Whitianga Waterways Medical Centre Agreement
Friday, July 22, 2016 at 2:29PM
Bill Barclay

Readers will recall that I raised the issue of the legality of the Whitianga Waterways's legal agreement with Council concerning the medical centre land at Whitianga that was hidden behind closed doors until the Council meeting on 29 June. 

While awaiting my own legal advice on the matter, I took the trouble to seek an opinion from the Charities Office as to the legality of  what was being proposed. These are the clauses that give rise to concern:

18.1                 The purchaser warrants that at the settlement date it will be registered for Goods and Services Tax and will also be registered as a charitable trust under the Charitable Trusts Act 1957 and shall be registered as a "Donee Organisation" under the Income Tax Act 2007.

18.2                 The purchaser shall pay the purchase price to the vendor on the settlement date immediately it has received by way of gift an amount equal to the purchase price and such payments may be arranged contemporaneously.

18.3                 The vendor shall not be required to complete settlement until the purchaser has provided satisfactory evidence of the matters in clause 22.

19.1                The purchaser covenants with the vendor that the purchaser shall:

19.1.1             use the Property only for a community medical centre; and

19.1.2             not for a period of five years from the settlement date sell, lease or otherwise dispose of the Property except for zero consideration to the Council or another charitable trust approved by the vendor and complying with the requirements of clause 22 and having the same or similar charitable objects as the purchaser.

19.2                The provisions of this clause shall be recorded by deed of covenant between the purchaser, the vendor and the Council and shall include an option for the Council to acquire the Property at zero consideration, together with an option for the vendor to acquire the Property at zero consideration in the event that development of the community medical centre has not commenced within 5 years of the date of satisfaction of clause 18.1.

The Charities Office have advised that as neither of the two entities have yet registered, they are not in a position to advise regarding the legality of the what they are proposing. 

Independent advice indicates that it is in illegal under the current Act in that it appears to be a mechanism to circumvent the requirements and intent of the Act. This is yet to be verified, but if it is the case then it could become the cause of substantial embarrassment, and a major re-think as to just how the proposed centre is to be supported by Council.

As most readers will beware, this is by no means the first occasion that questionable arrangements have been entered into with Whitianga Waterways, - the last was extremely costly for Council, and consequently rate-payers. It is to be hoped that on this occasion our advisors have sought, and obtained reliable advice other than that "there are no fish-hooks!"  

The problem for Waterways is that it appears that this particular block is covenated through its Resource Consent for use as a medical centre only. It is therefore of questionable value if there is no demand from any other entity, and totally unreasonable that our Council to be entering into arrangements that provides Waterways with a very satisfactory $250,000 tax write-off, and additional marketing power when it has no such obligation. 

And whatever the Community Board claims, it is Council that takes on any liability while whatever trust arrangements are proposed are put in place. Squaring off obligations before elections never seemed more satisfactory. 

It remains to be seen if the Charities office agrees with this interpretation.  




Article originally appeared on BillBarcBlog (http://billbarclay.co.nz/).
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