Lessons for councils and voters

The saga of the Southland District Council and the cost of the Around the Mountains Cycle Trail has lessons for councillors and council staff everywhere.

It illustrates multiple failures. It would seem key staff and the council wanted the trail to proceed and put their heads in the sand over costs.

Staff knew the $8million figure presented to council was well under what would be required, and councillors chose not to question the amount with any rigour.

Supposedly, the capital expenditure on the trail would cost the council nothing because the $8million would be covered half by the Government and half by grants.

Instead, by last year the council was expecting to have to front up with $9million. This could rise considerably, depending on the outcome of an Environment Court hearing on the part of the route.

The guard has changed at the council; the mayor and chief executive are both new since original decisions were made and the debacle took place.

This allows them to shake their heads and tut-tut about what happened without taking blame. Mayor Gary Tong now says ''council takes responsibility for the errors made and we have learnt from them''.

Chief executive Steve Ruru, meanwhile, says ''council seems to have become so engrossed in trying to make the cycle trail happen that it has forgotten to follow some basic project management disciplines''.

The cost of the 175km trail linking Kingston and Walter Peak Station has spiralled to more than $14million and is likely to climb higher. This is 75% above the original cited figure and heading higher still.

Faced with the alarming blowout, the council commissioned consultants Deloitte to review the financial management of the project. It found disturbing governance and management failures.

First, it said some council staff knew the project was going to cost more than $8 million. In fact, a 2009 engineer's report estimated the cost at $11.4million excluding consultation, resource consent, design and construction supervision costs, or $13.7million when a 20% contingency was added.

''It was clear from both the documents reviewed and the interviews completed that the council staff who were involved in the preparation of the budget believed that councillors would not approve a budgeted cost of more than $8million, so reduced the budget to fit with this cap,'' the report says.

Councillors, meanwhile, were criticised because they ''did not appear to challenge or test the robustness of the $8million budget''.

Staff were also criticised for key failures including inadequate financial reporting, poor project management and a failure to pro-actively manage risks. And councillors failed to set up an elected members' governance group until last year.

Somehow, the council expected $4million from grants. It now turns out that total is only about $1.3million. Somehow, the budget assumed $2.5million from the Community Trust of Southland when council staff were aware the trust was not providing grants of more than $50,000.

There are shades here of a certain Dunedin stadium and the role of wishful thinking in the acceptance of underplayed capital costs and oversold income.

In this case, however, the proportional increase in capital costs from the budget is far, far greater. The list of other failures are also more extensive, although the stakes in a project the size of Forsyth Barr Stadium were much higher.

Another parallel might be drawn with the South Dunedin cycleway debacle.

Voters cannot choose chief executives and council staff. What they can do, nevertheless, as elections loom, is make sure they elect capable councillors prepared to question and scrutinise.

As for the ratepayers of Southland, their council reserves might have to be raided and debt increased. Hopefully, the trail proves - like the stadium in Dunedin - to be a success in ways other than purely financial.

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