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Monday
May142018

LTP Deliberations Tomorrow

I intend to be present tomorrow if for no other reason but to observe the adoption of one the most financially crushing LTP's to come before this Council. The proposed rate increases are indefensible, and the failure to address coastal hazards in particular makes one cringe. Perhaps they will adopt the Hawkes Bay model - let us see.

I am particularly incensed at the proposal to increase the UAGC to 30% - a 'Trumpian' attempt by the rich to rob the poor, but strangely, on examining the supporting documents I discovered that the Community Boards had opposed the change by 3:2, and that the individual submissions were evenly split on the proposal; 47:47. That seems to me a clear mandate for maintaining the status quo so we see what happens. I intend to put in a Public Forum appeal for them to follow their conscience on this one, but don't expect any relief as a result - disgraceful! 

Readers of this blog will will aware that I have long expressed scepticism at a number of the financial practices adopted over the years by this Council - particularly during the term of the previous Mayor when my reasonable enquiries culminated with the him demanding in open meeting that the then CFO calculate what it had cost to formulate responses to my enquiries - arrogance personified, but perfectly in keeping with his splenetic response to my presence in the Chamber.

The advent of a new CEO and financial oversight structure that he put in place gave me reason to believe that improvements would be forthcoming to ensure that some of the more egregious aspects of the previous structure and processes may be corrected. Such has been the case in most areas, but I was extremely disappointed to see some of the previous arrogance creep back into the response to my query regards the financial projections provided for the LTP.

This is my letter to the Auditor General that I have forwarded today seeking intervention in order to obtain better explanations that I have been able to obtain to date:

Dear Sir/Madam

Thames Coromandel District Council Long term Plan

The above Plan will be deliberated tomorrow following what has been an excellent process – The best that I have seen since becoming interested in Council affairs in 2006.

However, there is a matter that has caused me considerable concern regarding the current Plan that I raised in consultation that I do not believe has been satisfactorily answered, and in regard to which I seek your further review, and if necessary, intervention.

My  Submission on the Plan contained the following comment inter-alia in this regard:

“The first (comment) relates to the long overdue decision to stop using depreciation reserves for building new assets rather than preserving the reserve for the purpose of replacing assets for which the depreciation has been set aside. The net result of this foolish, and possibly illegal policy is that the depreciation reserve cupboard is now bare with a mere $6.8m remaining, and with our Council facing $168m of 'renewals.' 

This reversal, and the stated intent to rebuild these reserves to $124m by 2028, while acquiring new assets of $126m appears contradictory, particularly in the light of the intent to eliminate external debt. It seems to me that this can only be accomplished through internal debt to its mandated limit, and a substantial increase in rates far beyond that already  signalled in the financial projections accompanying the LTP.  There is something 'screwy' about these figures that need better explanation, particularly as we appear to have been misled over the term of the last Plan, based on the use of depreciation reserves as outlined above.

And secondly, the question of asset re-valuations of from $24m to $58m annually, totalling $347m over ten years was raised in consultation at the outset of the previous 2015/2025 LTP, and never satisfactorily explained. Para 87 of the Regulatory Impact Statement accompanying the Local Government Financial Prudence Regualtions (2014)  states clearly that "These transactions provide local authorities with no financial resources to meet their outgoings,. Therefore they should be excluded from a balanced budget measure."

The proffered Financial Strategy on this occasion makes no mention of asset re-valuations, so that we are left in the dark as to their effect of the ciurrent projections, and claimed 'balanced budget,' if any. I believe that Council has an obligation to disclose this information for the purpose of consultation, and seek an immediate explanation. I should add that the previous CFO was unable to give an unequivocal assurance at the time that it complied with the Regulatory Impact Statement.”

The Paper entitled “Overview, submissions outside a Council activity and out of scope submissions” that goes before Council’s Deliberation Meeting tomorrow contains inter alia the following:

“Depreciation reserves

One submitter suggests that Council’s stated intent to rebuild depreciation reserves to $124M by 2028, while acquiring new assets of $126M appears contradictory, particularly in the light of the intent to eliminate external debt. It seems that this can only be accomplished through internal debt to its mandated limit, and a substantial

increase in rates far beyond that already signaled in the financial projections accompanying the LTP.The proposed Financial Strategy makes no mention of asset  re-valuations. The submitter requests that Council disclose this information for the purpose of consultation.

Analysis

Council's Long Term Plan financial assumptions and statements are independently audited prior to the adoption of the consultation document, and again before final adoption of the Long Term Plan. Any issues arising with financial information is best identified through this process by professional auditors. No issues were identified in the audit of Council's consultation document and supporting information”  (my underline)

The issues which I find concerning were drawn directly from the information provided on page 7 of the Council Consultation Document that incorporates your Audit Opinion. Council appears to be relying on that Opinion to avoid commenting directly on the issues I have raised.

I find this response unsatisfactory, and therefore seek a review your Opinion, and in the light of that review to advise both Council and myself that their proposals are fully in accordance with ‘best practice’ Council accounting standards.

Yours faithfully

 

 

 

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