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Local Government

LTP futile without accountability

In her “Letter to the Editor”, The Informer, 30 April, p.19, Ms Beston opposes my “A Fish Rots from the Head Down” opinion piece, in which I outline structural and political flaws in the processed 2024/34 LTP and the lack of leadership displayed by our present Councillors. She argues our Councillors are not responsible for rate rises and our current situation. I commend her for raising the issues. I wish to respond in kind to her arguments which affect a number of current issues and also enlarge on some aspects of the LTP that affect the majority of ratepayers.
 |  Flemming H Rasmussen  | 

1. Accountability:

Ms Beston is of the opinion that our locally elected Councillors are not responsible (accountable) for the enforcement of their 2023/24 11.6% avg. rate increase or this year’s proposed 12.9% avg. rate increase. In Mercury Bay, our rate increases avg. 15-16% in both years.

She argues this is “comparatively well done” by comparing us with Napier (23.7% increase). Conveniently, she omits to mention Napier Council faced real 2023 adversity of “natural disaster“ proportions. They are literally rebuilding (think the Esk Valley).

Water: Similarly, the argument continues that a proposed 29% increase in Auckland water charges makes our Council’s performance look good.

I happen to be an Auckland ratepayer and face a 7.2% water rate increase, not 29%.

Historically, Auckland water pricing has been subsidised and delivered at below cost. Auckland’s Watercare, a well-run Council-Controlled Organisation (CCO), has politically been made accountable, asked to face reality and address the fallout of the repeal of the disastrous Three Water reforms, all covered in a 7.2% actual 2024/25 increase for Auckland ratepayers for water. That is a testament to what a well-run organisation, living within its means, can do!

2. Comparing Apples with Apples

When relying on relative comparisons, we all run the risk of a flawed line of argument (percentage-point increases may be measured using different base figures when being compared). Structuring an argument on absolutes (comparing $ with $) often serves one’s argument better.

Rates: TCDC want an average eastern Peninsula residential dwelling to pay close to $90 weekly in rates (Mercury Bay $4,610 pa, Whangamata $4,553 pa, Tairua-Pauanui $4,566 pa).

In the Top-10: Per the Taxpayer Union’s “2023 Ratepayers’ Report”, TCDC is a member of the dubious “Top 10 Club” of the most expensive districts in New Zealand.

Looking at the peninsula’s eastern side, we are even more expensive (we subsidise the western side) and would be even higher ranked.

What are we getting for our money?

Many of us lack safe drinking water and wastewater reticulation. The list of essential (critical) missing services is long. However, few are more essential than safe drinking water and wastewater reticulation.

3. Responsibility

Ms Beston argues our Councillors are not accountable for the rising costs of bridges, sewage systems, and water supply systems (allegedly a 38%, 30% and 27% increase).

Unfortunately (for all of us), our Council is not proposing to increase our Mercury Bay rates by 16.2% to build infrastructure (bridges, sewage systems, water infrastructure). Those are all Capital Expenditures (CAPEX). Materially, we fund that by borrowing money (in addition to raising our rates). Our Councillors are proposing to raise our rates to pay for Operating Expenses (OPEX), not CAPEX.

Staff Costs: Our increased rates are being used to fund ever increasing staff costs. A staggering 25.8% of our rates are spent on staff (2023/24 $24.4m staff cost, $94.4m rate income). Next year (2024/25), our Councillors propose to spend an additional $3.5m on staff alone, increasing staff costs to $27.9m. That is why they want to collect an extra $14.15m in rates (2024/25 rate income $108.6m).

4. “It Is Not Their Fault” (But It Is Their Responsibility)

Ms Beston argues our Councillors are merely “possums in the headlight”, reacting to increases in inflation and raising interest rates and insurance costs.

The increased interest we are all paying is a monetary policy response (a singular, one-dimensional, blunt tool) applied to attempt to dampen our high inflation. The rest of the western world (EU/USA) has achieved this already, with significantly lower inflation than ours.

When you live beyond your means, spending more than your income and funding the excess with debt, your interest costs in absolute and relative terms will go up. That is precisely what is happening in TCDC’s proposed LTP plan, with interest costs increasing from $3.6m in 2023/24 to $14.5m in 2023/24. A quadrupling!

Our Councillors are proposing to triple our debt (borrowings) in the next eight years ($79.4m in 2023/24, ballooning to $225.8m in 2031/32). The increased debt and the increased interest costs (driven by an increase in interest rate as our risk profile increases, and an increase in the amount of debt we need to serve), are both consequences of living beyond our means; not cutting our cloth to balance the books.

5. Sticking To Core Business doing the Basics Well

Ms Beston is of the opinion that I have “accused TCDC of exceeding its legal authority”. That is not the case. However, I have argued that TCDC should not venture outside of delivering essential core services (drinking water, wastewater reticulation, rubbish collection, footpaths and local roads etc.).

Just because a “catch-all clause”, per s.10(1)(b) in the Local Government Act 2002 (LGA 2002), enables Councils to “promote the social, economic, environmental, and cultural well-being of communities in the present and for the future,” does not mean the Council has to take on social services. Section 10(1)(b) enables it to. It does not stipulate that it must or has to. As a society, many worthwhile social causes exist.

Delivery of these social services is, first and foremost, the responsibility of the Centralised Government, who must do it. Local Government (TCDC) does not have to (do it). It is optional.

Metaphorically speaking, our Council could consider delivering free school lunches, solving school truancy, or address woefully inadequate payments to retired veterans who have served. The list of aspirational, worthwhile causes is (almost) infinite amongst New Zealand’s chronic social deficit.

However, if a Council cannot get the basic fundamentals right, most reasonable persons would caution such a Council not to stray from its core obligations. If/when it resolves those core obligations sufficiently well, then, by all means, if you want to pay for it (instead of philanthropically supporting targeted aid and support organisations), vote for Councillors who aspire to solve New Zealand’s social ills.

Leading and showing leadership is not a popularity contest. Leadership is about doing the right thing (for our local communities).  It is not about deflecting or blaming unsatisfactory situations on predecessors, external factors or centralised government.  Councillors are required to show leadership, to ask the right questions and direct the stewardship of delivering sustainable core services to our local communities. This will require our council to navigate its circumstances to stay within its means.

What do you think?

Flemming H. Rasmussen is a local, independent lawyer residing in Kuaotunu.

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