Some Auckland Councils 'Hiding' Debt

The Transition Agency is well advised to look out to ensure that councils are not borrowing to keep down rates as mentioned in the article 'Forensics on $3b Super City Debt' NZ Herald 15th June. The ATA would have little further to look than another 'proactively released' Cabinet Paper EGI Min (09) 6/10. This analysis by DIA clearly indicates that some councils are dropping a timebomb into the new 'Super City's' accounts. For example, figures show that Auckland City appears to embarking on an artificially low rate rise at the expense of paying back debt. The new 'Super City' will have to face what seems to be an unbudgeted debt blow-out of 157%. Not only that but its accounts also appear to have been glossed-up by dramatically reducing its capital works programme. The City's projected spending on new capital works shrinks by -37% in year 10. In contrast the more prudent North Shore City projects a slightly higher rate rise (at average of 5.2%), lower debt change at year 10 of 80% and a steady infrastructural investment of 47%.

Clearly new infrastructure will have to be built in Auckland and already the Queen's Wharf proposal has to still be accounted for in financial planning. Auckland City is not the only council that seems to be saving its debt for the region. It is of great concern if lower than appropriate rate rises are used to artificially inflate the standing of 'Super Candidates'.

Reduced rate increase

Today North Shore City Council sent its long term city plan to the auditors and ATA. I want to thank to all those submitters who expressed a view or made a recommendation to the plan. The rates increase has been reduced from the proposed 5.9% to 5.2% in year one (plus Regional amenities charges). This is still too high but reflects the inclusion of essentialinfrastructural projects to indicate their importance to the new AucklandCouncil. Their omission would have artificially enhanced the appearance ofthe City's accounts as it appears, from a recent DIA report, some othercouncils have done. Also, our rates include wastewater charges, not all ofthe Auckland regional councils do and this needs consideration in anycomparison.
But a great deal of surplus spending has been trimmed. For example the rate increase is 2.8% lower than the previous council planned, saving theaverage ratepayer $136 next year. Also, capital expenditure has been cut by$71.5 million reflecting the close scrutiny of these projects. The largest saving is in transport by $82.9 million but increased spending is inwastewater (sewerage), and potable water by $46.5 million. I am pleased tonote that Birkdale-west wastewater projects have been brought forward ashave major components of Highbury's town centre upgrade. So, while the rates increase is still too high it reflects the tension between keepingrates as low as possible while providing desired and essential services and reducing debt.

Hide's 'secret agenda' exposed

Rodney Hide's 'secret agenda' has been exposed in a recently released Cabinet Paper EGI (09) 44. Hidden amongst the usual innocuous statements of 'reviewing', 'disclosing' and 'considering' are three items that cause concern. The first is that contrary to most of the public, Mr Hide sees that the "rarity of party organisation" in local government is seen as a weakness (p.5) . This explains his strong desire for having eight councillors elected at large.
The second area of concern is the obvious omission of libraries, parks and Reserves and other community amenities including leisure centres and halls from his list of "core services for local government" (p.4). One would not normally be concerned that these could be offered for sale except for a discreet comment on page 8 advocating the removal of "constraints on the use of the private sector to deliver local government services" and to "advance the Government's policy agenda". Of course, there are other areas in the document which are also concerning but the public will have difficulty expressing their views as the last page notes that "no public discussion document is proposed on these proposals as public views are well known". Oh really?