'Lies, Dammed Lies, & Statistics'
Monday, September 19, 2016 at 1:11PM
Bill Barclay

It is of course a maxim of local politics that you take what you can from the annual accounts of your local body and turn them into whatever advantage you can to enhance your reputation prior to an election, or as in the case of TCDC, your anointed successor.

Last week’s Hauraki Herald front page story by and of Leach was a perfect example of how media is manipulated to reflect this maxim.

I would have been prepared to overlook Glenn’s day in the sun and leave him to bask in whatever reflected glory he can glean from this panegyric - forgive the repeated use of this description, but it is what best explains the article.

What is less acceptable is the manner in which his acolyte, and now candidate French has adopted the shonky figures produced for Glenn’s article, and endeavoured to turn them to his electoral advantage. It is very difficult for opponents in these situations to argue the toss over the veracity of figures produced in this manner because it becomes very confusing for constituents - whoever produces the figures first gets first dibs, and consequent advantage.

But in this case, Leach’s, and now French’s two major claims in regard to rates and borrowing are patently and demonstrably untrue. The simple fact is that councils are permitted a far wider interpretation of basic financial information, and are able to manipulate that information when provided to the public without rebuke from the Auditor General who has often stated that he/she is only interested in the “big picture” stuff. And otherwise, 'internal' auditors, generally one of the “big four” concern themselves with internal issues.

For example, our Council’s internal auditors – KPMG, recently drew attention in a confidential report to extraordinarily bad, if not illegal tendering procedures that have crept in during the life of this Council, and that have led to suspicions of potential malpractice. It is an extremely disturbing document, the contents of which have not, and probably would never have been released to the public, but which are available to anyone capable of finding their way through the labyrinth of Committee documentation.

Then there is the question of borrowing. Both Leach & French have drawn attention to the lowering of EXTERNAL borrowing from around $50m to around $32m during the term of this Council. But the figure is meaningless and hardly credible in any case given the extravagant expenditure on a number of projects including “empowering boards," its totally ineffective Economic Development Committee and consequent tourism ventures of dubious value, none of which have come to fruition, and which promote unsupportable future returns on capital that would be rejected in any normal commercial environment - All Leach 'Legacies.'  

The borrowing figure is meaningless for the reason that under the previous administration (of which admittedly I was a member), borrowing was calculated as a total of  EXTERNAL (bank) borrowing, and INTERNAL (borrowing against depreciation and other reserves). Council was persuaded early in this term that this was unnecessary because “borrowing against reserves need not be paid back.” Here is a quote directly from the Minutes of the 9 April 2014 meeting:

"Council discussed that the terminology of 'internal debt' is misunderstood as a negative connotation and suggested staff use a different terminology going forward. such as 'internal reserves'."

So the intent was clearly to remove the “negative connotation” – hardly a satisfactory explanation for a practice that is fatally flawed and leaves out Council high and dry when it comes to replacing assets.

Thus, and since that time Council only concerns itself with EXTERNAL borrowing and fails to reveal the borrowing against reserves. This is straight out manipulation designed to make the figures appear better that they really are, and makes any comparison with previous borrowing figures meaningless.  

Further, this Council changed its borrowing limits to from 100% to 150% of rates income from the outset, and again is thus ab;le to claim to be “well within its borrowing limits.” Another self-engineered buffer designed to fool rate-payers into believing that all is well with borrowing, and to enable both Leach and French to make their outrageous claims.

Other councils engage in this nefarious activity – ours is no means alone, but seldom to the extent of our Council. The acknowledged expert in the area – Larry Mitchell, deplores the practice, and forecasts eventual problems,  even disaster for councils that engage in it. Mayors, and putative mayoral candidates should not be allowed to make what are demonstrably false claims in this regard. They should be held to account in this as with every other claim made. Readers should refer through the Search Engine to previous references to ‘Internal Debt’ to obtain a thorough picture.

And that brings me to rates. The only reason that the previous Council had rate increases as high as 7.5% was related to cost of the Eastern Seaboard Wastewater Scheme, initiated some ten years previous, and the cost of which had blown out to some $90m from the original $26m (think what happened at Kaipara!). Of course this was reflected correctly in the Ten Year Plan due to be revised In 2011 as Leach has admitted.

Again, the the incoming Council was in 2010 able to reduce rates resulting from one of Leach’s first actions on election - to reduce expenditure on renewals (maintenance) of Stormwater, and other Ten Year planned works by millions of dollars leading to the redundancy of several staff.

At the Candidates meeting in Thames on Saturday, French had the audacity to tell his captive audience that had the 7.5% rate increase continued that it would have led to a 40% increase in rates up until this year. This demonstrates his complete lack of understanding of how the rating system operates in relation to the Ten Year Plan – such an increase was never envisaged, and it is a total lie for him to infer otherwise, but it had the ‘wow’ factor for an audience of this nature.

Admittedly, it was certainly not the intention of the previous Council to chop renewals in the manner executed by Leach, but he has now created a potential liability for future councils that will be hard to justify come the next ‘Bola’ event.  

I will not further analyse other claims made by French during his speech on Saturday – suffice to say that any comparisons he made with the previous regime were entirely spurious and lacking any factual basis. He is of course not beyond calling upon staff to back his claims - but they should be very wary..

Afer all, he claims the backing of both Local Government NZ, and the Auditor General in another document, but the problem is that both are so slack in the manner in which they set standards, and exercise control over councils that they can get away with financial manipulation impossible in any commercial sense. And elected officers are inappropriate overseers in the main, even trained accountants, unless they are prepared to question every aspect of financial management. Such has not been the case with Leach’s Council, apart from in one notable exception – namely French’s opponent – Sandra Goudie. It is the principle reason that I back her candidacy. 




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