Request for access to financial analysis

Chief Executive,
Local Government Commission.

Dear Suzanne,

I am writing on behalf of ‘Our Waiheke’ because Morrison Low should now be at or near the end of its analysis of financials as they relate to the applications to the LGC for North Rodney and Waiheke Unitary Councils.

If this is correct – or when it is – we believe it is time for the LGC to share their findings with NAG and Our Waiheke. The view expressed by one of your staff that it is not normal practice for the LGC to share financial analyses with applicants is moot in our view. There is no normal practice for the LGC when it comes to applications to create new councils or consider de-amalgamations – there have been none to speak of since the 1989 major reforms of local authorities.

As we have said often before, there should be scope for benchmarking financials against councils around NZ, even if the analysis is only at an indicative level. A central pillar of our case is that there are high overhead costs and unhelpful complexity in the Auckland Council organisational arrangements and the long and multi focused communication channels needed to operate large and separated structures. These high overheads and the difficulty of ‘disentangling’ Auckland Council’s financials make us deeply concerned about any analysis that relies on them overly for determining the viability of a Waiheke Council.

There are diseconomies of scale in our setting and an inability to relate or respond flexibly to the very different issues and scale that apply to our islands than to those of the isthmus. In the major cost area for which economies of scale might apply on Waiheke – roading which makes up 40+% of all expenditure – we know that costs per km are as high as they are in cities such as Auckland and Wellington, despite all the complexities and size of their typical roads compared to our narrow country lanes.

Average costs over time for roading on Waiheke are as much as 6 times higher per km than in similar rural settings around NZ – a cost impossible to justify despite our terrain and the need to bring materiel and equipment to an island. That NZTA is seemingly unaware of this is a puzzle – costs for Waiheke must be lost in the wider cost averages for Auckland. For those who say we could not manage our own road maintenance because of the capital equipment involved etc we note that the main contractors on Waiheke, Downers, often use hire equipment or employ sub-contractors when major works such as tar sealing are carried out. We could do the same.

In considering expenditures applied to Waiheke since 1989, it is perhaps salutary to consider the performance of the 2 Auckland Councils on stormwater since then. Such few pipe systems as Waiheke has have proved demonstrably inadequate during flooding in 2011 and twice this year thus far. We believe redress would involve relatively modest investment, sometimes only ‘day lighting’ of pipes and restoring natural flows as in the norm over most of Waiheke, provided local knowledge is used to best effect. The inadequacy of poorly installed and undersized pipes has been exacerbated for individual households by permissive planning decisions allowing building and earth works which have diverted water on to neighbouring properties with at times dire consequences.

There have been many complaints about stormwater issues in recent years and while AC / AT have recently acknowledged the inadequacies of past work in stormwater and catchment management it must surely be accepted that local decision makers are less likely to have reached the inadequate position we have found ourselves in.

I can say with certainty that the Local Board has been very clear in expressing its views on how improvements in the design and management of roading and related stormwater design are needed. Auckland Transport has shown itself to be almost wilful in not listening to local input on this subject. I have personally taken AT engineers to places where roads break up year after year for want of some preventative stormwater design but no such preventative work ever seems to happen despite the significant expenditures made in roading on Waiheke.

Bad enough that AT is currently spending a massive amount of money on a minor dead end road in a flood prone area [Moa Ave] while much more heavily used through roads are badly in need of attention. [They pay no attention to the Local Board’s expressed wish to influence priorities in their maintenance programme.] Worse, AT refused yet again to accede to the Local Board’s repeated requests that it consult Council’s stormwater unit [now called “Healthy Waters” – HW] until the last moment before commencing work and only then after the Local Board checked whether AT had consulted HW as earlier agreed. [See the “Blackpool flooding breakthrough” story in the Gulf News, 15 June, page 12. Frankly, the residents feeling it necessary to say that the “turnaround…is a big victory for our group” is indicative of the entrenched lack of responsiveness of this CCO to date.]

AT has refused to allow Local Board input to its ‘road maintenance program’. Since there is nothing in the Long term Plan for any new AT capital expenditure on Waiheke, that decision is effectively cutting the Local Board out of all prioritisation decisions for our roading network.

We have elaborated issues such as these in our original application and on several occasions subsequently.

More than just dollars at stake

In any case, we are also concerned that there may be a tendency to overemphasise financial considerations in responding to our application. There is ample evidence available to show that the Waiheke community has been complaining vociferously about the administration of both Auckland City Council and Auckland Council in the development and enforcement of regulations, district plan development and subsequent resource consent decisions and enforcement matters since the 1989 reforms. Only last week we had a court decision declaring the Auckland Council’s de facto deletion of our Rural Urban Boundary – a very, very important safeguard against subdivision – “out of scope” as there had been no submissions seeking that outcome in developing the Unitary Plan. We have also seen the approval of a marina with conditions on development far short of those asked for by the Local Board after it extensively consulted our community.

Given that our application reflects the deeply felt conviction in our community about the need to safeguard Waiheke’s environment and its “feel” – as recently overwhelmingly re-confirmed in the “Essentially Waiheke” community strategy – it is clear that this lack of ability to satisfactorily and reasonably influence planning and regulatory matters is THE most important reason to justify an independent unitary council.

Our community’s beliefs are not just selfishly held for the sake of an increasingly able and well resourced local community but also reflect a desire for Aucklanders to continue to enjoy Waiheke as an escape from the city, for the enjoyment of visitors from further afield and for NZ Inc – a desire to realise the spirit underpinning the “100% Pure” concept that is increasingly at risk.

The other intangible that must not be lost sight of is the extent to which being subsumed under a multi faceted, relatively remote council, inhibits a creative, energetic community from the innovation in local government it is patently capable of. We have many highly qualified people who continuously come forward with ideas and projects promoting creative solutions to meeting challenges and providing opportunities for local government. Over the last 20 years Waiheke’s faster than average economic growth and social progress was mostly locally generated. We have the people and connections to continue to make the most of advances in technology and they are promising a range of energy alternatives, solutions in transport and waste management, pest and weed control, building techniques etc that are likely to further reduce our dependence on other than the broadest economic policy settings and to further reduce the need for scale.

Credit where it is due

The LGC will be aware of the deliberations of the Auckland Council’s Political Working Party [PWP] into the “Governance Framework Review”. Serious consideration is being given to delegating more authority to the Waiheke Local Board and empowering a local operational manager in a 3 year pilot project commencing in October. The paper justifying this project, based in turn on recommendations in the report prepared by Gareth Stiven, an independent consultant, provides objective testimony of many of the issues we have been raising in our application and subsequently – including that many of the issues and problems go back a long way.

Senior managers in Council have clearly been listening to Waiheke’s Local Board and are willing to be responsive within the existing organisational framework. Quite a few Councillors are also supportive and recognise that “Waiheke is clearly different” [Chair of the PWP, Deputy Chair Bill Cashmore, speaking at last week’s meeting].

I have attached the agenda of the PWP for its 21 June meeting to provide evidence of the objective testimony mentioned above in the section on the pilot project. There is also a report from Auckland Transport in the agenda papers which provides testament to the limits AT sees in its ability to devolve its responsibilities – despite the fact that doing so is very explicitly provided for in the LGAC Act.

Along with our concerns about continuing lack of authority over regulatory and planning matters, this serves to underscore the difficulty we see in Waiheke becoming some sort of “special Local Board” or even a District Council under a body with a multiplicity of powerful CCOs set up to meet the needs and rapid development of a large regional governance unit. Despite the best intentions of AC management, we fear continuation of constraints on good local governance – the prime objective of the LG Act that the LGC is expected to promote – and the costs of unnecessary overheads.

Conclusion

To conclude, the LGC has the ability to compare Waiheke with exemplar councils throughout NZ with populations of 10 – 20,000 in order to gain an indicative view on the costs Waiheke are likely to face rather than the costs accruing to the ‘super city’ from which most of us gain few benefits in our day to day lives – despite the protestations of staff made in the submissions to the LGC by the AC and its CCOs.

We have dealt with these issues in depth in earlier submissions. Here we particularly note the scope for improvements in spending on the biggest expenditure item – roading – prospectively in partnership with the NZTA. Another big item for most councils – provision for depreciation – should be noticeably lower than Auckland’s, pro rata, given our limited infrastructure and few substantial facilities. We have earlier shown that our opening debt position should, in fairness and inclusive of our share of the AC’s assets – not exceed about $20m and therefore be comfortably affordable.

There is a currently a limited need to provide better facilities to cope with increasing visitor numbers but that can better be dealt with by a council that is on the spot and more closely focused on the issues and solutions. This includes being better placed than the AC to seek funding from central government now that it is alert to the consequences of under investment in this arena.

As the LGC can see, an objective and empirically based analysis of the financial and economic implications of Waiheke becoming a UC, which our community can trust and have confidence in, is clearly needed. We repeat our request for access to, and engagement in Morrison Lows’ analysis, as part of the evaluation process and consistent with the purposes of the Act.

We look forward to receiving your response accordingly.

Our Waiheke.