Mangawhai Vs Kaipara Council Update

Great cartoon....

This is a sketchy  update on what's been going on recently, in regard to the campaign between Mangawhai Heads residents and ratepayers and the Kaipara District Council over its spending and planning for the EcoCare sewage scheme...

Three things have happened:
*  the Parliamentary Select Committee has reported back after hearing submissions and deliberations over the Validation Bill that was put up by appointed commissioners to deal with many of the issues that had arisen over the past 5 years or so;
*  AND the Office of the Auditor General has announced it has completed its report and investigation and will be reporting to Parliament and the local community in early December;
*  AND the Local Government Commission has considered various matters relating to local government in Northland and has recommended amalgamation into a single Council.....

Here is more detail....

Validation Bill Second Reading

When the Validation Bill had its first reading I was struck by the insight of many of the MPs who spoke. And these were all on the Select Ctte. Almost to an MP they referred to the apparent failure of the Audit Office in giving Kaipara District Council a clean bill of financial health.

My submission to the Select Ctte included this material:

Part I (Cayford submission)

2. I understand the KDC commissioners believe that to fulfil the terms of reference set out in the gazette notice promulgated upon their appointment, that a validation bill is the best course of action for them to pursue with the support of Parliament. However, their terms of reference do not specifically allow or require them to investigate the broader issues that have led to the situation that now exists. Select Committee members will be aware that several investigations are underway into the events and processes surrounding historical KDC decisions that relate to the Ecocare Sewage Scheme.
3. It is my submission that while the Select Committee is required to consider the Validation Bill, members cannot do justice to that consideration unless they are informed about the broader issues. I submit therefore that Committee Members should be provided the relevant report of the Office of Auditor General and the report which investigates the role of the Audit Office. Members need to read and understood those reports if they are to make sense of the submissions of many citizens who will inevitably raise broader concerns – alongside specific concerns relating to the Validation Bill itself.
4. In support of this submission I would draw attention to the statements made by Members in the House of Parliament when the Validation Bill was introduced and had its first reading. I watched this session of Parliament on TV and was struck by the depth of understanding shown by MPs into the broader issues – and by their public calls for submitters to come to the Select Committee and explain the whole story. In my submission, Select Ctte Members and Chair will need to be in a position to respond to those broader submissions.
5. In my submission giving consideration only to submissions that specifically address the validation would be like re-arranging the deckchairs on the Titanic. It is essential for the Select Ctte to be informed about the broader issues and be in a position to act in the round.

Part II (Cayford Submission)

6. I have been doing some research on how the provisions in the legislation that has been relied upon to justify the loans and the ability of KDC to rate ratepayers for them, came about. The following bullet points are a very simple (probably too simple) summary of what happened.

• On or about 18 July 1996 Parliament made a suite of financial management changes to the Local Government Act. The then Minister of Local Govt Graeme Lee explained to Parliament: "The predominant objective is to require local authorities to identify explicitly the reasons for their funding proposals. In turn, this will engender public consultation, and will promote funding decisions that are more clearly representative of the wishes and the values of local communities....". This included a section about "protected transactions" and borrowings. Richard Northey - an opposition member told Parliament: "....Government members, and members of the other parties were happy to see the abolition of loan polls on the basis that the consultation and forward planning provisions for revenue raising and borrowing, in particular, that are provided in this Bill provide a fairer accountability and a level playing field in terms of revenue raising for local government...." The idea of a separate loan poll was dropped by Parliament on the basis that borrowing decisions would be accountable.
• Then in 2002 Parliament introduced a new Local Government Act. This included the idea of General Competence - that Councils could do what the community wanted (subject to consultation), rather than being constrained to provide specific services. When the new Bill was introduced to Parliament it did not contain any "protected transactions" provisions. Several Councils made submissions about this to the Select Committee. Parliament was persuaded to include the old 1996 Local Government Act Section 122ZG(3) (which protected bank transactions). This change was made seemingly at the last minute - and without properly integrating it into the consultation, transparency and democratic provisions of the new Act. Without that integration it is likely that it should have been included with a Loan Poll requirement. But it was not.
• On 24 August 2005 Kaipara District Council (KDC) resolved to accept an offer from EarthTech Consulting Limited (EarthTech) to design, construct and operate the proposed EcoCare Sewage system. The idea was to establish an arm's length company to do this. Local Authority Trading Enterprises and suchlike were envisaged in the new Local Government Act. This was a bit like a "Build, Own, Operate and Transfer" arrangement. (BOOT).
• On 21 March 2006 KDC publicly notified the statement of proposal for EcoCare (EcoCare SoP) and LTCCP 06-16 for consultation. The EcoCare SoP indicated that the capital cost for EcoCare was estimated as $35,600,000. (You can see the sequence - decision first, consultation later.)
• On 26 September 2007 KDC resolved in confidential to adopt Modification 1 (the expansion of the sewage scheme - doubling its size and cost), confirm the EcoCare Agreement and concluded negotiations with EarthTech and ABN Amro Bank to activate the necessary funding and borrowing arrangements. At this stage the public were none the wiser about the expansion.
• On 7 December 2007 KDC decided - in secret - to give effect to Modification 1. It also executed a term loan facility agreement with ABN Amro Bank for the amount of $53,000,000. Ultimately KDC borrowed $57,978,000.00 from ABN Amro Bank - including capitalised interest. This debt did not show on any public KDC balance sheet for several years. It stayed hidden from public knowledge - presumably on the accounts of EarthTech - despite the fact it was the Council that had negotiated the loan - and presumably offered rates revenue as security.
• In April 2011, ratepayers were consulted about KDC's changed Long Term Community Plan. For the first time KDC's Annual Plan showed the $57,978,000 loan - and the interest payments - and KDC's proposals for getting it paid off by ratepayers. (You can see that the decision to take the loan was totally disconnected from any public consultation - a million miles from what Parliament intended in 1996 when it first provided proper provisions for Councils to borrow from banks and protected those transactions.)

  7. The ratepayer revolt began. The rest is history. Ratepayers could NEVER have found out about the $57,978,000, until it was provided for in an Annual Plan. The borrowing was hidden in EarthTech and described in deals between KDC, ABN Amro and EarthTech. No amount of LGOIMA requests for information could dig deep enough. But ratepayers had good reason to be concerned. That was why they tried to alert the Office of the Auditor General and the Audit Office. These institutions - had they looked - would have seen what was happening and could have blown the whistle years ago. They could also have seen that the legislation lacked public interest safeguards requiring consultation PRIOR to taking out bank loans. 8. The validation Bill Select Committee is an opportunity for a good sized group of MPs to understand how the law has failed KDC ratepayers, and to learn about the consequences when Government's system of checks and balances (Audit Office) fails to do a decent job when alerted. Then the MPs need to act. Those actions need to extend beyond the narrow scope of the Validation Bill..

So. That was my submission. You might like to have a look at what others had to say. This is great material and recommended reading. You can see a list of all submissions to the Bill here, and then see that actual submissions.

Mike Sabin's media release after the Second Reading report includes these paragraphs:

Mike Sabin, MP for Northland, has called for the Office of the Auditor General to meet the cost of any failure if it is shown that Auditor at the time failed in their duties and responsibilities to the Kaipara Council, during in his second reading speech on the Kaipara District Council (Validation of Rates and Other Matters) Bill last night.

Mr Sabin, as the local MP, was asked by the Council’s Commissioners to sponsor the Bill into the House and it had its first reading in early June this year.

“No one is a fan of retrospective legislation. It is a last resort and reflects Council failure. Unfortunately, it is required, and is the only workable way to remedy failures and errors that were avoidable but, nonetheless, occurred,” says Mr Sabin.

“It has been vital that parliamentarians were given the chance to hear submissions from ratepayers and scrutinise this bill in every way.....

Mr Sabin was highly critical in his speech of the previous Council and their auditor, and questioned how, with such longstanding and deep-seated compliance and other fundamental financial mismanagement issues it could get clean audits year after year.

He outlined that his support for the bill in the first place was conditional on it validating only matters which could have been done lawfully, that wouldn’t impose any additional costs and would not absolve anyone of their culpability. He also pledged to leave no stone unturned in the on-going search for accountability wherever it can be shown that responsibility for wrong-doing lay....

“The committee were however very concerned about the penalties and I am also pleased that a compromise was able to be found which all, including the commissioners supported.

“Some ratepayers in Kaipara – about 1000 of the 13000 total - are withholding their rates, because they feel aggrieved that the Mangawhai Wastewater project blew out in cost, or simply because they believe the rates are not valid.

“This Bill validates the penalties on the rates that this Bill validates. However some Select Committee members felt that some of the penalties that had been applied to accounts should be remitted and worked hard with the chair of commissioners to find a way to accommodate these concerns.

“I am pleased we secured the Commissioners’ commitment to take to Council a proposal to forgive specific penalties that had already been applied in rates notices should this Bill be enacted this calendar year, says Mr Sabin......

Which sounds good, but the devil is in the detail. He states that"the Office of the Auditor General to meet the cost of any failure".....but wait for it "if it is shown that Auditor at the time failed in their duties and responsibilities to the Kaipara Council."  This is the devil. Shown by whom? My understanding is that the Audit Office is an unwelcome watchdog, but that is what it is. If it visits, and barks a bit, is that what its duty and responsibility amounts to?

I think there is a need here for Government to recognise that it has a moral duty here. The buck stopped with the OAG and the Audit Office on this. Perhaps the Minister of Local Government. However you look at it the failure is with governance at the highest level.

From where I sit the only real pressure on Government to do the right thing here is the Judicial Review proceedings initiated by the Mangawhai Ratepayers and  Residents Association. I believe this will lead to a High Court ruling along the lines that Kaipara District Council cannot legally require ratepayers to be liable for loans that were not raised in accordance with LGA provisions.

Investigation of Office of Auditor General

The Office of the Auditor-General has advised that it expects that the Speaker (of Parliament) will table the inquiry report into the Mangawhai community wastewater scheme on the afternoon of Tuesday 3 December 2013. AND that the Auditor-General will brief the community on the report at:

• 2pm – The Mangawhai Club, Molesworth Drive, Mangawhai Heads, Mangawhai 
• 6.30pm – Maungaturoto Country Club, Bickerstaffe Road, Maungaturoto. 

Both sessions will cover the same information. The full report and a summary of the key points will be published soon after 2pm on the internet at www.oag.govt.nz and copies of the summary will be available at the community briefings.

So that should be interesting. I hope and expect that the report into the role of the Audit Office (which is a separate report) will also be reported on.

Northland Amalgamation

Here is part of the undated Media Release from the Local Govt Commission:

The need for a single voice for Northland and for local communities to keep their special identities is reflected in a new model of local government proposed for the region.

The Local Government Commission has released its draft proposal for reorganisation in Northland, following applications by local authorities and extensive consultation since February. The highlights are:

• One council and one mayor to speak with a region-wide voice for Northland.
• A second tier of boards to represent diverse local communities.
• The name of the new local authority to be Northland Council.
• It replaces the Far North District Council, Whangarei District Council, Kaipara District Council and Northland Regional Council. The new council would be a unitary authority, combining the functions of the district councils and the regional council.
• Northland Council would have nine councillors elected from seven wards. The mayor would be elected by all Northland voters.
• Northland Council would have seven community boards with 42 elected members. The seven council wards and seven community boards would share the same boundaries.
• The proposed names of the wards and community boards are: Te Hiku (far north), Hokianga-Kaikohe (north-west), Coastal North (north-east), Coastal Central (east), Whangarei (south-east), Coastal South (south-east), and Kaipara (south-west). These names are open to public submission.
• Northland Council would have a standing committee to ensure the views of the large Māori population are heard. The Māori Board would include elected members of council and representatives of all local iwi. There would also be a Maori Advisory Committee to advise the council committee responsible for issues under the Resource Management Act.
• Northland Council administrative headquarters would be in the current Whangarei District. The council would also have offices in a further nine towns: Kaitaia, Rawene, Kaeo, Kerikeri, Kaikohe, Kawakawa, Ruakaka, Mangawhai and Dargaville.
• Existing council debt, rates and other financial arrangements would be ring-fenced to the communities which incurred them or benefit from them.

The Chair of the Local Government Commission, Basil Morrison, said Northland Council and its community boards would have a total of 52 elected representatives: approximately one for every 2,974 people. Current arrangements involve four councils, three mayors, one chair and 61 elected members: one representative for every 2,615 people.

“A whole of Northland approach is designed to bind together all communities to create a stronger strategic vision for the region,” Mr Morrison said.

This was always an opportunity here, for an opportunist, to seek amalgamation on the back of local discontent. To say that it is designed "to bind together all communities" is disingenuous and misleading. Local communities know they are different - and viva la difference - they would say. Amalgamation is a bind for locals because they can no longer determine locally their destiny.

"Beware what you wish for", was my way of expressing reluctance at amalgamation when I stood for the Exec Ctte of Mangahwai Ratepayers and Residents Association. I sensed that locals were quite happy to get shot of Kaipara District Council after what it had done. The trick is - though - what will it be replaced with? Sounds like - from the above - that it will be by a new "Whangarei Ward and Community Board"  (South East Ward of Northland.).

You can get the whole LGC document from its website. And submissions need to be made by 14th February 2014. My short term concern is that amalgamation could be used as a "catch-all" opportunity to sweep the EcoCare mess under the carpet. Not really deal with it. So, for the short term I would suggest submissions that call for EcoCare debt issues to be cleared up BEFORE any debate on amalgamation. Start with a clean slate at least.

But on the wider front, longer term, I understand that the supposed efficiencies that are claimed from amalgamation are not real. Certainly Auckland's debt has ballooned, senior managers and executive pay has sky-rocketed, and there is very limited accountability. Very hard now for anyone who works in Auckland Council - let alone ratepayers - to figure out who is responsible for what.

Interesting times.