Grappling with councils' costs

The Government's proposed local government reforms will come as a welcome and overdue breath of fresh air to many who have long protested its excesses.

The news that it is set to unleash sweeping changes aimed at curbing local council spending powers arrives amid a slew of revelations over mounting arrears. In the past 10 years, council debt across the country has risen from $1.8 billion to $7 billion.

In the same period, rates have risen an average of 7% per year.

The reported per capita debt for councils in 2010 ranges from $4142 in the Kaipara district in the north, to zero for the Central Otago District Council. The Queenstown-Lakes district is near the top of a national list of indebtedness, with per capita borrowings of $3563, and Dunedin City is in the top third with $1920.

Foremost in Local Government Minister Nick Smith's sights are the overblown pay scales of council chief executives, and the wage bills of their staff. This, at least, will strike a chord with ratepayers.

Just as there is growing awareness and concern at the disparities between private sector chief executives and the workers on "the shop floor", the huge salaries of council chiefs have raised both eyebrows and ire.

A case in point was the proposed pay rise of Tony Marryatt, chief executive of the Christchurch City Council, of an additional $68,000 to take his salary level to $538,529.

After much publicity and pressure, most of the pay hike was declined.

In grappling with the disconnect, people fondly recall the days of the "town clerks" and wonder how it is that empires of professionals have grown up to replace them.

The easy answer, and the one at which the proposed reforms are aimed, is that where once councils concerned themselves with waste, water, roads libraries and consents, today they involve themselves in all manner of events across a range of public activities.

Dr Smith is certainly of the view that council debt has ballooned because councils can and do get involved in areas they have no business in. It is true there are examples of both activity and ambition that go well beyond what most people would consider as council business. He cites Auckland which "has set targets for NCEA".

Others have aspirations and targets over levels of child abuse. Such matters are patently not the business of councils; policies governing them have already been, at least in part, funded by ratepayers whose national taxes meet the costs of the government departments responsible.

It is also true that councils have spent considerable sums, often with adverse results, on promoting "community" events: the Auckland Regional Council lost $1.79 million helping to stage a football match involving David Beckham; V8 Supercar races ended up costing Hamilton ratepayers more than $40 million.

Councils routinely involve themselves in staging a number of other "feel good" community events, such as Christmas concerts, and to this extent some councils fund or underwrite spheres of activity that once would have been beyond their brief.

But it is also possible to overstate the impact of such "sideshows" on council and per capita debt when in fact much of it can be put down to essential infrastructure projects which have either been postponed in the past or which have become more urgent because of growth.

Queenstown Lakes is a case in point, having only a resident population of about 28,000 but having to provide infrastructure to meet the needs of 2.8 million visitors annually.

Equally, there are strong and internationally validated arguments that debt funding of essential projects is a way of spreading the costs across future generations which will benefit from them.

Council debt mountains must be addressed and reckless spending curtailed. But there are still arguments to be had over how best to pay for growth and building infrastructure for the future; and over where the line should be drawn on "core" activities.

Some so-called "marginal" events - Wellington's International Festival of the Arts, for example - supported or seeded by local government funding, have come to epitomise the cities in which they occur, and routinely return the investment many times over.

 

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