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.

Bankruptcy Looms for Ponzi Mangawhai

Two Oceans, two Harbours, two versions of reality.... The number "2" comes up a lot with this Ponzi saga. Doubling of rates is the use of "2" that worries most Mangawhai rate payers. (see background here.) Especially those on fixed incomes who were not consulted when Kaipara Council was persuaded to double the size of its sewage scheme.....

... and of course there's the double-take, double-act, of Mayor Tiller and even Ex-Local Government Minister Nick Smith. Smith had the gumption to use this Ponzi example is a reason for over-hauling local government, and going ahead with local government mergers. What Mangawhai needs is an accountable and democratic Council - not a bigger one that's further away.

This Ponzi is a real doozy. Council has been influenced by property speculators to go ahead with a much bigger sewage scheme. Council was persuaded the sewage project had to be bigger, enable even more land to be developed, because then the returns from rates and developer levies from all the new subdivision enabled by the scheme would not only pay back the investment (fantastic!) - but Council would reap further benefits (even more fantastic) and be able to spend on other projects. Dream on....

This is one hell of a Ponzi scheme, and the thing is, Council can't escape criticism. Not only can it not escape criticism, but it alone has to be liable for losses. Why should existing ratepayers - whose benefit from this high risk investment - has already been paid for, be required to pay the Ponzi costs of a failed property speculation?

And this is where "2" really comes into its own. Kaipara District Council has double-crossed the Mangawhai community by allowing itself to be influenced by vested interests (who carry no risk), and expecting ratepayers to pay for policies which did not meet Local Government Act duties. Members of the Mangawhai public who did their best to get Government Watchdogs to audit Council processes have been let down totally. No wonder there's anger. The elephant in the room here is Central Government. It, and its agencies, stood by and did nothing...

I well remember being on North Shore City Council when it sold its shares in Auckland International Airport for around $80 million. The meeting was in confidential, but the halls and corridors were filled with brokers and dealers advising what price to sell at and what to do with the money. They wanted Council to invest the money in the stock exchange. Councillors got all excited. It was only the sober voice of the Chief Finance Officer who calmed everyone down and advised: "put it in the bank. This is public money. Council is not in the business of taking risks with public money..."

Pity there wasn't a similar voice of reason on Kaipara District Council when it voted and took out bank loans - in "public excluded" meetings - that underwrote speculative property development at Mangawhai.

Mangawhai Bankrupts KDC

There's been a lot of comment in the media lately about the size of Council debt. The Sunday Star today (citing data quoted by Local Govt Minister Nick Smith) puts Kaipara District Council at the top of that list - in terms of debt/capita - at $4142/resident.

The total debt of KDC is $90 million - according to "Legal Eagle" (mouthpiece of activist Mangawhai) - of which some $63 million is for the local Mangawhai Sewerage Scheme.

My involvement with this matter, and my interest in it, goes back a few years....

Twelve years ago I was invited to help the Mangawhai Residents and Ratepayers Association (MRRA) make submissions on a pro-development plan change (Plan Change 9) that was being foisted on Mangawhai by Kaipara District Council.  MRRA approached me because of my experience working with North Shore City Council on its wastewat4r network and system, and because of research I'd done abroad on alternative community wastewater systems. After  preliminary investigation, on 1st August 2001, I wrote in the Herald:

....Mangawhai is the latest community to be on the receiving end of a Council imposed sewage treatment scheme. The local Residents and Ratepayers Association has called for a Septic Tank Bylaw and is anxious to consider alternatives which keep costs down. However Kaipara District Council, under pressure from the Regional Council to clean up the Mangawhai Estuary, and from developers keen to follow the Cooks Beach example and get intensive subdivision development underway, are pushing ahead with a proposed $16 million sewage scheme. Kaipara District Council have decided they cannot fund the project, and have instructed Beca’s to put the whole project out to private tender. I am advised five private organisations have been shortlisted. These include overseas companies....

There are a number of things that are interesting about this quote. For a start there's the figure of $16 million. That's what KDC reckoned it was going to cost.

At the time, there was significant concern about reported levels of enterococci in the Mangawhai Estuary - an indicator of the presence  of faecal colliform from human sewage. The same indicator was routinely measured on North Shore beaches - and levels were used there to decide where most energy was needed in making the city's wastewater networks more leakproof. At great expense.

However, again at the time, North Shore City Councillors were skeptical about what these enterococci reports were telling us, so we required officers to measure for actual faecal colliform microbes, so that we really knew what was happening. These measures were done for some time, and officers reported that enterococci could indicate the presence of a range of microbial things, including from rotting vegetation, stormwater ponds that hadn't drained, dog poo in the gutter and on the roadway for example, and cow shit - as well as from sewage network overflows.

I advised the MRRA to require Northland Regional Council and KDC to properly investigate what was causing the enterococci levels to be elevated in the estuary - before commiting to a wastewater network system as the solution to a problem that could be caused by rotting vegetation, farming etc etc.

However it was clear that the fundamental reason for KDC's enthusiasm for a new traditional sewerage system was that it supported calls from land owners and developers who wanted to develop their land, and subdivide down to lots of around 400 square metres. That sort of urbanisation was in conflict with the large lot development that had characterised Mangawhai hitherto. Bach owners and resident lots were around 1200 to 1500 square metres - big enough to accommodate an onsite wastewater system based on a good septic tank and a drainage field. The underlying land being largely sand - drainage was appropriate and effective.

So. Intense urban development proposals required a networked wastewater system - sewers and a wastewater treatment plant - and existing property owners were advised that their onsite systems were polluting the estuary. At the time I couldn't believe the draconian and uncaring way that KDC went about imposing this vision on this seaside community.

I still have a copy of the submissions that were made by MRRA to KDC about Plan Change 9 (PC9), and the associated "Infrastructure Plan". Extracts include:

...MRRA are particularly concerned that Mangawhai residents themselves have been insufficiently consulted over the implications and consequences of PC9. The consultation with the community over the infrastructure study, what should be done, what options to pursue, how a possible community sewage scheme should be funded, how it should be built and owned, are all severely deficient – given the huge issues for the community....

We have even more of an issue with what is proposed for wastewater, and how that has been shared with the community. The MRRA recognise that how we tackle wastewater is fundamental to the proposed zonings in PC9. Many of the proposed changes cannot go ahead – or at least cannot be made to happen in real life - without the proposed community waste water system. The huge increase in urban intensification envisaged by PC9 for Mangawhai can only occur with a reticulated sanitation system. We believe there is a gap in the council's communication over this. It is hugely controversial, building something as expensive as a community sewage scheme, and involving the private sector in the manner proposed. It represents a major political shift in service provision. I am not aware that the community has really much of an inkling as to the possible impact of what is proposed - in terms of costs, changes in accountability, what their options are - and indeed whether they have been asked whether this is what they want for their community....

We are of course aware that PC9 does not explicitly mention any costs for the proposed Community Sewage System. PC9 is explicit about financial contributions required for stormwater and roads, but is silent when it comes to wastewater. Documents we have sighted suggest the capital cost of the sort of system which seems to be preferred by Kaipara District Council and its consultants – Beca – is $16,000,000. There are 1200 affected lots in Mangawhai Township now, and PC9 envisages a further 535 – giving a total of 1735. If we all paid equally for this sewage system, it would cost each ratepayer $9221. But PC9 is silent about this huge sum of money. If ONLY the new lots were required to pay – because the rest of us tidy up our septic tank systems – then the cost per new lot would be more than $29,000.....

And it goes on.... I include it here to give you an insight into how it felt for the community as KDC went about its decision-making. Residents had no idea what was happening on the wastewater cost front. They didn't even know if they would be forced to connect. The MRRA made submissions to the effect they would accept an onsite system bylaw, empowering the council to make onsite inspections, and requiring repairs to bring onsite systems up to standard. But to no avail. KDC wanted a networked sewerage system come hell or high water, because it wanted to allow relatively dense subdivision and development of adjacent lands.

Ironically, after renting a bach at Mangawhai Heads for a few Christmas holidays between 2006 and 2009, we purchased the family bach there around 2010. Fantastic. This was about the time KDC unleashed its contractors on the local road networks to install the sewerage network. It was interesting to be on the receiving end of this - as a ratepayer - and as the new owner of newly upgraded onsite septic tank system and drainage field which I was very proud of.

I tried to get the Council to allow us to remain connected to our own onsite system, but they insisted (as I knew they would) that given my house was "passed by a sewer" we had to connect. Like many Mangawhai residents we were very reluctant. For a start there was the desire to maintain the status quo, then there was the worry about "where will the pipes go" and "what about my garage"...., and there was the concern about how much it would cost to connect.

I remember the communications that came eventually about this. We were told that "existing ratepayers" would be charged "one off levies" of around $4,000, while "new connections" would pay around $8,000 (these are approximate figures only).

Still nothing happened, apart from the obvious fact that sewer pipes were laid in the streets (that's another story). I was reluctant to do anything because of the worry of how it would upset the bach, plantings, fences, driveway, etc. And so - I imagine - were hundreds of other ratepayers. Then a letter came from KDC offering a "free connection installation", provided we took up the offer by a particular date. Again I was a bit slow, but talking to neighbours I learned contractors were doing quite a good job, so I got on the phone, said yes, was sent a rough diagram of the route they proposed for our connection, I made some modifications, which were accepted, and when we next went to the bach it was all done. Fantastic job. They'd run the connection up a side driveway, installed a manhole, put a lateral, sawed a gap along about 10 metres of concrete drive and footpath, laid the pipe, reconnected from our onsite system to the network, reconcreted, and made good the fence etc. Very tidy job. I guess it would have cost the Council about $10,000 (based on my experience that a council project usually costs about 3 times what it would cost if done directly by private sector - for a variety of reasons public works are expensive.)

So we didn't have to pay that. We did have to pay the "one-off levy" connection rate of about $4,000. But as you can see, it would not cover the cost of the system - even if it had only cost $16 million.

So now the cost has blown out to a reported $63 million. Well. If 1000 residents got a free physical connection, like we did, that would add another $15,000,000.

But the real problem for KDC is that its plans suffered from the collapse of the coastal property market. It installed a wastewater network to support a property boom which never came. It borrowed money, just like all those real-estate investment companies did that went bust. But Councils don't go bust. Well. They haven't yet in New Zealand.

I am pleased that the Auditor General has agreed to review the decisions made by KDC about this matter. It needs to be a very full review indeed.