Mangawhai Residents Meet Commissioners

In the golf club (where else?) on Monday 18th February at 9:30am, about 300 Mangawhai ratepayers crammed into the biggest space that could be found, to hear what the four government appointed commissioners had to tell them, to ask questions, and in some cases to make statements. Kaipara District Council's advertising for the meeting explained that in part the purpose of the meeting was to introduce plans for the future.

The power point presentation that was presented by Chairman John Robertson contained a key slide. It was headed: "Priorities for 2013". It included these bullet points:

• address existing issues
• establish sound financial basis for council to operate from
• deliver a robust 10 year plan
• build back confidence in Council

Introduction

In his introduction, Mr Robertson, explained the initiatives that the commissioners would be conducting over "the next 30 days" would be to "fix historical issues" and to "propose amendments to the Long Term Plan". A big set of initiatives that one - especially fixing historical issues. We were all on tenterhooks. Next Mr Roberston "set the scene". He explained that the council deficit for the year 2010/2011 was between $5m and $7m. ie that the council spent that much more than it earned through rates and charges in that year. He talked us through the history of the government appointed Review Team, and reminded us that in September last year Commissioners had been appointed. He explained that their view was that they needed to make Kaipara District Council "fit"; prepare it for elections in October 2015; and "reassure the banks and auditors" (he didn't explain how that was done....).

Tackling Issues

This was where the meeting began to warm up. I mean get heated. Robertson asserted that Commissioners could only deal with issues going back 2006. He said, under law, breaches before 2006 cannot be challenged. Bruce Rogan, chair of Mangawhai Ratepayers and Residents Association jumped up at that point to assert that the community did raise issues that went back before that, to 2002. And reminded commissioners that they had not been dealt with then, or since. Robertson continued. Reading from his script he told the crowd that, regarding the issues that went back to 2006, that they were "technical issues" that they were "technical discrepancies" and "technical breaches of the Local Government Act" - but that "services had been provided" and that "rates were levied correctly..."

At this point Clive Boonham jumped up. Angry. You can see his comments in his posting here. He was outraged that what he saw as a litany of errors and inequitable treatment of ratepayers could be explained way as "technical errors". Robertson continued. 

He explained there were three ways for commissioners to deal with these "technical errors". These are summarised in these 3 bullet points:

• 1st, using the Local Government Rating Act, past rates cease, and are replaced by new rates that are correct (technically). He said this would be costly and that KDC was not capable of doing this;
• 2nd, that KDC would refund all the rates that were collected incorrectly, and set new rates. This would mean that old rates would be "cancelled". He said that would not a fair way of doing it because some of the problems go back to a time when properties may have been owned by other people. So it would be inequitable.
• 3rd option, "validation legislation". These are the words used to describe the proposed Local Members Bill sponsored by local MP Mike Sabin. Robterson explained, "this is what we are pursuing now". He said "it was in the final stages of drafting.." and that "the Minister of Local Government supports this". He said, "it was a tidy way of fixing errors....

Man oh man. Did this get Clive going. Robertson went on. The Bill will be introduced in Parliament, and then there would be a Select Committee hearing. They "might even meet in Dargaville" he said. (What a concession!). But the bit that really stuck in my gullet was when he indicated that "ratepayers who are current will not be required to pay any more...". This sounded like a whack for rate strikers. It sounded like a punitive and vindictive whack against ratepayers concerned by the history of illegal goings'on.

The crowd was getting restive. Robertson went on to talk about EcoCare specifically. He mentioned "allegations of fraud", and said that the Office of Auditor General's investigation was the largest investigation being conducted by the OAG at present. Probed later we learned that the OAG's report might not be done "for months...". Somewhere in here commissioners were at pains to point out that the Bill would not be dealing with the issues that the OAG was looking into.

Robertson was getting near the end of his presentation by now. His last few slides dealt with what will happen in 2013 to the Long Term Plan. How it will be amended. First of all he explained that Commissioners had reviewed the 2012/2022 Long Term Plan (that's the one that MRRA's legal opinion condemns as unlawful). He said they've done that (it would be good to see a copy of that review). Now the commissioners want to propose amendments to that plan. Clive again jumped up and asked "how can you amend something that's not legal?" Robertson ploughed on. "We're going to simplify rates, we are going to change differentials..."

One of the problems with the 2012/2022 Long Term plan, Robertson explained, was that it only provided for 10% of the EcoCare debt interest being paid off. The rest of that interest liability was capitalised! This was news indeed. Confirms the bad to worse concerns of ratepayers. He said, "so for 2013/14 we intend to pay all the interest..." He also said that the commissioners planned to reduce the debt from $80million to $50 million by 2022.

I prepared a couple of questions....

Then Robertson sat down. Colin Dale stood to manage the rest of the meeting. He introduced Peter Winder to explain about the proposed Bill a little more.

The Bill and Questions

Peter Winder explained that the Bill "was 20 pages". It deals "with all of the technical errors that the KDC could have done legally..." Clive was very hot under the collar now. "What about units of demand...?" Winder responded indicating that it was a mess, "but that if KDC had adopted a different definition it would all be OK...". Winder confirmed that "nothing in the Bill deals with the KDC decision to double the size of the scheme, the $28 million, nothing in the Bill seeks to legitimise that...". That was good to hear.

Question: Why are OAG auditing themselves? Winder explained that apparently an independent process has been set  up for that part of the enquiry...

Clive continued to be very concerned about the proposed Bill. He asserted, "you cannot validate rubbish."

At this point I got the opportunity to ask my questions.

Question: Given that you said all of the Ecocare interest is to be paid from now on, and that you plan to repay $30 million of debt over the next 10 years, and that you will be putting these numbers in your March amendments to the Long Term plan, can you tell us now what the average rate increase will be for Mangawhai residential ratepayers?

Well. This had them jumping through hoops. After a while Steve Ruru, CEO of KDC, explained that it was proposed that the increase in debt interest payments (versus capitalising the interest and just adding it onto the debt) would be phased in over the 10 year period. I didn't quite catch the detail of this, but it sounded like the goal was 50% of debt interest paid in the first year, then a further 12.5% next year, and so on, so that after 5 years, all of the debt interest would be being paid out of earnings. At one point someone did ask what interest rates they were being charged and we were told 6%. (So - if the debt is $80m, then the debt interest is currently $4.8m/annum. And if only 10% of that was paid in the current financial year, then the debt has increased by $4.32m this year - just because of KDC's inability to pay interest).

Mr Winder explained that it was impossible to answer the rates increase question because all properties are different, and their rates are different.... blah, blah.... I know that, Peter, but you will know how to give a good average % rates increase answer to the question.... fudge....

They didn't deal with the bit of my question about the impact of the $30m debt repayment on rates, so I persisted, asking what proportion of the $30million debt repayment related to the EcoCare debt? But again, this met with fudged answers, and no detail. Commissioners did say that this detail would be in the amendments proposed, which would be coming out in March. (Why not tell us now?)

Question: Does the $80 million include the Mangawhai Endowment Fund monies of about $5.6 million?

Answer: No it does not. The $80 million is just external debt. Mainly bank loans.

Q: So where is the money, where is the Mangawhai Endowment Fund?
A: It's on the balance sheet. It's a liability. Don't worry - it's there.... (This was a disingenuous answer. The fact is the jam jar labelled "Mangawhai Endowment Fund" has been emptied. It has been scraped clean and used to retire some bank debt. It is gone. It no longer exists. Like Monty Python's parrot. It is an ex-fund. The figure - $5.6 million - sits on a KDC balance sheet somewhere. But the money is no longer in the jam jar.) Commissioners explained that KDC was still paying interest on the Endowment Fund (which could be regarded as a loan from Mangawhai residents to help KDC reduce its debt.)
Q: So. What interest are you paying on the Endownment Fund. You say that there is $60,000 available this year from the fund. Based on interest from the fund. $60,000 isn't a very good return on $5.6 million is it?
A: Fudge, mumble....

And so it went on. Many members of the crowd asked questions, made statements. presented their own findings and research into rate increases. One man had gone into KDC's rating database over the past few years and found - to his consternation - that farms and commercial properties had generally experienced sharp drops in rates, while residential property rates had sharply increased. (This would relate differentials being changed. Interesting research.) He also found that properties of the same value along Alamar Crescent in Mangawhai. had increases varying from 8.1% to 35% - a fact that commissioners could not explain.

And there was a final question which I noted that summed up what a lot of people felt:

Q: Why don't you ring fence the $28 million. Sequester it....
If that was sorted out we wouldn't be here....?

This is the boil that needs to be lanced.