The debt millstone

Few Dunedin ratepayers would disagree with the city council's finance and corporate support general manager Athol Stephens' observation that any new spending during the next decade had to be "reined in" given the extraordinary total debt which is forecast to peak in the next financial year at $360 million.

"It will require a commitment of following councils to make sure it does go away," he said.

Since this year is election year, a focus for voters ought to be to determine from candidates precisely how, if elected, they would ensure new spending is restricted and the debt mountain reduced.

No matter who the candidates may be, or how skilled, the task will be exceedingly difficult without increasing rates and other charges more than is already predicted.

Whether or not the council should have set out to do so many expensive things more or less at the same time is moot; councils certainly cannot stand still, they owe to the citizens present and future at least an aspiration of progress.

But in a city of just 118,683, a large proportion of whom are living on fixed or state-provided incomes, the prospect of ever-higher debts for which they may see no real need or advantage is a considerable worry.

When a council sets out on an expensive capital spending programme, even to exceed its self-imposed limit on the ratio of interest to total revenue, questions must be asked - as indeed they have been - about responsible governance.

The saving grace for this council is that the predicted debt load line shows a steady decline from 2013; the legacy for future councillors looking for votes is the constraint this will impose on new spending, as well as the possibility of councils having suddenly to deal with the unexpected.

One of those consequences lies in the hands of central government.

There is no doubt that costs imposed as a result of central government requirements have had an impact on debt and rates levels.

Few would argue against meeting higher standards required for water quality, for example, or more environmentally beneficial waste and wastewater disposal.

Then, too, councils have funded much infrastructure growth or improvements through a mixture of levies and taxes and have imposed extra costs on users to meet new legislative obligations, such as those required by the amended Resource Management Act, Building Act and Local Government Act.

But the fact is councils all over the country are burdening their ratepayers with enormous debts: spending other people's money compulsorily has become an unfortunate addiction and - Rodney Hide notwithstanding - the ratepayers seem powerless to halt it.

The prospect of a new council in Dunedin elected on a platform of frugality is therefore not good.

The council has long disappointed ratepayers with its history of failing to curb rates increases and rising charges, of heavier drawing down from debt-laden council-owned companies, and of encouraging ballooning liabilities.

The spend, spend, spend mentality has been a fixture, a tendency of all bureaucracies and all organisations in the absence of the motive of direct profit and loss and, ultimately, the threat of bankruptcy.

The separation of governance from management in all councils has given great power to managers and little incentive to reduce staff numbers in straitened times, decrease the size of their empires, or do much more to justify their existence and their excessive pay.

Councils take money from citizens who have little choice in the matter, but who is to determine how much of it is wasted, thrown away on expensive duplication, or used to pursue pipe dreams? In practical effect this council - like all others - is unanswerable to its shareholders, unable to be held to account except by the limited means of triennial elections.

Perhaps this is a the real reason why voter turnout is so low.

Ratepayers are entitled - indeed they really have no other choice - to place their trust in council leadership to ensure suitable scrutiny and restraint, to be able to deny ambitious managers their pet projects and the interest groups with their wish lists; and to critically examine sacrosanct spending areas.

Inflation has remained more or less steady for years, yet the city's rates have moved in the opposite direction.

It has been mainly the same core councillors who have agreed to the "buy-now pay-later" philosophy, and to council's debt burden which is a cost present and future ratepayers will have to pay: it is to be wondered whether they have noted precisely the same situation also faces citizens on a national scale - a prospect that should surely stir keen interest in the local body poll later this year.

 

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