The need for local body reform

November 3rd, 2012 at 12:04 pm by David Farrar

The Herald reports:

A rates rebellion in a small coastal town is growing as more than 500 Mangawhai residents refuse to pay an estimated $1 million or more to the debt-ridden .

Rates have soared this year by about 40 per cent for many residents – more than doubling for some – to help pay off the council’s $80 million debt, which was mainly caused by a $58 million cost blowout for a local sewage treatment system.

The total population is only 19,000, which will be around 7,300 households. So the Council sewage treatment system is a cost of $10,000 per household!

Former New Zealand cricketer Warren Stott, who runs the Riverside Holiday Park, was told earlier this year that his rates bill would increase by more than 1300 per cent from $6316 to $84,850. He’s still not happy with a revised 43 per cent increase to $9050 and worries about the effect on the local economy.

The local economy has challenges already, and this has been the final straw.

Mangawhai Ratepayers and Residents Association chairman Bruce Rogan said residents were refusing to pay because the sewage system was an ever-expanding “Ponzi scheme” foisted on the community without its consent.

Meeting papers show councillors secretly agreed to expand and more than double the cost of the project in 2006 without telling the community for another four years and the council’s own legal opinion shows it has collected about $17 million of rates illegally.

Outraegous.

The council resigned in August and was replaced by commissioners. Chairman John Robertson, a former National MP and Papakura mayor, said 90 per cent of residents were paying their rates, including 75 per cent in Mangawhai.

Good the Council has done, but their decisions lived on. The challenge for any reform is how do you stop something like this happening again.

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19 Responses to “The need for local body reform”

  1. thedavincimode (6,590 comments) says:

    Why are these people not exposed to the same duties and cares that directors of public companies are? After all, they are dealing with public funds that are raised by compulsion, in contrast to public companies in which the public at least as a choice to invest. The sooner we head down this path the sooner the standards of fiscal responsibility will improve. These pricks should go to jail. If its good enough to jail finance company directors on a strict liability basis, then its good enough to put these arseholes in the pokey.

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  2. liarbors a joke (1,069 comments) says:

    Outrageous. These petty little bureaucratic spendthrifts need to be held to account. So easy to spend other people’s money. Watch for maximum arse coverage and lots of ” he said/she said ” and “misunderstandings”

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  3. GJKiwi (179 comments) says:

    Quite simple: any expenditure outside the norm, e.g. investing in a new sewerage scheme that will have a large effect on rates should be put to the ratepayers before going ahead, or the councillors should make it known that it is their policy in an upcoming election, and if its not popular, then they won’t be re-elected. As well, there should be, at local government level, no secret meetings. It often means that the councillors are up to something nefarious.

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  4. redeye (638 comments) says:

    thedavincimode: Well said.

    Far too much council business is done in public excluded meetings.

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  5. hmmokrightitis (1,571 comments) says:

    liarbors, who do you mean? Im just checking to see whether you’ve understood the situation.

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  6. gazzmaniac (2,319 comments) says:

    One has to consider that maybe it wouldn’t have happened if Mangawhai Heads had its own council and wasn’t part of the Kaipara council.

    This sort of carry on will continue unabated with more mergers. I can absolutely see the same thing happening in a place like Otaki if there was a Wellington super council.

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  7. Alan Wilkinson (1,848 comments) says:

    Apart from incompetence and attempts to hide it, the imposition of gold-plated sewage schemes on small communities by Wellington bureaucrats setting rules appropriate for cities is a nation-wide problem.

    Here in Russell the Council spent $20M on a project originally estimated to cost $3M for a few hundred properties. Consequently rates have escalated vastly ahead of inflation.

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  8. Viking2 (11,276 comments) says:

    All mandated by Govt.
    Imposed upon council like most stuff.

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  9. MT_Tinman (3,044 comments) says:

    I’m struggling here.

    Surely council finances are public.

    Even though the details of the sewage scheme were kept secret the costs must have shown up on council financial reports prior to elections.

    Is this correct?

    If so why were the councillors not called on this during elections?

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  10. hmmokrightitis (1,571 comments) says:

    The primary issue is every council has responsibility to deliver water and sewerage services to their communities. Given the fact that we live in a poxy little country of less than 5M, it should be one organisation. Dont care if its a partial public / private, but do we really need 50+ water and sewage departments across the country?

    So if DPF you mean those sorts of reforms, as opposed to the ill conceived and badly delivered LG reforms that National have put on the table, lets focus on LG Councillor governance controls – because that’s where this clusterfuck came from.

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  11. liarbors a joke (1,069 comments) says:

    “Rates have soared this year by about 40 per cent for many residents – more than doubling for some – to help pay off the council’s $80 million debt, which was mainly caused by a $58 million cost blowout for a local sewage treatment system.”

    hmmokrightis , these bastards ( who resigned ) should be held to account, …and if that happened, you could just imagine the buck passing and arse covering by the ex councillors who would be ducking for cover. Secret meetings, illegally collecting excessive rates, ffs what country are we living in? Accountability is what I want. Heads should roll and they should be in the klink.

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  12. Azreal (15 comments) says:

    It’s my understanding that the staff were told that the (previous) CEO did not put the Sewerage Scheme on the financial records as a Council debt because it was a Design, build & operate, and was “owned” by the supplier/operator and not the council. Audit NZ thought otherwise.

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  13. gump (1,553 comments) says:

    I notice that nobody is complaining about the sewerage system itself.

    Presumably it is a fairly decent system?

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  14. liarbors a joke (1,069 comments) says:

    at 10 grand per household Id be wanting gold plated pipework and fittings.

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  15. SPC (5,473 comments) says:

    The only way to deliver first class sewage systems and drinking water quality nationwide is for there to be subsidy of low population size areas. The same applies to water storage and irrigation (though here a contribution from economic beneficiaries is appropriate).

    This should be done from national funds much as we do roading infrastructure.

    Expecting this of the local councils concerned is asking too much of local ratepayers – and just results in local squabbles, such as farmers demanding ratepayers fund their irrigation and water storage demands while they oppose spending on anything else .

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  16. hmmokrightitis (1,571 comments) says:

    Liarbors, yes, correct. The Councillors made decisions behind closed doors, and that should not be allowed when the ratepayers coin is at stake for material investments.

    Azreal – 100% correct. The Council didnt receive good advice, made shit decisions, and the CEO didnt have the nuts to do anything about it. A perfect storm of fucked up. Hence why the governance rules need to be made tighter. We, the people, elect from our peers, BUT we should expect them to be accountable and well advised. They were and will be neither.

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  17. Kleva Kiwi (281 comments) says:

    “The total population is only 19,000, which will be around 7,300 households. So the Council sewage treatment system is a cost of $10,000 per household!”

    I have to laugh at some people trying to make some simple things outrageous…

    You do realise that $10,000 is not a lot of money per household for a sewerage system for a city. In fact you will find it can and does cost a lot more than this. The difference being, that most cities are able to build and renew their networks over 80-100 year life cycles (or more), thus spreading out the cost.

    The problem here is the whole thing was done in such a short amount of time. The reason for all this is more likely poor city planning and bad project estimates (I would hesitate to guess from unqualified councillors trying to do an engineers work). The cost itself, nothing unusual.

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  18. Kleva Kiwi (281 comments) says:

    Lets say for example, an average property in a city of 50,000 has rates of $2,000 a year. Now over 100 years thats $200,000 in rates paid.

    The design life for most sewerage, storm, and potable water networks (lets call this ’3 waters’) is 100 years. There are also additional things like sewerage treatment plants, water treatment, stormwater catchment, settlement areas etc on top of this. So if each network requires say $10,000 (the figure David thinks is a lot) of capital work (ie replacement and/or renewals) in that life time the thats $30,000 for all three out of $200k, or 15% of your rates/ So that means each household contributes $300 a year to capital works on 3 waters. With 50k people, thats about 21k households, and at 2k a household thats $42m a year in rates alone, 6.3m going to replacing pipes in the ground.

    Now on top of that there is maintenance, cleaning, investigations and operational costs etc which to be fair, can add up to a lot more than the cost to put it in the ground to begin with. A city of 50k is likely to spend 1-2 million dollars a year on each of the three networks building and replacing pipes, and at least an additional 3 million and more running them each year. On top of that will be one off costs for water treatment plants (every 15-25 years), sewerage treatment (similar time frames) and other such things. These normally get government grants and require loans to do. All essential stuff.

    I don’t think many people here realise the amount of money, time and effort, not to mention planning goes into infrastructure just so Joe Blogs the ratepayer can flush hi toilet and not have to think about it. And its no science getting the numbers right either. There is so many variable and unknown factors from ground conditions to pipe supply that can change things. Get a grip people…

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  19. gazzmaniac (2,319 comments) says:

    If you take $300 per year for the capital cost, plus interest on the $10k at say 4% ($400), that is a $700 per year rate increase. While this is a lot, I know from personal experience that the increase in rates in the Buller District the year that they started their sewerage treatment scheme was more than that.

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