Whakatāne District Council has identified potential budget savings for next year’s Annual Plan, thanks to cost-saving measures and a slight easing of interest rates and inflation pressures. At today’s Extraordinary Council Meeting, Elected Members provided guidance on how these savings could shape the draft 2025/26 budget.
Council Chief Executive Steven Perdia emphasised the financial challenges the Council is facing.
“Like many other councils and in fact central government, we are operating in a deficit just to pay the bills, and ongoing borrowing is unsustainable in the long term.
“This highlights the financial pressure our Council is navigating as we look for ways to return to a balanced budget while ensuring services continue without reductions to levels of service.”
The Annual Plan 2025/26 draft budget report presented five options for allocating the savings identified, including:
1. Recover from the operating deficit as soon as possible, requiring significant rates increase in Year 2 of the Long Term Plan.
2. Maintain the planned 12.7 percent rates increase for Year 2 of the Long Term Plan and apply savings to reduce the deficit.
3. Slightly reduce the planned Year 2 rates increase and apply some savings to the operating deficit (reduce rates increase up to one percent).
4. Use savings to further reduce the Year 2 rates increase (reduce rates increase up to two-three percent).
5. Allocate savings to fund community-requested Long Term Plan items that remain unfunded.
After robust debate Councillors indicated to staff to prepare a draft 2025/26 Annual Plan budget based on option 3, a ‘mixed model’ approach.
Councils are required to adopt an annual plan prior to the start of each financial year, which outlines the Council’s work programme, budgets, and any necessary adjustments for the second year of the 2024-34 Long Term Plan.
Year two of the Long Term Plan had a rate increase of 12.7 percent to maintain current activities and service levels.
Despite this increase, the Council is still forecasting an operating deficit for 2026, meaning it must continue borrowing annually to cover operational costs — a situation that is not financially sustainable in the long run.
The deficit recovery process outlined in the Long Term Plan was structured rates increases over six years designed to return the Council to a balanced budget. The operating deficit occurred as rates were deferred during the COVID-19 pandemic to ease financial hardship for households. The challenge was compounded by the cumulative effect of insufficient funding, inflation, and rising interest rates which has left the Council in a ‘catch-up’ position.
Community feedback during the Long Term Plan process indicated a preference for a gradual six-year deficit recovery plan to ease the immediate burden on ratepayers. This six-year plan aligns with the timing of loans taken to cover annual deficits, which are structured over 25 years.
Today’s meeting also discussed how deferred rate increases must eventually be recovered to balance the budget unless service levels are reduced. The Council has worked to avoid cutting services, as the deferred increases were not introduced with an expectation of reducing service levels in the future.
The decision now provides a clear direction for staff to develop a version one 2025/26 Annual Plan budget, which will be presented to Mayor and Councillors early next year.