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Council Debt (Cont.)

I guess that most readers will have read CEO Hammond's reply to Dal Minogue's reasoned challenge that was printed alongside in Friday's Hauraki Herald, and are  like me left wondering what on earth he was talking about. 

On Friday afternoon I received this request for comment from Stephen Brosnan - editor of the 'Mercury Bay Inquirer':

Dear Mr Barclay,

Your comments in a previous column in the Peninsula Press about TCDC’s debt spurred me to meet with their CFO, Steve Baker. He told me that TCDC’s debt on April 2010 was $40.7 million and on 10 April 2013 $36.9 million.

Given your concern that TCDC was not comparing apples with apples in their previous advertorials, would you like to comment on the figures from Mr Baker? I’m attempting to put a balanced view to our readers.

I look forward to hearing from you.


Stephan Bosman                                                                                                                                      The Mercury Bay Informer

This was my reply:


Thank you for the invitation to comment of the ‘new’ debt comparison.

I gather that you are approaching this in a serious manner with a lead story, and have therefore replied accordingly – please see attachment.

I realise that this may well require editing to suit your story, but  I felt obliged to explain in detail because the PR people in Council (and CEO evidently) generally simplify to the point of obfuscation, and to tell a version that suits their purposes.

By the way, I have fully attended every Council meeting but two since its advent in 2010 – more than most of its members, and I only quote what I have heard.  

My column on Thursday will reflect much of the same material.



This is my comment:

First, let me deal with the response by the TCDC Chief Executive David Hammond to the Dal Minogue’s letter in the 24 May Hauraki Herald, and presumably my column in the Peninsula Press the previous day.

Mr Hammond’s implied suggestion that the ‘same-day’ (10 April) comparison of debt taken in 2010 and 2013 revealing a $3.8m rather than $9m ‘improvement’ over the divergent dates in his advertorial the week before is of no consequence, is significant. Indeed the whole tone of his letter leaves a strong impression that he has a less than thorough understanding of the Council accounts, and that is a worry.  

For example, he states that “it is difficult to determine how the council has borrowed from the banks to keep rates down.” This simplistic notion has been followed elsewhere in parallel fashion by Mayor Leach. In effect, our Council has only two sources of revenue – rates and debt. The other traditional source – Development Contributions, have dried up to near zero for obvious reasons. If rates are lowered, and Council expenditure is stable, increased debt is inevitable. Claims of ‘improved efficiencies’ are fallacious - staffing costs actually increase by 3.7% for 2013/14.

So just how has this miraculous $3.8m debt reduction been achieved on 10 April 2013? It is almost wholly down to the simple expedient of delaying or postponing forecast capital works.  We know this because Chief Finance Officer Steve Baker told the meeting at the 14 May Deliberations which I attended - “Don’t  worry about capital expenditure falling well behind budget”. He went on to explain that even although capital expenditure had been revised downward from $35m to $23m at the March Budget Review; only $16m had been committed up to 14 May, and substantial, abnormal  carry-overs were anticipated beyond year’s end - 30 June.    

Steve Baker further explained that “Next year’s capital expenditure is heading through the roof”, as well he might - $29m was suggested. In the meantime, our Chief Executive and Mayor blithely lay claim to “improved debt levels”. This is not rocket science, and although this Council has achieved a great deal in a number of areas, claims of financial wizardry are an illusion that it’s members appear unable to fully comprehend, while deeply appreciative of the implied electoral advantage that the claimed ‘debt improvement’ provides.

What is important to remember is that regardless of the spurious claims refuted above, the fact remains that this Council will on 26 June 2013 adopt an Annual Plan that incorporates a $22m increase in borrowing between 1 July 2012 and 30 June 2014. This has never been denied and reflects the change in borrowing policy brought about by the Councillor McLean led motion in 2011 to change borrowing limits from 100% of total revenue to 150% of rate revenue – an effective $30m increase with the stroke of a pen.

 The debt reduction claimed by Mr Hammond is therefore irrelevant regardless of the dates he chooses. And his claim that “underspent funds are used to repay external debt” it utterly spurious when considered in the light of the $22m forecast increase

It will interesting to see how much makes it into print!




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