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Monday
Jan262015

The Financial Strategy

Here is the Paper that deals with Financial Strategy.

Right from the start I wish to point out a blatant lie on which this paper is based, and here it is:

"Our starting financial position for this ten year plan is sound. At 1 July 2015 we are projecting a balance sheet with opening balances of:

Retained Earnings reserves    $6.4 m

Depreciation Reserves           $8m

Special Purpose Reserves      $33.5m (The Power Company shares)

External Debt                        $53.2m

Internal Debt                        $63.2m

* Internal debt is the temporary use of Council funds (reserves) for a different purpose from that for which they were received. The funds will be repaid at a later stage to enable them to be used for their original purpose." (my bold!)

Internal debt comprises all the reserves that have been borrowed against in order to help pay for the Eastern Seaboard Waste-water Scheme. There is no way, nor is there any intention to re-pay this debt. It is simply intended to transfer liability for the debt from future Development Contributions, to the ratepayer.

Since internal debt comprises so much of the 'Operating Capital' of the organisation, it behoves every ratepayer to consider just how the transfer of this debt will effect future rating. I do not need to go any further into financials to know that there is something radically wrong with the manner in which they are being presented - simply view the forecast rate increases over the ten year plan in the previous post. There has to be 'smoke and mirrors' exactly as has existed in the past as the Auditor General has blithely approved Long Term and Annual Plans - even praising them as "models" of accounting rectitude - what balls!

Our Council was told in December that is was facing a "financial crisis", with substantial projected rate increases, but now, miraculously, our staff have come up with a Plan that incorporates a cumulative increase of only 20.98% over the ten years. Wow! With our Chief executive claiming that they brilliantly reduced rates for the first three years in order to much more easily increase rates from next year, you have to wonder at the convoluted logic that drives this outfit, and immediately call into question the fact that only now have they apparently come to realise that the Waste-water debt can never be repaid on present terms - they have to go back to the ratepayer. This is described as "a change of circumstances"

Except that there has been no change of circumstance. The projected rate of increase has been determined by our staff on faulty data since the economic downturn of 2008 - seven years ago. Does Mayor Leach, and his sidekick Hammond expect us to believe that it has taken seven years to realise that there had been a "change of circumstance" - bollocks!

Their so called rate reduction was presaged on one thing and one thing only - electoral advantage - they were determined to reduce rates in accordance with their stupid 2010 election promises, and that is the long and short of it. It has taken them four long years to realise that they had made a 'blue', and are now determined to blame the previous Council for their predicament.

And as a result, they have now decided to adopt the old LGCI (Local Government inflation rate) plus 2% that the Minister  has previously declared "unacceptable", but which they now say "recognises the challenges that must be met." Note that the LGCI has traditionally run at least 2% over CPI due to the preponderance of oil based products used by councils. That may change with the new oil reality. 

 

 

 

 

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