Rates Strike at Mangawhai

Things are getting very interesting at Magical Mangawhai, where residents are currently under threat of an 85% rate rise from Kaipara District Council. Residents are being consulted about how they should pay an additional $2000/annum, on top of their existing rates, for the next ten years. (You can see my previous blogs about this here and here.)

The Minister is finally taking an interest. Have a look at this 30th May media release from Local Government Minister. He's announced a Review Team to "work with" Kaipara District Council as it completes its 10 Year Plan. I understand in fact that the Minister communicated with the Council earlier in the week to the effect, "if you don't ask for our assistance you might get what you don't want....". So Council wrote asking for assistance and its got a Review Team.

And just in case you thought Government was getting ready right now to bail out Kaipara District Council - think again. Here's the Q and A that went with the Minister's media release. Among these are:

"Is the Government stepping in with financial support for the Council?


No. The Government will only fund costs associated with the appointment of the review team. It is also important to remember that the Mangawhai scheme has already received a Crown subsidy of $5,896,107 (GST exclusive) through the Sanitary Works Subsidy Scheme administered by the Ministry of Health...."

Submissions to the KDC Team Year Plan had to be in by 30th May. Just last week. A day of hearings at Mangawhai is happening on Thursday this week 7th June. I hope to be in attendance - especially if the fishing is bad. I'm sure the Minister's Review Team will be in attendance. Councillors must be shitting themselves.

Deservedly. The Ten Year Plan needs to be adopted in a couple of weeks.

Word among the locals is that they want a rate strike. Signs are sprouting around the neighbourhood. Their anger is understandeable. Around three years ago Kaipara District Council voted in confidential to double the size of the wastewater scheme (doubling the land area that was serviced and could be developed, and doubling Council's infrastructure investment) - without consulting ratepayers.

An ultra vires decision. By definition.

Residents oppose paying for a loan that was taken out by their Council illegally. You'd think that Central Government had no option but to cover costs and liabilities of an illegal Council decision.

Economic Growth Projects Disasters for NZ Communities

The financial cost of the Christchurch earthquake has been huge and carefully valued, a disaster for many but an opportunity for economists and politicians alike who regard it as New Zealand’s best hope of achieving economic growth targets.

Last week the economics division at National Bank of New Zealand said, "four solid quarterly increases in economic activity have propelled Canterbury to the top of the year-on-year economic growth rankings", ahead of Auckland. The New Zealand Government’s recent budget relies heavily on economic activity in Christchurch to deliver GDP increases it believes are necessary to bring New Zealand’s economy into the black. As if all New Zealand needs is another disaster to keep on track.

Questions need to be asked about economic growth assumptions and about GDP – New Zealand’s commonly used measure of progress and success - because the same strategy is being applied by Councils in towns and cities with disastrous effects.

Kaipara District Council has achieved notoriety because of its proposal to almost double the rates of Mangawhai ratepayers to pay back the huge loan it raised to pay for a controversial sewage scheme.

Ratepayers were forced to abandon well maintained onsite wastewater systems which were generally working soundly, and then connect to the new wastewater network for a modest fee.

The original scheme raised a few eyebrows and might have succeeded. But, under pressure from developers and without consulting ratepayers further, the Council decided to double the land area serviced by the scheme, doubling the cost of the project. Now, because the predicted growth and development did not happen, the sewage scheme debt equates to an additional $20,000/residential ratepayer.

The Kaipara District Council 2009 - 2019 Long Term Council Community Plan gives some insights into how this happened: ‘The Kaipara District Council believes its key role in assisting the local economy to sustain and grow itself is to ensure the appropriate infrastructure is in place…’

While KDC’s investment in a sewage scheme might encourage growth in and around Mangawhai sometime in the future, it is questionable whether it is appropriate to levy the costs of that strategy now on existing ratepayers, by charging them an additional $2000/year - for the next ten years - on top of existing rates.

The investigative report now being condicted by the Office of the Auditor General will make interesting reading. Late last week, the Minister of Local Government- David Carter, announced it will appoint a Review Team to work with Kaipara District Council. This is very late in the day given Council must adopt its new plan and set the rates before the end of this month.

Still. Better late then never, though it will be too late to influence the potentially disastrous economic growth related decisions of Auckland Council.

Auckland Council’s Auckland Plan includes a diverse range of initiatives aimed at delivering a real GDP increase for Auckland of 5% /annum. This rate of growth is described in the Mayoral Forward to the Auckland Plan as “bold”. The services provided by the Council are said to: “support economic development of the region and contribute to the national economy”. The stated objective is to shift Auckland’s economic performance rating from 69th to 61st in OECD city rankings.

Last week Auckland Council media statements drew public attention to the fact that residential rates will increase by a gentle 3.6%, but quietly ignored its Ten Year Plan financial position statements which make for rather unhappy reading.

These show that council debt will balloon from $4.5 billion to $12.5 billion in ten years reaching almost $20,000/residential ratepayer. As bad as Mangawhai which is the worst in New Zealand. That debt will incur interest charges of more than $750 million each year – more than a quarter of the rates revenue for the Auckland region.

Auckland Council plans indicate that a number of big ticket projects would be funded from new loans. The City Centre Rail Loop project cost to ratepayers ranges from $1 billion to $3 billion over the next ten years, depending on whether the Government contributes its half of the cost, and how the project is staged. Auckland has needed this part of the rail network completed for decades. More than can be said about Watercare’s $800 million mega-sewage project that is to be bored under Auckland.

Even without these projects Auckland Council debt would still be $9 billion.

In its budget this year Central Government gave notice of its intention to reduce spending, though it is still borrowing heavily and government debt to GDP ratio is fast approaching 50%. Big ticket motorway projects apparently needed for growth are still provided for.

No such notice came from Auckland Council, despite signs that the growth much of its spending is for, is as illusory as it was in Mangawhai.

New Zealand’s population growth rate has dropped to the magic figure of 0.6% per annum due to emigration to Australia and other factors outside our control. Much of the population growth that Auckland is experiencing is due to internal migration. For example families are shifting to Auckland from Christchurch and other urban centres.

These shifts will cause Auckland’s economy to grow slowly, but they will cause other urban economies to shrink, leaving New Zealand’s overall economic position little changed.

Rather than chasing the tail of economic growth at all costs and incur enormous debt, the time has come to build economic resilience into New Zealand, to spend only what we earn, and to ensure urban living remains affordable for those who live here.

Business Booms at Watercare

The large newspaper advertisements in NZ Herald today, and the stormwater story earlier in the week, are shots across the bow of unsuspecting Auckland public.

The newspaper advertisments described Watercare's new charges for water and wastewater, and for residential and business ratepayers. Of course it has always been deeply ironic that the "One Council, One Bill" rhetoric was never ever going to be true. The re-organisation was always intended to allow Watercare to be a law unto itself, with its own computer system of residential and business ratepayers, and with its own business model and charging system. It is now almost stand-alone.

Watercare has embraced Central Government's business growth model with both hands. Watercare is now well placed to be sold off as a going concern, taking a sizeable chunk of Auckland Council's debt with it, and the promise of some very large, well funded, centralised network infrastructure projects.

The devil here - is behind the detail in Watercare's media release.

There are a few things that need to be aired, that are hard to discern readily in the Council's Ten Year Plan, which is the shop window on what Watercare plans:

1) I support the fact that Watercare can now charge residential ratepayers for their wastewater services on a volumetric basis. This will provide an economic incentive for water consumers to manage their consumption of water.

2) But these changes do not apply to business customers. We see in Watercare's public statement that "existing arrangements will apply...". While these are to some extent volumetric, their main purpose is to allow businesses to tip contaminants and trade wastes into the sewer, where they mix with ordinary sewage, ensuring that the cocktail that finally arrives at Mangere is completely untreatable for re-use. So Watercare is perpetuating an outdated system, which provides little incentive for Auckland business to clean up its act at source, and generates a nice little earner for Watercare. The resulting biosolids are too contaminated to be reused as soil conditioner, and must be landfilled. Hence Watercare's desire to continue its business oriented dumping operation by landfilling the biolsolids at Puketutu. (I have walked on the existing biosolids landfills in Manukau Harbour. These are not happy places.)

3) The Council's Team Year Plan includes the debt level for the Auckland Council Group - ie Council, plus Council Controlled Organisations - including Watercare. The debt level that Council has voted for is close to $13 billion - almost 3x what it is now. It appears that around $3 to $4 billion of that debt is Watercare debt. Part of the increase in that debt will be the proposed $800 million "Central Interceptor" project - the huge pipe/storage system to be dug under Auckland, allowing business as usual activity to occur, and to allow for more of it.

Councillors should not be allowing Watercare to hide this burgeoning centralised network of water and wastewater infrastructure - on the basis that the bills for it reduce Council's own rates bill, and on the basis that "they can blame Watercare...not us".

Watercare's practice is increasingly unsustainable. It is already the biggest user of electricity in Auckland - because of its need for pumping of water and wastewater, and for the electricity intensive, centralised treatment plants that it operates.

The fact that Auckland Council has to deal with stormwater, now that Watercare successfully separated the meter-paid waters, further exacerbates this trend. I await with interest the debate over the stormwater disposal charges that Watercare will levy on the Council, when Council seeks to divert pesky stormwater flows into Watercare's Central Interceptor. Another nice little earner for Watercare.

Rating Toward Auckland Monoculture

In the Mayor's message to Auckland in the Draft Long Term Plan 2012-2022 out for consultation now we read the following: "...properties of equal value will be paying equal rates, wherever you are in the region. Properties in Takapuna will be rated at the same level as those in Titirangi and those in Takanini..."

This drastic simplification is one solution available to the Council in compliance with the law requiring it to produce one rating system for the region. The same "one size fits all" approach is being applied to dog licences, rubbish collection, and I dare say to a whole heap of council services which have been applied in different ways and with different priorities across Auckland by the previous different City Councils.

There are lots of nice-sounding words used to describe this process. Like "harmonisation".

But is this gross simplification of Auckland's rating system justified? Especially in light of the fact that the impact of the Auckland council's rating proposals will be a massive increase in rates for those in properties of above average capital value, matched by a corresponding decrease in rates for those living in properties of lower than average value.

The Local Government Act calls for a Funding Impact Statement. In fact it's a requirement. I couldn't find one in Auckland Council's draft long term plan. To give you an idea of what one of these looks like check this one from Tasman District Council. You will see that the Council has assessed the level of service that different parts of the district receive, and this has been translated in a "cents in the dollar" rating value, by service type. In other words your rates contribute toward the cost of the services that you get.

Auckland suburbs are not the same. So why should they pay the same rates for the same house value? Over the years the costs of living (including rates), and the priorities for Council expenditure (parks, clean beaches, free swimming pools etc) - have influenced the decisions of people in where they choose to live. That is called choice and is fundamental to the development of diverse communities within the city conurbation that is Auckland. These communities have developed over more than a hundred years - some of them. Other communities are more recent. But they are not the same. Nor have they had the same services. Nor has their development been subject to the same planning rules.

In its time the Auckland Regional Council recognised that different communities benefited from different levels of public transport service. For example some communities were close to rail services, high frequency bus services, or the Northern Busway. And houses of the same value paid different rates as a consequence. This is rational and fair. It is also transparent. Ratepayers can examine the Funding Impact Statement and understand what services they are paying for with their rates, and they can also understand why they might pay more rates - for example - for sewer infrastructure (because of the amenity of local beaches), for public transport, for rubbish collection using pay-by-bag (instead of bins). And so on.

Auckland Council's harmonisation is more like Stalinisation. This might suit Council's bureaucracy and internal systems, but surely Auckland is entitled to a little more sophistication and diversity in service delivery and rating from its new Council. And surely Council can find room for fairness in its rates.

Just because someone is living in a home with more than average Capital Value, does not automatically mean they have the ability to pay significantly more than average rates. I know that Councils generally take the view that home value is a rough proxy of the ability to pay. But many pensioners and pensioner couples on fixed incomes who have lived in modest sized family homes and had families should not then find themselves suddenly rated out of their homes because the Council has not properly thought through the consequences of its blunt proposals - particularly a UAGC set at $350.