. Some might argue that lowering rates rises while taking on considerable new debt is not a wise decision. While some might welcome the opportunity to pay less now, others might feel as if we’re only postponing the pain of having to pay our bills.

No Contributions to Resilience and Insurance Reserves

When asked about contributions to resilience and insurance reserves in this Annual Plan, the Manawatū District Council responded with this: “The Annual Plan contains no rates funding for Resilience and Insurance reserves. Council can use existing reserves or borrowing facilities in the event of an emergency.”

While some might support the action of not making any contributions, others might find it a very risky play. The choice could ease the burden on ratepayers in the short term, though should we have any disaster or infrastructure failure, it may result in borrowing to cover the emergency funds needed. This would put a much larger burden on ratepayers in future.

One way that borrowing now and repaying the debt at a later date would make sense is if the district is in future going to have a larger base of ratepayers. Population growth in future can be expected to be achieved through new developments, such as Maewa.

A larger ratepayer base would help spread the cost of servicing the new debt incurred under this Annual Plan, as well as any future borrowing. However, if projected population growth does not eventuate, existing ratepayers may face higher rates to meet those debt obligations.

Questions were asked about these new developments - such as Maewa - raising concerns about who funds the infrastructure costs of these developments: Who is going to pay for the new infrastructure to support population growth? Would it be the developer or the ratepayer? When the council was asked a question along those lines, this answer was given: “Development

Contributions are used to recover the cost of all growth works.” This means that existing ratepayers will not be subsidising any housing development, and that development contributions (from the developer to the council) will ensure the council recovers any funds spent on the development.

Certainly, many will support the council’s decision to take on a potentially riskier position in order to ease the immediate burden upon ratepayers, though others may take a contrary view. Critics might cite that increasing debt while simultaneously reducing rates rises, and entirely cutting rates contributions to resilience and insurance reserves may put the district in a much more risk prone position, and the actions might be seen as postponing the pain of paying our bills.

Response from MDC

Manawatū Mayor Michael Ford responded to my opinion piece in Feilding First the following week with a column titled “MDC in good space with debt levels”.¹

Mayor Ford sought to clarify that the council is not borrowing to fund operational expenditure, but only capital expenditure. However, this was already clear in my original article, where I specifically identified the $13.83 million increase in debt as funding for capital projects.

He also argued that it would be unfair for today’s ratepayers to carry the full cost of long-term capital assets. Again, this was a point I had already acknowledged. My article explicitly recognised that ratepayers cannot reasonably be expected to fund major capital projects entirely in the year they are built.

Mayor Ford also addressed the council’s debt cap, noting that its new AA credit rating has increased the cap from 175% of revenue to 280%. However, while he explained why council now has greater borrowing capacity, he did not really address the significance of council moving beyond the 175% limit it had previously set for itself.

That distinction matters. The question raised in my article was not whether council is legally or financially capable of borrowing more, but whether reducing the immediate rates burden through additional borrowing and reduced reserve contributions represents the most prudent approach for ratepayers over the longer term.

Mayor Ford argues that the council’s approach is prudent and points to its comparatively low debt per household. Those are important considerations, but they do not remove the question of why council has moved from a 175% debt limit to a position where its new limit is 280% of revenue.

The debate, therefore, is not simply about whether council can afford to borrow more. It is about how much debt ratepayers should be comfortable carrying, and whether the lower rates increase this year is worth the additional financial commitments being pushed into the future.