Source: New Zealand Government
Local Government Minister Simeon Brown has today announced his intention to appoint a Crown Observer to Wellington City Council, following news that the Council will now be required to rewrite its 2024-34 Long Term Plan.
“I have been concerned about the Council’s ability to manage their Long Term Plan amendment and adoption process, following their recent decision to rewrite its 2024-34 Long Term Plan,” Mr Brown says.
“Under Part 10 of the Local Government Act 2002 (the Act), I have powers of assistance and intervention in relation to a local authority that has a problem. Following advice from officials I have identified there is a significant problem at Wellington City Council that warrants the Government appointing a Crown Observer.
“Advice provided to me by the Department of Internal Affairs highlights that the Council is not utilising its balance sheet appropriately in order to maintain critical infrastructure like water, and that is failing to manage its insurance risk appropriately. These risks have been increased due to its recent decision to amend the Long Term Plan.
“The Department advises me that while it is not uncommon for councils to amend their Long Term Plans, it is uncommon for a council to reverse such a critical financial decision that requires such an amendment only four months into the cycle,” Mr Brown says.
The Department has found that the Council has demonstrated an inability to understand the mechanisms it has available to manage financial pressures it is facing.
This includes the Council choosing in its Long Term Plan to use rates revenue to pay for its water infrastructure up-front, rather than appropriately using debt financing. Local Water Done Well financing mechanisms enables further debt headroom for Wellington City Council to meet its under-insurance issues.
“The advice from the Department highlights that the 2024-34 Long-Term Plan shows the Council’s net borrowings for water services increase by just $66 million to fund this investment (6 per cent of the total), with the remaining $1.10 billion of capital investment proposed to be funded by rates (94 per cent of the total).
“This is an inefficient and expensive way to fund infrastructure investment. The Council is front-loading costs on current ratepayers rather than utilising debt financing to spread the cost over current and future users of the assets,” Mr Brown says.
“The Department estimates that the Council’s financing approach to water services as set out in the 2024-34 Long Term Plan would overcharge Wellington City residents by more than $700 million over ten years.
“Recent Council meetings have also seen councillors walk out, refusing to participate in votes, and confusion regarding decisions, amendments, and voting. Councillors have also made repeated public criticism of one another and Council staff.
“This environment is not conducive to the Council effectively managing the Long-term Plan amendment and adoption process. Not resolving these challenges would likely have adverse consequences for Wellington residents and ratepayers.
“The Department is of the view that the appointment of a Crown Observer is necessary to better enable Wellington City Council to address the problem and allow me to monitor their progress in addressing it. I agree with their assessment.
“The Crown Observer would be appointed to assist the Council to ensure that it secures a financially sustainable Long Term Plan that prioritises the capital programme.
“The Government has written to Wellington City Council with a draft Terms of Reference and has given the Council 10 working days to respond as required under the law.
“The Government is clear that by proposing a Crown Observer, the Government is not taking responsibility for any of the decisions made by the Council. The Council and Mayor are democratically elected and are responsible for the decisions made by the Council, and will remain accountable to their constituents.
“By providing a Crown Observer to assist the Council on matters of governance, financial strategy and planning, the Government will be working to ensure that Wellington City Council Ratepayers can have increased confidence in their Council and that the Long Term Plan decisions are finalised in accordance with the Local Government Act,” Mr Brown says.
