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Wednesday
Feb292012

Rates and Debt

The following is the main message in today's Press Release. The Mayor was adamant that the people need to get direct information about the achievements of this Council, and Ben Day (PR, but soon to be Director of Economic Development) was told to make sure to get it out:

The Council is responding well to the current economic climate with a reduction of over 40% in average rate increases and $37M less debt when compared to the projections in the previous Council's 2009 Ten Year Plan (over the full ten years).

"This Council is responding appropriately to the depressed economic climate we all face in New Zealand. We're still delivering all of the major projects and we aren't cutting back on sustaining our current asset base. We're just making sure we're not going for the gold-plated option, when more efficient or pragmatic options are available" said Mayor Glenn Leach.

"This Council is committed to reducing the rates burden and delivering quality services and projects with less financial inputs, just like the private sector does during these lean times; the days of unsustainable rates increases are over. There are also more savings to come, which will also reduce the bottom-line".

"We delivered a -1% average reduction this year, and we're well on the way to keeping rates low for next year".

What the PR does not state is that these figures have been achieved by way of a revision of future growth propects as Finance Manager (soon to be Director I understand, and not before time) Steve Baker reported this morning - "Renewals remain in place, but additional projects are not now required". In other words, capex has been dramatically reduced - why on earth Leach believes that he can claim brownie points for this I will never understand.

They contiunue to disguise the decision they took at the outset to simply delay Stormwater for a year, and now he is talking of reducing the Matatoki water renewal from $16m to $10. All I can say to that is good luck - every Council for the last ten years has grappled with this ridiculous, but mandated scheme and failed to come up with a satisfactory answer.

The reference to "a reduction of over 40% in average rate increases", is puzzling - what on earth does it mean? - average over what period?  Of course other media will publish this clap-trap with its usual uncritical stance. Hammond promised a great deal more would result from his new round of efficiencies, and staff reorganisation (AKA reduction) He has a great opportunity to get the credit for the process that Ruru had commenced, and had he still been in the chair, could have achieved in a staged, rational and reasonable manner.

Of course changes are necessary if you are responding to the economic climate by chopping capex. You don't need the same people, but lets be quite honest about this, Council has been beholden to unrealistic growth projections for far too long. I don't know who can be blamed for this. Staff claim that the Act requires them to use external experts for this process, and it is not easy for councilors to argue against this combination.

In any case, we were assured in an aside today that all the 'pet' projects are still in, including Whitianga Town Centre, sports facilities at Whitianga and Thames Zoom Zone, community center at Pauanui and swimming pool and skate park for Thames.  We will know on Friday or Monday when the TYP is published - there has been contradictory information in that regard, and I will post on it ASAP.

The whole squeeze on which Leach places such store is grossly over-simplified, but because most of those around the table are financially naive, few if any are equipped to question the outrageous claims that he is prone to make, but appear comfortable like Cheshire cats with his effusive praise for what a great job they have done. 

 

 

 

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Reader Comments (1)

This is a comment from Dal Minohue who has been having problems posting comments - I am trying to sort out thisa problem with the Squarespace people.

It is interesting that Mayor Leach only seems to be able to define himself politically by slagging off the previous Council - usually through misrepresentations and gross exaggerations.

Perhaps it is a symptom of some personal malaise or is merely a smoke screen for his own political shortcomings, which are becoming more and more obvious with each new day.

Leach's references to a "reduction of over 40% in average rate increases" and "37% less debt" than the previous Council, are typical of this approach, which, as you have pointed out do not stand any form of rational analysis.

One of the most obvious aspects of irrationality is the implication that in comparison with the previous Council a 37% reduction in debt has been achieved due to" the creation of efficiencies within the Councils structure". For gods sake, when capital works are delayed due to the slow economic environment, savings in capital expenditure (mostly paid for with development contributions) are nothing to skite about and - to anyone with half a brain - bear absolutely no relationship to "creating cost efficiencies in the Council organisation".

The claim about reducing future rates increases by over 40 % is also interesting as it follows on from an earlier absolutely absurd claim by Mayor Leach in a local Whitianga paper (see the Jan 26 edition of the Peninsula Post page 1) which quoted him as saying: "What we are trying to achieve right now is have, on the average a 2.5% rates increase year on year compared to 7.5% in the previous Ten year Plan".

One might well point out that Leach's Peninsula Post claim is for a 200% reduction in average rates. How is that consistent with his new 40 % claim about reducing average rates increases?

I guess one explanation would be that his first claim in the Peninsula Post was so absurd, he decided to scale it down before it got Peninsula-wide currency and made him look foolish.

But the simple fact remains, as you have pointed out, that the comparison is worthless as in the light of the changed economic environment. The previous Council had already instigated a budget review that would have delivered a similar result.

However, the results of this review would have been done a lot more professionally and astutely than what we are witnessing now. "Slash and burn" is a rather apt phrase. Congratulations on coining it. The previous Council's review would not have resulted in the complete decimation of the Councils Planning departments, placing the integrity of our new generation District Plan in jeopardy and wrecking staff morale.

Dal Minogue.

March 2, 2012 | Registered CommenterBill Barclay

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