by Eugenie Sage
As part of the Local Government and Environment select committee I have been listening to people and organisations from all around New Zealand who strongly oppose the changes to local government that National is forcing through.
The Government’s claiming its main rationale for making these changes is financial, so Local Government New Zealand (LGNZ) commissioned a report to analyse the last 10-20 years of fiscal performance of local government and they concluded that councils have not been fiscally irresponsible.
You can download the whole report but NZ Institute of Economic Research Inc (NZIER) have also put together this great poster which summarises their findings.
People are telling the select committee loud and clear that local government shouldn’t be restricted in their purpose, now the quantitative evidence is also telling the same story. So what’s National’s real agenda for changing local government?
Published in Environment & Resource Management by Eugenie Sage on Tue, October 2nd, 2012
Tags: local government, Local Government Reforms, rate rise, rates
More posts by Eugenie Sage | more about Eugenie Sage
on the trolls and those who are unable to keep on topic
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You are taking the mickey aren’t you.
Kaipara Council and Auckland Council are both examples that have just got competely out of control. The government is right to try and get them to focus on what they are supposed to be doing instead their own feel good schemes which encroach on central government responsibilties.
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NZEIR is commissioned by the local government lobbyists to prove their point. No more reason to believe that more than you’d believe a consultant commissioned by the petroleum industry proving how clean and green they are.
The reason to constrain local government is because entities with power to spend other people’s money acquired by force, to regulate people’s behaviour and to borrow forcing others to cough up for the cost should not be unrestrained barring a vote with low turnout every 3 years (look at Greece, Portugal etc to see the end results of that).
Why do you want local government allowed to start up businesses in any field, set up non-profit organisations in any field, be allowed to raise rates and tax whatever it likes?
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The report shows rates to have risen significantly, so suggests measuring rates against a rise in GDP – an indicator which has been heavily criticised here and internationally as lacking real validity. The fact that GDP is going up makes not a iota of difference to me, the fact that rates are going up does.
The report also claims GDP is an “income measure” which is plainly ludicrous. It’s hard to take the report writers seriously when the make such a claim.
The report suggests using the ratio of rates to property values, rather than a real terms increases in rates as an indicator. Why? Unless your property is owned purely as an investment, this makes no sense. Is the report suggesting that it doesn’t matter that my rates are rising because I can always sell my house to pay the bill?
The report shows both total debt and the ration of debt to income climbing steeply in recent years, and vaguely comments that it isn’t clear what a ‘responsible’ level of debt is. They also suggest looking at a debt to assets ratio, which is irrelevant when you are dealing with local government – many local government assets are, hopefully, unlikely to be sold. Or have the Greens decided to back asset sales in order to pay debt?
Basically, this is an exercise in muddying the waters, rather than a logical analysis.
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We measure government cost against GDP, not whether its costs are rising faster than inflation – this is simply placing central and local government on the same terms.
We also measure government debt against its assets, so doing the same for lcoal councils is logical. This does not speak to sale, but to the risk profile to the lender – ability to pay the loan out of income flow or by selling assets, if necessary.
Measuring rates to property value is more relevant to landlords and those downsizing.
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Measuring government costs against GDP is always a bit odd – often there’s no reason for the link. The NZ military has often been keen to do this because it makes it look like they are spending less and less. In reality there’s no reason why military spending should be correlated with GDP and the same goes for a lot of other government services.
Measuring debt against assets makes sense if you are dealing with a private company, which can be liquidated if necessary to pay costs. Government, local or otherwise, is not simply going to sell up and quit. measuring debt against income makes more sense. This seems to be a case of trying to pretend everything works like private companies, something neo-libs are mad keen to do.
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In this case, it’s more the victim of central government criticism is responding with pot, kettle, black. Let’s compare ourself to our critic and then if they sustain their criticism then it falls on themselves as they do so.
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But actually we – citizens – figure in this too, and having one branch of government say “It’s OK because we are no worse than another branch of government when judged by the same criteria” isn’t really good enough.
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To the extent that central government is trying to enforce fiscal discipline on local government, because it wants local government assets privatised – following the central government’s example – this does speak to an agenda without reference to local ratepayers.
There is a consistency from ACT because they want to place central government under the same fiscal straight jacket, whereas National just buys into privatisation.
Ratepayers have always been able to vote for councils that placed a focus on lower rates and or lower debt options.
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I was referring to the report – not the central government agenda. It strikes me as either an inept defence of local government’s record or an attempt to whitewash genuine failings in local government.
It looks likely that our current councilors will be voted out next election, but it hasn’t stopped them upping rates and running up debts in the meantime – much of them for projects and costs that don’t have popular support.
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I am struggling to understand how local government has been fiscally responsible, when:- City Councils and some District Councils, in a time of severe economic uncertainty and hardship, borrow and spend-up hugely on grandiose, basically luxury projects, and less-than-necessary endeavours. It’s obvious where an individual acting similarly would end up! More expansive motorways at a time of Peak-Oil kicking-in; glamourous(noisy, chlorine-smelly!)Aquatic Centres; extravagant stadiums and convention centres; money for air and water-polluting industries; and so on and on…(Not that central Government is any less spend-thrift in its use of taxpayers’ money!)
My point is that -especially in and around Christchurch – no real assessment can yet be made as to how many people, either local or visitors/tourists, will be able to afford to frequent all these ‘facilities’ And do tourists want to cross the oceans (even if they can afford it now) to see the pollution and grandiosity they’ve left behind at home?
Not to mention the impact on ordinary citizens – most of whom are already needing to cut right back on budgeting for fuel and leisure;
So much City and District borrowing and spending is at the expense of ratepayers – espec. in ChCh’s eastern areas – damage and destruction of homes, yet still psying rates; and like everyone else, will pay towards all the “progressive”(?) projects, arguably unnecessary in the “modern”, costly, cold-hearted form; and possibly will be used far less than is envisaged by those who develop them…
In a sense, local government “shouldn’t be restricted in their purpose” – but that depends on what their purpose IS – for the well-being of the people? or not?
Same applies to central Government’s approach!
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Sam, when I ask people what Wellington City Council should stop doing, mostly they say strengthening the council offices. I think that’s an indefensible change. What do you think it should stop (or not have started) doing?
Noelene, I suspect that all of the things that you have in mind are traceable to central government or CERRA; what does the local council still control in Christchurch?
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jc2: Well…….at least according to my impression:- City Council still controls, e.g., the rates; motorway plans and execution, I think; input into the new city plan; interest or lack of it in the plight of eastern suburbs’ residents forced to live in sheds/tents/garages….. etc.,…District Council:- borrowing/spending for $14million aquatic centre; lending at least $5million rate-payers’ money to water-polluting industry …and so on…
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I dunno, jc2 – I don’t live in Wellington. I’d be quite happy with strengthening, though our local council (Kapiti) used the need to earthquake-proof their offices as an excuse for a major re-building of the council buildings which goes far beyond simply making them safe – local councils seem to believe they need flash, spacious offices in show-off buildings these days, when a while back they managed fine in quite basic offices.
Our local council is ‘re-branding’, spending thousands on a new logo for no apparent reason. Nobody is upset about the old one, which isn’t very old. The CEO got a $40,000 rise in salary, despite a fair number of problems with management and cost over-runs, not to mention friction with staff. We’ve had a long running saga of the council forcing through volumetric charging for water against clear public opposition and recently they produced a poorly produced and misleading report on coastal erosion which looks likely to see the council being taken to court by residents whose houses are likely to lose value even when not threatened.
The council spent $24 million on consultants over the last five years, which might have been money well-spent if we had an effective, competent council as a result, but we simply don’t. Too many things they do are sloppy, slow or simply unwanted.
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Noeline: from what I can tell, the $14m pool is in Rolleston, which is in Selwyn District, and they’re developing and selling sections like mad. If they’re doing it right (which I don’t know), then I would think it’s being paid for by development contributions.
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Sam Buchanan, I think there are standard wage levels for chief execs of councils (as well as mayors and councillors) – these set according to the category of the council in terms of size.
Of course they are related to the Higher Salaries Commission type awards – where bureaucrats, MP’s and them receive pay linked to that for management in the private sector (the fastest rising pay rates of all). Other workers should be so lucky.
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JC2: I’ll respond later….I just somehow lost my entire post!!
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“I think there are standard wage levels for chief execs of councils”
Nope, it’s entirely negotiable – though some sort of standardisation was suggested by our local Mayor after the furore that followed the news of the CEO’s salary increase.
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There might have been.
Annette King proposed a members bill that would moderate chief exec pay – pay agreements would have to go to the State Services Commissioner for approval. Labour, Greens and Maori Party supported this. The government blocked it.
http://www.parliament.nz/en-NZ/PB/Debates/Debates/d/1/4/50HansD_20120815_00000024-Local-Government-Salary-Moderation-Amendment.htm
The Bill was to:
•require the employment conditions (and any variation to them) including remuneration to have had the prior written consent of the Commissioner;
•obligate the Commissioner when considering whether or not to give written consent to any employment agreement or variation, to determine whether that agreement or variation provides for terms, conditions, and remuneration comparable to those that apply in similar situations; and
•prohibit a local authority from giving effect to any employment agreement or variation unless the Commissioner has consented to it in writing.
You can compare salaries here
http://webcache.googleusercontent.com/search?q=cache:p9V5JHdI4BwJ:www.localcouncils.govt.nz/lgip.nsf/Files/Excel/%24file/FY%25202010_11%2520Local%2520Authority%2520remuneration%2520of%2520Chief%2520Executives.xlsx+chief+executives+of+local+councils+pay+levels&cd=3&hl=en&ct=clnk&gl=nz
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Tauranga is remarkably straightforward; the values in the two columns are the same.
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Same in Westland, Kawerau and Central Hawkes Bay.
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jc2: Hi, Admittedly the newspaper article I kept was late December – under the headline, ‘Growing alarm over rising pool costs..”, but as far as i know nothing will have changed.
Yes, the Aquatic Centre is being constructed in Rolleston. Arrangements to cater for funding ae stated as follows: ‘residents will contribute to the cost of the pool through a targeted rate, which varies between wards’; new financial arrangements, including extending the loan period, and a higher target for corporate sponsorship. A lotteries grant of $680,000 “boosted the external fundraising target..” A tender of $12 and a half million byacnstruction company was approved by Council votepesent councillors are not too happy; e.g. “It’s a huge amount of ratepayers’ money to spend on it; it means facilities can’t be built or fixed in other oarts of the district…” and “the cost will be a lot more than the $14.7million; the council will have to pay for the surrounding infrastructure as well..” A former councillor says it’s only a matter of time before the costs are passed on to ratepayers; there is not enough money coming in to the council. It needs to be revisited and the frilly bits cut back – we can’t afford it..”
and a resident maintains it’s irresponsible of the council in today\’s financial climate; the pool plan should be deferred for five to ten years until when it can be paid for..”
The Centre is due to open in Jany 2013 – an eight-lane, 25 metre pool with walk-in ramp access, a hydrotherapy pool with spa area, a learn-to-swim pool, and a leisure pool. I think a “Water-Feature” may have been scrapped from the plan. Probably enough water involved already…Some residents approve of the Centre; others cite distance and travel-costs to get to it; unable to drive or swim – infirmities; high noise and v. strong chlorine-smell of such facilities. I am not nit-picking but included this project among those which, to me, show grandiose thinking, inappropriate, unnecessary and unaffordable , when,now and in future,
individuals, towns, cities and countries need to scale down their spending and borrowing, towards a future I believe will be, or need to be,one of greater simplicity, healthier, affordable, rejuvenating, locally-based pastimes and projects – accessible to all without undue stress and expense.
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Here is a Listener article on the issue of local government that includes the 2007 Shand report.
http://www.listener.co.nz/current-affairs/tackling-our-rising-rates/
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