Matthew Hooton writes in NBR:

What Mr Peters may recognise, but Labour does not, is that, before Mr Key suggested the share issues, most voters had never heard of Mighty River Power, Meridian Energy, Genesis or Solid Energy, much less worried about their ownership structure.

Compared with disposable incomes, the local school competently teaching maths, grandma getting her hip replacement, the cops tracking down the local crims or even keeping Asian immigrants out, whether a Waikato River dam is owned 100% or 51% by the state simply doesn’t rate.

The actual policies of those who claim to oppose share issues prove it.

Through nine years of the Helen Clark regime, when a global economic boom fuelled massive fiscal surpluses, the government bought back not a single share in Contact Energy.

Nor did Phil Goff promise to buy back shares in Contact.  Nor does Mr Shearer promise to buy back shares in the companies Mr Key plans to list.

If it is OK for national symbols such as the Clyde Dam and the Wairakei geothermal network to be 100% privately owned – and majority foreign owned – how could it possibly matter that Waikato River dams will be only 51% government owned and perhaps 20% foreign owned?

Matthew gets it right on. The opposition is symbolic bluster.

While averse to nationalisation, Labour also argues that not a single share in any of the Crown’s $50 billion of commercial companies should ever be sold – in effect freezing more than $30,000 per New Zealand household in a portfolio that is a mere legacy of the tumult of the 1980s and 90s.

This is the perverse logic of Labour’s stance. They are basically arguing that the exact right number of power companies for the Government to own is three out of five. Not two, not four – exactly three.

The ideological opposition to the private sector means that we don’t have an intelligent conversation over what assets should be state owned and which should not. Instead we just have a die in the ditch defence of the status quo no matter how illogical it might be.

Arguments that the state must own 100% of “strategic assets” – a meaningless phrase, never defined – would suggest the government should nationalise all food production and distribution, something Labour is yet to propose.

In fact, an immovable asset producing a commodity involving no proprietary intellectual property would seem to be exactly the sort of thing where ownership is irrelevant.

Absolutely. There is a far stronger case for the Government to own Fonterra than a power company.

The Greens are happy that their anti-asset-sale petition has won them tens of thousands of new email addresses to spam in election year.

And they used taxpayer money to collect them! I bet you everyone who signed that petition will get an e-mail from them if they gave an e-mail address.

A reader sent in this interesting infographic. From this site.

I’ve lived in Thorndon for around 20 years, and in the area of Thorndon that is within 100 metres of so of the Katherine Mansfield birthplace. Despite that I only visited her birthplace for the first time a few weeks ago.

I never studied Mansfield at school, and don’t actually know her story and her works as well as many New Zealanders. So the Circa show Talking of Katherine Mansfield seemed a good opportunity to get to know her better.

The 80 minute show is by Catherine Downes, who is a Mansfield expert. She’s been playing her for over 30 years. The play is a mixture of Catherine talking about Mansfield’s life and reading out some of her writings.

I found it a bit slow to engage initially, but perked up with the recital of Leves Amores and the references to The Thistle Hotel in Thorndon. And from there we learnt of her outraged father who was happy to have her go back to London after she published such scandalous (for the times) prose.

You learn about her relationships and influence on so many other leading literary figures such as D H Lawrence, Virginia Woolf and of course John Middleton Murry. Murry is not the most sympathetic of figures as you heard about how he would write to Mansfield complaining how hard her dying was on him!

This isn’t a play for everyone, but if you are a fan of Mansfield or just wanting to know about her, it’s a pleasant introduction to her work. Downes has a real passion for Mansfield’s work and she doesn’t just act off a script but engaged the audience in her recital of Mansfield’s life and works. I suspect every night the show is slightly different.

The lighting in the show is worth a mention. The final scene where Katherine dies is done beautifully and to powerful effect as her face fades from view.

The “Climate Realists” have published a schedule of speaking engagements for prominent climate change sceptic Lord Monckton.

My position on climate change is that greenhouse gas emissions beyond doubt cause warming. There is a legitimate debate about how much warming will occur, as we do not know for sure how the rest of the very complex climatic system will respond.

But personally I don’t find Monckton a particularly useful contributor to the debate. He has a history of over-egging his claims and this rebuttal by John Abraham shows that he has quoted people out of context.

I think the biggest challenge with climate change is getting the major emitters to agree. An agreement without China, India and the US is basically worthless in environmental terms. China’s daily increase in emissions is greater than NZ’s total emissions.

John Armstrong writes:

What on Earth does the management at Mighty River Power think it was doing with its blanket refusal to answer questions posed by the very parliamentary committee to which those running the power generator are supposedly accountable?

Although it might seem relatively trivial in the grand scheme of things, such obstructive behaviour must technically come close to contempt of Parliament. It was certainly an affront, if not an outright insult, to the commerce select committee and thus to Parliament as a whole.

Mighty River Power’s unwillingness to respond to nearly 100 of the 133 written questions submitted by the committee was rationalised on the flimsiest, most ridiculous but ultimately the most dishonest of grounds – a pedantic and childish interpretation of what are standard annual queries.

It is a terrible precedent, which other Crown entities will be tempted to follow.

I think John is over-stating the case here.

I do think Mighty River Power was unwise to antagonize MPs by not answer the questions supplied in writing to them, but it is worth pointing out that the Opposition MP who wrote the questions allowed them to do so by just cutting and pasting them from those used for departments without using the correct terms.

A typical question was:

Did the Department/ Ministry and its associated agencies undertake any restructuring in the last year; if so, what? How much was spent on restructuring costs and what are the estimated savings as a result of restructuring in 2012/ 13?

MRP’s response was

Not applicable to Mighty River Power as Mighty River Power is not a Department, Ministry or associated agency.

And another was:

What new services, functions or outputs did the Department/ Ministry and its associated agencies introduce in the last financial year? Describe these and estimate their cost.

And the response again was:

Not applicable to Mighty River Power as Mighty River Power is not a Department, Ministry or associated agency.

Now I agree MRP could and should have been more forthcoming and could have answered the question on restructuring costs rather than be pedantic over the term used to refer to them.

However on the latter question, the question is not one suitable for an SOE. SOEs do not have outputs. Government Departments do.

The Oppositon MP who asked these questions should have taken half an hour to customise the questions so they are appropriate for an SOE. A diligent MP would have done so.

TVNZ report:

Fijian Prime Minister Voreqe Bainimarama says he will “stick by his men” if they are found to have been involved in the savage beating and torture of an escaped prisoner.

A nine minute video posted online this week shows two men being repeatedly beaten with poles, as they lie huddled on the ground handcuffed, screaming in agony. …

Sources have told ONE News the men carrying out the beating are army, police and prison officers.

Speaking to fijivillage.com , Bainimarama said if that is shown to be the case, he would support their actions.

“At the end of the day, I will stick by my men, by the police officers or anyone else that might be named in this investigation,” he said.

“We cannot discard them just because they’ve done their duty in looking after the security of this nation and making sure we sleep peacefully at night.”

I wasn’t aware their duties included torture?

Hopefully those responsible will still be arrested and charged, despite the views of the Commodore. It would show that no one is above the law.

The Commodore is due to announce in the near future if he will contest next year’s elections. I expect he will. He may find that his support for torturers doesn’t go down that well with the voters.

Vernon Small profiles David Clark:

Clark, a Presbyterian minister, returned the favour, officiating at Robertson’s civil union. (The Wellington Central MP’s partner, Alf, joked at the ceremony that given the keen interest from singles of both sexes he was sorry to report Clark was neither gay nor single.) Clark and wife Katrina have two children, the youngest just 3 months old. Katrina is on maternity leave from the Ministry of Economic Development, overseen by his new political duelling partner, Joyce.

Clark concedes: “We will have to face how we handle that” but says she is an exemplary civil servant and a “fanatical observer” of the public service code of conduct.

I’m sure she is, as was Madeleine Setchell whom got effectively sacked and blacklisted from public service jobs because her boyfriend worked for John Key. It’s fortunate National actually believes in public sector neutrality – unlike Labour which talks the talk but didn’t walk the walk.

So far his biggest impact in the House has been his bill to ensure a statutory holiday on the next Monday if Waitangi Day or Anzac Day fall on a weekend. It should have the numbers to pass – a rare victory for a non-Government measure.

It will conclude its second reading on Wednesday 13 March, and should pass into law on 17 April. I support the bill.

Clark says the free market is a good servant if properly regulated.

A statement few can disagree with, but what is critical is the details. Most people accept a degree of regulation in the economy such as the Fair Trading Act, the Commerce Act. But the fact that some regulation is desirable doesn’t mean all regulation is desirable. I’d like to see examples from Clark as to what further regulation he proposes.

Normally Oppositions gain seats and Governments lose seats in elections. Not so in yesterday’s Western Australia election.

Of 59 seats, the 2008 election resulted in the Liberals had 24 seats, their partners in the Nationals had 4 seats, Labor had 28 seats and there were three Independents. The Liberals won the two-party preferred vote by 51.8% to 48.2%. So it was a Liberal minority government.

The Liberals have had an 8.8% increase in their primary vote and are projected to go from 24 seats to 33, making them a majority Government. The Nationals picked up one seat also so combined they will have 40 out of 59 seats – a two thirds majority. Labor have been slaughtered going from 28 to 19 seats. Such a slaughter is not unheard of for an incumbent Government (like in Queensland) but is even rarer for an opposition.

Vernon Small writes:

Perhaps we should thank former Ministry of Education head Lesley Longstone for only stinging taxpayers $425,000 as a severance package.

Yes it is a lot of money, especially to onlookers on the minimum wage, the average wage or even anyone outside the top echelons of pay packets.

Given the circumstances of her departure – just over a year into a five-year term and as a result of a clash of personalities with her minister – she could have asked for more. …

So given that, and the public revulsion at such pay-outs, it is time to look again at how those contracts are written.

Setting aside for now the fact it would have been cheaper all round (and arguably fairer) to have shifted Parata, rather than Longstone, it’s time to dispense with the fiction that state sector chief executives are not on grace and favour contracts – essentially at the behest of their minister.

The Longstone example makes it as clear as day that a CEO cannot stay on if they fall out badly with their minister. But the fiction forces the SSC to dance on the head of a pin over the reason why they go, and the payouts that follow are eye-watering to most people.

It is true that if a Minister loses confidence in a CEO, then one of them has to go. And in a democracy it is the civil servant, not the Minister.

There are strong arguments that can be advanced about the quality of chief executives that might be recruited, and state sector purists will choke into their lattes at any move away from the notional independent public servant.

But there are precedents. Press secretaries and political advisers in politicians’ offices are on the public payroll but are on so-called “events-based contracts”. The “events” are essentially the continuation of the MP or minister in that office but they also include a clear parting of the ways between a minister and a press secretary. Payouts are modest. …

Acknowledging – and embracing – the reality that senior public servants are to all intents and purposes there at the will of their minister is an argument that has some resonance among some MPs too, but from a different perspective.

As they see it, politicians are elected and they should expect their decisions to be implemented. Something akin to an “events-based” chief executive could eliminate deliberate attempts to frustrate the will of their minister or the Cabinet.

I can see the attraction of an events based contract for CEOs, but there is a reason I think they would do more harm than good.

They would make it too easy for a Minister to dispense with a CEO. You only want the CEO to go if absolutely necessary. And as part of that, you actually want the departure of a CEO to cause political pain for a Government – which a payout causes.

If you had a clause that just allows a CEO to be sacked with three months notice, then I think you’d see a far higher turnover of CEOs – and I don’t think that is necessarily a good thing.

I don’t like paying $425,000 out for premature termination of a contract. But education is a $10 billion budget. If we have to pay out 0.05% of the budget to get a Ministerial-CEO relationship that works, then it is worth it. Of course some will argue the wrong person went – but Ministers are accountable through elections, and National will be judged in 2014 on how it has done overall.

So what is the happy compromise that would cut back on payouts by establishing events-based contracts; acknowledge the “political” nature of some public service roles – and the need to have someone driving hard to implement government policy; but maintain a flow of contestable advice?

One option would be to insist on a competence-based (not purely political) selection process where the nominee is examined by a select committee, much as the United States does with its Senate confirmation hearings.

That would allow the government to win the day, but in the process unearth incompetence and expose any skeletons to the public eye.

I’m not sure select committee hearings would un-earth any incompetence.

If we were to have select committee hearings for government CEOs then we should go the whole hog of the US model where the Government of the day appoints the entire senior management of the government departments. Of course that has some drawbacks also!

James Henderson at The Standard blogs:

Some analysts are talking about risks of investing in Mighty River Power in the media today. Weather, electricity demand, overseas expansion. I’ll tell you what would make me think twice if I was contemplating buying shares (like most Kiwis I couldn’t afford to even if I wanted to).

Everyone acknowledges the power companies over charge because of the way National set up the system with the Bradford reforms. Right now, the government has 400m reasons a year not to do anything about it. After the sales, that will be $200m in dividends.

Any reforms to lower power prices will fall mainly* on a relatively small number of (often overseas) private shareholders and much less on the government books. That rather reduces the government’s incentive to protect the over-charging status quo, doesn’t it? Lots of votes in being the government to bring down power prices, especially when a lot of the profits are otherwise going to foreign corporates.

James is saying that when the Government wholly owns the power companies, it is less likely to regulate them if in the consumer interest. The massive profits and dividends under Labour suggest he is correct.

As James says, when the state isn’t conflicted by being sole owner and regulator, it is more likely to act in the public interest and stop over-charging. That’s an excellent reason to support the asset sales. It’s outrageous to think that people may have to continue to pay more for their power than they have to, just because the Government is the sole owner.

Newstalk ZB reports:

Two new schools are to be built in north east Hamilton, but the plans are not without controversy.

Minister of Education Hekia Parata has announced a primary school will be built in Flagstaff by 2015, and a secondary school by 2016.

Labour MP Sue Moroney says locals have been calling for a secondary school for five years, but the primary is not seen as such a priority.

“The proposal for a new primary school? Well that’s come out of left field, or right field as it might be.

“It’s not the priority. The community is very clear about its priorities, they want the secondary school in place.”

Hekia Parata says the evidence shows the primary school will be needed first in the area, which is growing rapidly.

Just because you are in opposition doesn’t mean you need to oppose everything the Government announces. Criticising the Government for spending $10 million on a new primary school for Hamilton is not likely to help you win the seat.

There are projected to be an extra 600 primary age students in North-East Hamilton by 2016.

The new secondary school will be the first new one in 40 years I believe. It reflects how strong the population growth there is.

Q+A returns for 2013 this Sunday. We speak to the Government’s Mr Fix It, Steven Joyce, about the deals with Novopay and SkyCity, and question how committed the government is to creating new jobs.

Also on the programme, should marriage be solely between a man and woman; we hear from a gay couple who question why they’re being treated as second class citizens. We debate the same-sex marriage bill with Labour MP Louisa Wall and Conservative Party Leader Colin Craig, and ask if gay couples should be able to adopt.

On the panel this week is political scientist Dr Raymond Miller, publisher Ian Wishart, and former Labour party candidate Josie Pagani.

Join host Susan Wood and political editor Corin Dann on Q+A at 9am this Sunday on TV One

Jeffrey Tucker writes at Not PC:

Twitter began by calling it “libertarian porn” — the longest and most sustained attack on the State leviathan from the U.S. Senate floor in modern history. But then it became more. And more. It went on for 13 hours. It was about halfway through when the junior senator leaned over to an aide and whispered: “Can I get a candy bar?” 

He deserved it. Before the end of the night, the significance of what he was doing was being described as “epic.” What began as a surprise political move became a bipartisan cry against all the evils of our times, which somehow all come down to the egregious power of the executive state and its omnipotent power over our lives and property. It became political theatre unlike any we’ve seen in many years. The target: all terrible things. 

In short, it was a beautiful day on Capitol Hill. 

It all came courtesy of Senator Randall Paul, the man who has brought truth, excitement, fun, and the appearance of real-life morality back to the Senate. …

Senator Paul’s action began just before noon. He started by standing alone against the nomination of John Brennan for the head of the CIA. This Brennan guy is the top advocate of the drone program and the White House’s super-creepy claim of the right to kill American citizens on American soil using unmanned aircraft.

Sen. Paul seemed to break the taboo. He finally said it: This winner of the Nobel Peace Prize is asserting the right to kill citizens right here, without any recourse to courts or law or anything related to the dead letter called the Constitution. …

Again, his one question: Why won’t the president say that he won’t kill non-combatants with drones on American soil? The White House pretended none of this was happening. …

Just before noon yesterday, Rand Paul stood alone. Then others joined him. Still others. Rand talked and talked. He went on and on. The online crowd began to grow. And grow. The tweets grew and grew. Facebook went nuts. It went on all day. The Senate chamber filled up by the evening. The fracas became frenzy and then became a mania. Hashtag #StandWithRand became the Internet meme of the night.

The drone debate has been fascinating. Obama has used drones to kill hundreds or thousands of targets (and collateral casualties) in Pakistan and other countries. Most Americans support the use of drones (83% in February 2012). The opposition has been a few muted liberals. I suspect if Bush had been carrying out the same numbers, there would have been massive protests.

I personally have no problem with using technology to kill people at war with you. However in one recent case a drone was used to kill a US citizen and for some that was a significant step – maybe one too far.

Now wars are no longer between states, but between states and loose groups of militias or terrorists, I think drone strikes are a sensible way to fight such wars. There are some risks of course – namely that it becomes “too easy” to kill – an issue some US Generals have said is why drone use should be limited.

But wars are basically against foreigners. Should a war power be used against a citizen of your own country born in this case in the United States?

The argument in this case is he was based in Yemen and actively advocating attacks on the US by Muslims living there. And if you look at his history, you can see why he was seen as a danger. But it means the line has gone from killing foreign combatants to killing US citizens overseas.

And then that raised the question – what if a US citizen is in the United States and thought to be a terrorist. Can the President add his name to the list and send a drone in to kill him? If US citizens can now be killed by drones – does it matter where they live?

To my mind, it does. If they are in the US then you can arrest them and should try to do so (if they surrender peacefully). It is impractical to think you can fly into Yemen and try and arrest someone in the middle of the mountains.

But the Obama administration when asked by Rand Paul would not rule out using drones in the US. The Attorney-General said:

Mr Holder stressed in his letter that the prospect of a president considering the assassination of an American citizen on US soil was “entirely hypothetical” and “unlikely to occur”.

Yet “it is possible, I suppose, to imagine an extraordinary circumstance in which it would be necessary and appropriate under the constitution and applicable laws of the United States for the president to authorise the military to use lethal force within the territory of the United States,” he wrote.

Appearing in front the Senate judiciary committee on Wednesday, Mr Holder reiterated that “the government has no intention to carry out any drone strikes in the United States”.

That response is what led to Rand Paul to do his filibuster of the CIA nomination. And it worked. After 13 hours the Obama Administration then clarified:

“It has come to my attention that you have now asked an additional question: ‘Does the President have the authority to use a weaponized drone to kill an American not engaged in combat on American soil?’ The answer to that question is no.”

So the filibuster is over. But the issue of the limits of drone strikes is now mainstream, and occurred not due to any Democrats but the libertarian Republican Senator from Kentucky.

The Economist reports:

IF YOU are a working woman, you would do well to move to New Zealand—or if that is a little out of the way, you could try one of the Nordic countries. To mark International Women’s Day, The Economist has compiled its own “glass-ceiling index” to show where women have the best chance of equal treatment at work. Based on data mainly from the OECD, it compares five indicators across 26 countries: the number of men and women respectively with tertiary education; female labour-force participation; the male-female wage gap; the proportion of women in senior jobs; and net child-care costs relative to the average wage. The first four are given equal weighting, the fifth a lower one, since not all working women have children. New Zealand scores high on all the indicators.

The index weighting is 23% each for the first four factors and 8% for child-care costs.

NZ has a far higher proportion of women than men in tertiary education which will be part of the reason NZ is ranked the best place in the world to be a working woman.

NZ Herald quiz here.

Gerry Brownlee spoke this week to the Marlborough Chamber of Commerce on the possibility of the terminal for the Interislander ferries moving from Picton to Clifford Bay. He stressed no decision has been made, but his speech was all about the benefits of doing so and suggests that a positive decision is likely. Some extracts:

By bringing travel times down between our major population centres, we could increase trade between the two islands and in doing so increase economic prosperity.

We have made no decisions, but information to date has suggested we need to further test the viability.

Clearly any benefits must be weighed against the cost of developing and operating a port.

It would need to be a commercially viable and sustainable operation.

Decreased travel times is good for trade and tourism.

By way of comparison a Clifford Bay terminal would cut 30 minutes off the ferry trip between North and South Islands.

The road trip from Wellington to Christchurch would be 50 minutes shorter and the same rail journey would reduce by 80 minutes.

So a road trip would be 80 minutes quicker and rail would be 110 minutes quicker – almost two hours. Knocking 80 minutes off a 480 minute journey is 15% improvement – very significant.

Because of the steep terrain between Picton and Clifford bay, there would be a one-third reduction in fuel burnt when transporting freight by rail to Christchurch.

The shorter ferry journey would mean ships could be more productive, making more journeys.

Better for the environment also.

Speed restrictions through the Marlborough Sounds limit the number of return sailings ferries can make each day.

Two of the ferries have ‘grandfathered’ speeds – meaning they do not have speed restrictions – and can complete three return trips a day.

That fleet is nearing the end of its economic life and will need expensive replacements.

And replacements are going to be harder to find, as internationally rail ferries are rapidly falling out of favour with operators.

Larger, faster ships are becoming the norm.

But if the route stays the same those replacement ferries will also be speed restricted.

These restrictions affect operating efficiency and cost, and any potential tightening of the speed restrictions will further constrain ferry services.

If you can’t get as many sailings out of the fleet, more ships will be need to provide the same capacity.

And that comes at a high cost.

That suggests that Picton is just not very viable in the long-term.

I think it is clear the Government would like a new terminal at Clifford Bay. The challenge is who builds is, and for how much.

Stuff reports:

Prime Minister John Key says he is “totally relaxed” about former Solid Energy chief executive Don Elder appearing before a select committee, but the decision was one for the committee and the board of the state-owned coalminer.

“If he wants to go and they want him to go he is not going to get any opposition from my office,” Mr Key said today.

Totally relaxed is a step up from relaxed. This got me wondering on Twitter yesterday if we need a formal scale to measure the PM’s relaxed level. It could be:

• 1 – Fairly Relaxed
• 2 – Pretty Relaxed
• 3 – Reasonably Relaxed
• 4 – Relaxed
• 5 – Very Relaxed
• 6 – Totally Relaxed
• 7 – 100% Relaxed

So totally relaxed is pretty high up the (now) official relaxed scale.

Jason Krupp at Stuff reports:

In addition, some energy sector commentators have questioned MRP’s decision to actively pursue geothermal projects in Chile and the United States as opposed to passively investing via an investment fund structure as it has done in the past.

Energy analyst Molly Melhuish said investors needed to be aware the strategy shifts MRP’s risk profile away from a “safe, utility-type investment prospect”, which is how the firm is being marketed to investors.

Countering those negatives is the company’s position within the New Zealand market, with MRP generating and selling about a fifth of the country’s power, a position that gives it fairly defensive earnings.

It is worth making the point that Mighty River Power does have risks around its investment plans. I don’t say that as a bad thing – it is in fact the risk which is one of the reasons the Government should not be sole shareholder.

Some people think running a company is easy. Just produce your product, mark it up, and sell it. Bang – guaranteed product.

Solid Energy is a good example of how quickly things can change. The global price for coal dropped 30% over two years. While power prices are less volatile, demand can be variable and you can end up with over-supply.

I am looking forward to reading the prospectus.

Chris Keall at NBR reports:

What I’m talking about is an actual William Shatner moment. 

Sky TV is bringing the Star Trek star to Auckland later this month.

I’m thinking the event must be the launch of the sci fi channel that unemployed Wellington man Pat Pilcher has pushed so hard for (and, earlier, Sky TV CEO John Fellet told NBR ONLINE a sci fi channel was number two on his list, after Soho).

If the speculation is correct, that would be great news. I will happily pay for the Sci Fi channel.

Meagan Dillon of Northern Territory News reports:

A MAN charged with having sex with a pet pig called Michael Jackson on a Territory island has appeared in a Darwin court.

The 35-year-old man, who cannot be named for legal reasons, sat in the dock at Darwin Magistrates Court charged with having sexual intercourse with an animal and indecent behaviour in public in November last year.

The NT News understands Michael Jackson had to be shot following the incident at Alyangula, on Groote Eylandt.

Why did they shoot the pig? Would have been better to shoot the guy!

A guest post by Larry Mitchell:

It is sobering to reflect that at the time of the passage of the 2002 Local Government Act a working maximum Territorial Local Authority debt level was set, in 2002 nominal dollar terms at $1,500 per ratepayer, ($750 per capita). Looking back then there were few Councils challenging these limits, even fewer exceeding them.

Fast-forward to 2012 and average debt per ratepayer in today’s’ dollar terms have reached close to $4,000 per ratepayer. Sector-wide total debt, (including the Regional’s) has quadrupled from around $2 billion seven years ago to $8 Billion by 2011-2012.

Of greater concern, according to Council long terms plans forecast sector debt is scheduled in the period to reach around $25 Billion, with Auckland Council taking a disproportionate share of this at $16 or more billion … or over two thirds of the total.

And what have we got from this explosion of debt? The picture is murky as the dollar figure put on the infrastructure created and associated with this debt has been revalued-inflated due to accounting valuation adjustments, a number of times over the period. It is next to impossible to assign accurate values to the Council assets created that have been funded from debt sources.

The quality of this recent debt-driven capital infrastructural asset expenditure is also problematic. It has been a very mixed bag, consisting of a proliferation of low or no revenue-earning community assets amongst (exempting local roading), the creation of largely self-funding public utility assets.

Given these uncertainties of asset creation and quality, one thing though is “for sure”. In spite of Council’s bold business as usual long term 2012-2022 plans  …  plans set less than a year ago, they will not proceed. For one, the law has outlawed them and future affordability issues render them unrealistic and redundant.

Apart from the obvious perils and unreality of the proposed unsustainable blowouts of Council debt, there are two principal reasons why Council’s tomorrows will be very different from their yesterdays … in financial management terms. 

The law has changed

December 2012 saw major changes to Local Government law. Councils now are legally bound to realign their future plans and budgets to deliver “cost effective expenditures” spent upon “essential community based infrastructure”. This is a very explicit central government-directed shift to utilitarian purposes, a far cry from the much broader earlier free-for-all multi-purpose Council capital expenditures.

There are some concerns though, that Councils have “yet to get it”. Although the jury is still out, sector chatter at this early stage is that many Councils will not, at such short notice make the necessary budgetary or other shifts necessary or that they plan to ignore the new provisions in the belief that the law is drawn loosely enough to permit a continuation of their more expansive spending.

To counter this delinquent behaviour, the second stage of the reforms, planned for mid 2013 should include any necessary amendments to plug these apparent loopholes. To do otherwise would be to scupper the reforms while accepting the continuation of unsustainable Council debt levels and risking further poor quality expenditures.

We will not be able to afford it!

An aging population, (to say nothing of likely increases in future debt servicing costs) will with little doubt reduce our local community’s future capacity to carry increased (real dollar) Council rates and charges.

Authoritative assessments of looming demographic influences are plain scary. In Canada for example, where research on their comparable issues is deep, detailed and convincing, their affordability “Tsunami” is still some 12 to 15 years away.

In New Zealand, where Council debt limits have already been reached for many (a majority of) New Zealand Councils, our projections are that the crunch point will be reached in as little as 5-6 years time. Further detailed research of these issues is now urgent but the implications of the known facts are plain enough.

The new reality

To address these new financial realities, Council management policies must be adjusted to take account of the following sobering future realities.

• New Zealand Council sustainable-affordable debt limits have been reached and must not be allowed to “blowout” further. Debt reduction programmes must match the altered budgetary frameworks

• Future community affordability issues for Council rates and charges including those created by an aging ratepayer base insist upon a complete rethink and revised budgeting of all Council 2013 Annual Plans  …and then beyond to amended 2014 -2022 long term financial plans.

•  Legislation including closing the existing legal loopholes (with “active” audit encouragement) must ensure that Council financial management policies recognise these new realities.

It isn’t just central Government that needs to live within its means. We must not burden future generations of taxpayers and ratepayers with massive interest bills on the debt we incur.