Christel Yardley/Stuff
Making cuts to a multi-layered cake – staff at Hamilton City Council’s HQ are running the ruler over projected expenditure for next year after a $6 million savings order from councillors.
Pushing back some big projects, and cutting payments to contractors and consultants are key possible ways to slice $6m from the city budget.
The savings directive came from Thursday’s city council meeting, where councillors approved a 4.9% rates rise but sent staff to cut $6m in operating expenditure to bring the projected deficit down to $11m.
Mayor Paula Southgate’s expecting staff to do a “good forensic look”, while other councillors have suggested cutting the spend on contractors, and one felt it was “wishful thinking” to suggest a $6m cut wouldn’t affect service to the community.
Cuts are likely to be challenging, chief executive Lance Vervoort said on Friday, and his predecessor Richard Briggs felt the low-hanging fruit was already picked, leaving the question “what are they prepared to give up?”
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The city’s projected 2023-24 balancing the books deficit has already been slashed from about $35 million, the level staff had feared last month as high inflation kept ripping through the country.
Staff are due to outline their proposal for a further $6m reduction in a few weeks.
Tom Lee/Stuff
A close eye on costs – mayor Paula Southgate and chief executive Lance Vervoort at Thursday’s council hui. Casting a sharp eye over costs was called for to make $6 million in operating expenditure cuts.
Thursday’s hui heard there was about $55 million in uncommitted capital expenditure (capex) projects out of a mammoth $375 million worth targeted for 2024. Some felt the full programme unlikely to go ahead anyway, particularly in light of national capacity constraints after recent disasters.
Deferring $1 million in capex roughly saves $100,000 in operating expenditure (opex).
Also eyed for savings potential were $50 million in annual contractor costs and $13 million in consultant fees.
Tom Lee/Stuff
Councillor Ewan Wilson wants the ruler run closely over capital projects and $63 million in consultants and contractor costs.
Vervoort said Friday it might be better for staff to suggest putting off whole programmes or projects rather than trying to pluck small savings from many areas.
He agreed on looking at cutting or deferring capex and more opex.
On whether some opex cuts may be easier than others, Vervoort said: “I think it’s all going to be challenging.”
Service cuts “that have the least effect on the community” may be considered and sharing operations with other councils may also help, he said.
Councillor Ewan Wilson said Friday he’d “be watching, respectfully, very carefully” for staff trying to avoid spending cuts by proposing reductions that councillors could be reluctant to make, such as cutting library hours or pool guards.
He asked “is the use of contractors at a cost of $50 million appropriate?” and felt the very high planned capex needed tight scrutiny.
Councillor Geoff Taylor was also keen Friday for a close look at consultant and contractor costs, and deferring capital expenditure. “I don’t buy into the notion that if you cut opex you have a reduced level of service.”
Emma Pike, who seconded Wilson’s $6 million motion Thursday, also supported looking at capex and consultant and contractor costs.
“How can we work smarter? Ultimately our role as governors is to set the benchmark…and look at cuts.”
Mayor Paula Southgate was reluctant Friday to “cherry pick” projects that could be put off.
“What I would be expecting is for [staff] to do a warts and all look at the business.
“Don’t pick all the low-hanging fruit first… I want you to have a good forensic look at what can be deferred without a big impact.”
Christel Yardley/Stuff
Councillor Sarah Thomson doubts the full $6 million in cuts can simply come from deferring capital projects and is worried about how community services could be affected.
Councillor Sarah Thomson strongly disagreed with seeking a specific $6 million in cuts without clarity over how.
“It’s completely wishful thinking to think we can cut $6 million from the budget without reducing services to the community.”
She agreed Friday there were potentially significant savings in deferring capital expenditure but noted this could mean missing out on, for example, transport funding from central government, which would need to be re-applied for.
MARK TAYLOR/Stuff
Former Hamilton City Council chief executive Richard Briggs says councils having to make budget cuts is a worldwide phenonomen.
Former council chief executive Richard Briggs said councils around the world were having to make cuts due to cost rises, and trying to maintain services was “the challenge New Zealand councils are being confronted with”.
“Hamilton City Council has been through the low-hanging fruit” when it came to making cuts in recent years and the question now was “what are they prepared to give up?”.
“If they make a call to cut $6 million something’s going to have to give.”
He and former deputy mayor Gordon Chesterman said council must stick to its guns whatever was decided.
“It’s encouraging for the first time that councillors are starting to think like ratepayers,” said Chesterman.
