The council posted deficits above $35 million in the past two financial years, a deficit of about $28.5m is budgeted for 2024-25 and a deficit above $3.6m has been indicated for the next year, before surpluses are forecast through the remainder of the 2025-34 draft long-term plan.
Any deficit results in higher debt.
The council went into some detail in its financial strategy about what was behind next year’s projected deficit, as well as the situation in the following year.
A planned operating deficit in the first year of the draft nine-year plan related to unfunded depreciation for community housing and for Three Waters, the strategy said.
Depreciation refers to reduced value of assets over time and funding for this relates to how cost of replacement is accounted for.
The strategy, part of supporting documentation for the draft nine-year plan, noted depreciation would be fully funded for community housing after the first year.
"The Three Waters activities continue to have unfunded depreciation in year two of the nine-year plan and, from year three onwards, depreciation is fully funded."
Posting operating deficits occurred after revaluation of Three Waters infrastructure assets in 2022-23 resulted in a significant increase in depreciation.
The council chose not to fully fund depreciation, which kept expenses in check but added to debt.
A need to balance the books has been heightened by government demands relating to Three Waters reform, including councils having to explain how water services will be financially sustainable by June 2028.
The city council signalled it would have to increase water charges.
Increases of 15% for Three Waters targeted rates were indicated for each of the first two years of the draft nine-year plan.
"As we work towards having the cost of providing our water services being fully funded by targeted rates," the financial strategy said.
In community housing, 98% of depreciation would be funded in 2025-26 and it would be fully funded after that.
A breakdown was provided about Three Waters, for which depreciation would be fully funded from 2027-28.
For the water supply, 73% of depreciation would be funded in year one of the nine-year plan and 92% in year two.
For wastewater, 82% of depreciation would be funded in year one and 93% in year two.
For stormwater, 62% of depreciation would be funded in the first year and 85% in the second year.
The council is also set to decide in July or August if it wants to set up a company for Three Waters services or to continue delivering the services in-house.
