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I was sufficiently concerned regarding aspects of the previous post that I resolved to raise the issues directly with the Auditor General.

Based on past experience, I don't expect a great deal to eventuate, but a 'warning shot' across the bows occasionally does not hurt.

It is important to get it away now while they are going through the 'approval' process prior to consultation.

Here is the letter:

 Attn: Bruce Robertson (Asst. AG – Local Government)

 Dear Mr Robertson

I operate what I believe is a serious blog ( on Thames- Coromandel affairs, and in particular the activities of the Thames Coromandel District Council, and Waikato Regional Council.

I have been concerned for some time at some aspects of governance, and the financial affairs of TCDC in particular. I have refrained from raising these matters with you previously, but on this occasion am moved to raise some issues arising from the Draft Long Term Plan approved on 28 January for submission to your office for approval prior to consultation.

Council appears to have now recognised that it cannot continue year on year to carry the debt arising from the unforeseen $95m cost of construction of the Eastern Seaboard Waste-water Scheme between 2005 and 2008. The debt arose through bank borrowing (‘external’), and through the use of the ‘Special Purpose Reserve’ created from the sale of Power Board shares that had been vested in the Council, together with other reserves, and characterised as ‘internal’ debt.

With the realisation that there is no hope of this borrowing being repaid from Development Contributions as originally intended, Council has decided to transfer the debt from developers through future Development Contributions, to the ratepayer. While accepting the inevitability of this $48m being reflected in rate increases, Council does not wish it to happen in its lifetime. In fact it appears to have postponed significant repayment until 2020 – after the 2019 Election, and then to bring down external debt rapidly from $57m to $3m.  

The claim in the ‘Financial Strategy’ document that the ‘internal’ debt’ “…will be repaid at a later stage to enable them to be used for their original purpose” is clearly false, and a deliberate obfuscation. There is no material evidence of any intention now or in the future to repay the ‘internal’ debt, and this alone disadvantages every non- participant in the Eastern Seaboard Waste-water Scheme.

In this regard, I am incidentally concerned at the manner in which our Council proposes to undertake the changes in liability without regard to the circumstances surrounding the original decision in 2001 to adopt District charging of wastewater, replacing Area of Benefit. This decision was made on the assurance that developers would meet a substantial proportion of the cost through development contributions – now in effect forgiven. This 2001 decision is of course irreversible, but the indefinite continuation of ‘internal’ debt further and severely disadvantages those who are not connected to the ESWS.   

I am particularly concerned that it has been seven years since the 2008 World Financial Crisis, and that Council has is only now taking appropriate steps to deal with debt. To the contrary, it exacerbated the situation immediately on election in 2010 by reducing rates by 6% while increasing permitted debt levels to 150% of rates revenue. Now, while paying lip-service to the need to reduce the debt, it has postponed significant moves to achieve that objective for five years.

Further, Council appears to have adopted a highly dubious asset re-valuation projection in order to “balance the books.” These appear to have been incorporated into the statements with no apparent basis or supporting evidence - staff appear to have produced an LTP that incorporates a projected 25% gain in asset valuations through “re-valuations” of from $24m to $58m annually, totalling some $340m over the 10 year period, but with only $200m in property plant and equipment acquisition indicated. This aspect deserves the closest scrutiny.

For the sake of clarity, these are my three principal areas of concern:

  1.  The proposal to transfer debt liability of $48m from Development Contributions, along with liability for associated interest and depreciation to all ratepayers, together with the intention to delay significant repayment of ‘external’ debt through rates until 2020.
  2.  The failure to plan for any reduction of ‘internal’ debt that further disadvantages non-participants in the Easter Seaboard Waste-water Scheme who fail to obtain any benefit from the Special Purpose Reserves while they remain as ‘internal’ debt.  
  3. The incorporation of unsupported asset re-valuations of some $347m, or 26% over the term of the plan while over the same period, only $200m of capital purchases are indicated appears a gross misuse of the planning process.

I wish to request that the basis for the compilation of these projections is more closely examined than may have been the case in the past. It is further requested that you take steps to ensure that that what is proposed is acceptable, and in accordance with the International Accounting Standards to which our Council is required to adhere before you approve the LTP for consultation.   

Yours faithfully,


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Reader Comments (1)

I suppose your ears will be burning when our elected representatives and, (no doubt,) senior TCDC staff, read your post.
There can be little hesitation, as least for those familiar with your recent posts, that your AG letter is an 'inevitable conclusion' to a sequence of actions that are breath-taking in their audaciousness.
We shall see what comes of it all - probably, as you suggest, nothing much.

February 4, 2015 | Unregistered CommenterRussell

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