Last week, council chief executive Mike Theelen said while that was a "tough proposition" given the cost-of-living crisis, the council was also facing considerable cost increases.
The largest of those were associated with the settlement of two high-profile weather-tightness claims over the past two years, relating to Wensley Developments Ltd’s Oaks Shores and Oaks Club Resort.
In December, Mountain Scene reported Oaks Shores unit owners reached a confidential out-of-court settlement with the council, who had been suing it and other parties for $169.2million.
In 2021, the council paid $40million to settle another leaky-building claim, including legal fees, taken by the owners of Oaks Club Resort.
Those claims also meant council had to review its capital works programme and service delivery, resulting in a reduced capital expenditure programme, with $106.7million of projects proposed for deferral.
In her report to councillors, corporate services general manager Meaghan Miller said the settlements also contributed to a rates impact of 4.03% for the year, enabling council to pay off the total settlement costs over several years.
Other cost increases included were attributed to a "dramatic overall increase in interest rates" over the past 12 months, with the balance of higher interest costs contributing another 4.5% on top of the impact from building-defect claims, and record-high annual inflation at 7.2% in the year ending December 2022, coupled with growth in the council’s operational costs to maintain service levels, which had a rates impact of 4.1%.
When asked by Cr Quentin Smith yesterday to explain what the council had done to minimise the impact of the weather-tightness settlements on ratepayers, finance general manager Stuart Burns said the council had borrowed to make the settlements.
"In order to spread that cost we have, obviously, incurred interest and we’re making repayments."
He said Queenstown Airport’s dividend would be used to fund some of those repayments.
In February, the airport announced a half-year dividend of almost $6million, the most significant payout since 2019, of which the council would receive $4.49million for the first six months of this financial year.
Mr Burns said if the dividend had not been used on the repayments, "the rates impact would have been much higher".
"But the interest will fall on the ratepayers."
Cr Esther Whitehead asked Mr Burns how the council could ensure "this isn’t going to happen again", given it was in a situation where the law, as it stood, left local authorities as "last man standing".
He responded there were still three or four weather-tightness claims on the council’s books, but none were of the scale of the Oaks properties.
"That’s not to say there will not be another. We’re talking about buildings that were completed 20 years ago. There is a limitation period, in terms of when people can make claims, and we’re reaching the end of that."
He said there was also an assurance around the process which resulted in the claims — essentially, the building inspection and consent process.
"We are audited regularly on those ... externally, and we’ve certainly got a lot of confidence that the way we operate now is appropriate."
Public consultation on the draft annual plan will begin today and close on Wednesday, April 26.
