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Guest Post: Larry Mitchell on Auckland Council's finances

Auckland Ratepayers “Wake Up” at last

Bernard Orsman's analysis last week of Auckland Council's financial trouble got right to the heart of the matter. The section headed "Hey Big Spender you’re in a deep financial hole" accurately nails the central issue facing Auckland’s overtaxed ratepayers. With a new 2015-2025 long term plan gearing up, Auckland Council's control of its expenditure long based on borrow and spend, at long last  will now be put under the microscope.

The best place to start with the analysis is the new purposes of local government post the 2012 changes to the Local Government  Act. Section 10 (requiring "cost- effective infrastructure expenditure")  and section 11 (which lists the "core" activities) suggests that the Council is now staying well outside the typical activities we associate with councils.

Of course, Auckland  Council has been quick to run to Wellington for funding of its plans, but I think Central Government should withhold any consideration of tolls, regional sales taxes (or other alternatives) until Auckland Council can produce solid evidence of its adoption of a principled "cost effective" "core" services-based budget. At present it is anything but.

In his regular blog this week, Joel Cayford, Reflections on Auckland Planning makes some telling and useful points with his advice directed straight at Auckland Councillors. These include the suggestion that in place of existing assumptions - that ratepayers should foot the bill for the city’s growth-infrastructure, affordability to ratepayers must become the central issue:

“Under the Council's present policy settings, ratepayers can't afford the Auckland Plan, and it's not equitable to require ratepayers to subsidise Auckland's economic growth. It's not that urban growth is a bad thing ... it becomes a bad thing, an unaffordable thing for existing ratepayers ... that does not justify overloading existing Auckland ratepayers with growth infrastructure costs”

Other worthwhile suggestions he makes for Auckland Councillors to consider ... “while they are at it’ are all matters that echo sentiments  true of many other New Zealand Councils. These include:

  • Ratepayers, not just self selecting focus groups should (“novel thought”) be asked “whether they would prefer cuts in their local services (parks, libraries, waste management, plantings, gardens, community services), or whether they would prefer you to spend less of their rates on growth infrastructure projects - then I think you'd get a clear answer. Local council and community services are highly valued in a liveable city”.
  • Watercare, (the Council controlled water company), itself, a huge burden of cost on ratepayers additional to Council rates, is accountable both to Councillors and ratepayers. Joel ruminates that “Watercare,  possibly knows something that the rest of us don't know, maybe the reason is that it has been ratcheting up its connection fees (thereby) giving strong warnings that water and wastewater rates are on their way up” ... and “ Councillors should not assume that Auckland Council would raise a ratepayer funded loan for Watercare’s plans.
  •  He points out where the accountability buck stops:
     “Don't think you can escape responsibility for Watercare charge increases by keeping rate increases down a bit. Watercare is your responsibility too. You govern it. No-one else does”.
  • In the context of consultative process relating to budgetary assumptions Joel insists that ratepayers are a living breathing part of the decision loop:
    “I think you would be assisted in your task if you asked officers for typical household scenarios with different policy settings. You should be provided with information at the individual ratepayer level of all the consequences of your plans, policies and assumptions. This would tally up rates AND Watercare charges AND any other Council charges - so you can see the total funding impact of your potential decisions on typical Auckland ratepayers across the region”. Hear Hear to that!

Joel concludes by taking a swing at the vexed Housing Affordability conundrum, not merely an Auckland issue. He presents it in this way:

My biggest policy concern with the growth pathway Auckland is headed down is the assumption that existing ratepayers will subsidise costs of growth infrastructure needed to accommodate new ratepayers ..., then the true costs of new accommodation will not be paid by those buying into that part of Auckland's property market. This inbuilt subsidy is already causing property market failure. The craziness of Auckland's property market is partly driven by Auckland Council growth policies.

Let’s hope that this time, Auckland Councillors do two things:

First: They must be persuaded of the importance of achieving what was hoped when the former Auckland councils were amalgamated in the first place. It was supposed to be driven by excellent performance management and reporting, high standards of accountability and value for money and

Secondly: They should take up the enlightened constructive suggestions of Joel and other commentators - in the interests of their long-suffering ratepayers.

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