Council’s 2020 Vision

Prudent reinvestment of proceeds from the recent sale of Powerco shares could enable New Plymouth District Council to abolish general rates by 2020.

Chief executive Rodger Kerr-Newell says the Perpetual Rates Reduction Fund (where the Powerco proceeds will be held) can provide increasing annual returns, enabling the council to remove the current level of general rates within 16 years.

Mr Kerr-Newell says: “We’re setting our sights high on this one but when you do the maths it’s definitely an achievable goal.

“At present general rates make up around $45 million per year – some $20 million from investment income and about $25 million from ratepayers.

“Our advice, and we have some of the best available in the country, is that the Perpetual Rates Reduction Fund is capable of producing gross earnings of 10.65 per cent per year.

“On the $259 million Powerco proceeds, this would achieve a return of more than $26 million in the first full year of investment – i.e. a $6 million surplus on our current $20 million investment income.

“This $6 million would be added to the fund and, assuming we maintained the same levels of return going forward, this surplus would increase year on year.

“By 2020 we could have a fund of $590 million – and this is the point at which, if the council chooses, it would no longer need to ask the ratepayer for the annual $25 million worth of general rates money.”

John Armstrong, chairman of New Plymouth Equity Advisors Limited, the council’s investment advisory body, says: “This is a very worthy objective and a goal that in the present climate is eminently achievable.”

NOTE: This news release refers to general rates. Uniform annual charges (UACs) for water, refuse and sewerage services would still apply. Currently these charges are $209, $43 and $270 respectively.

More… A typical ratepayer, paying his/her current general rate plus all three UACs, is now paying overall rates of around $1,250 per year. Therefore, using current figures, removal of the general rates would see their total annual bill cut by almost 60 per cent.

© Scoop Media