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Friday
Jun152012

Mayor Strikes Back (Again!)

Our Mayor is clearly feeling sensitive on the borrowing issue. His claim in a paid advertisement in today's HH that

"A few commentators have got it wrong lately talking up the debt situation; lets be clear, this Council has reduced the debt levels compared to the last Council's plan and we only use debt as a way to fund big ticket items so that future generations share in paying for them. Our debt levels are conservative, the repayments are affordable and we aren't using debt to fund the operations of Council."

is a clear indication of his 'thin skin'. 

I  have not seen any other "commentator" discussing this issue, so I guess that again it is a case of Glenn being able to mention me by name - pretty sad really that he so lacking in self confidence.

The statement is carefully worded to avoid the truth - I am not sure that he understands the figures sufficiently to be able to label him a dissembler - he appears to simply accept the releases that are prepared for him by his close advisor - Ben Day, who has already demonstrated a loose grasp of facts. So it is probably not Glenn's fault.  The reference to the previous Council's Plan conveniently ignores the issue surrounding current plans which are to increase borrowing by $30m, or 54% over three years - those are the facts. The previous plans are totally irrelevant. 

Under pressure from Cr Mclean, Council increased the external borrowing limit in early 2011 from 100% of revenue to 150% of rate income. The net effect was an increase in the limit from $80m to $90m. But the actual borrowing increase proposed in the first three years of the Ten Year Plan is from $55m to $85m - an increase of some $30m or 54%. Steve Baker's Power point makes this very clear - see Slide 2 of his Power Point on the proposed borrowing. Claims of being "conservative" are disputable, but esentially irrelevant. Claims of borrowing not funding "operations" are disingenuous - being prohibited under the Act. External borrowing has always been used to fund long term capital works - that is a given.

What Mayor Leach is not explaining is that money has to come from somewhere - if not from rates, then from savings, postponement of capital works,  or borrowing. In our case, costs are continuing to increase, but by simple substitution, Council has covered those increased costs by increased borrowing - simple. The savings from all the redundancies and the 'sinking lid' are inconsequential in the overall scheme of things. Sure the borrowing is being used for capital works in accordance with the Act, but a far higher proportion than otherwise would otherwise have been the case. Further, the justification for generational transfer in many cases is tenuous to say the least, and huge interest and depreciation costs will be be incurred along the way that will have to be met from rates. 

Postponement of works was achieved by the simple expediant of calling a halt to stormwater expenditure for twelve months. That is not clever - more gratuitous irresponsibility. The reduction of the Matatoki/Thames Valley water from $11m to $3m was totally predictable, but it is still necessary to raise $13m to pay for the Whitianga Town Upgrade through borrowing. Past councils have endeavoured to pay for capital works on a 'pay-as-you-go' basis until faced with the huge blow-out on the Eastern Seaboard wastewater scheme.

The description of current and proposed borrowing as "conservative" is totally subjective - what is conservative to one is downright risky to another, and to use manipulation of rates in the manner adopted by this Council is nothing short of irresponsible. It will hurt future councils sooner or later, and there are many who will recall the appointment of an Administrator to Thames Town Council when it could not meet its debts.

Leach can crow about this 'achievement', and there will be many simple souls who will applaud from the sidelines who do not understand the long term implications of 'reducing' rates in this manner. I trust that there at least as many who may perhaps able to see this piece of chicanery for what it is.  

 

 

 

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