David Farrar: Brown appoints observer to Wellington City Council

Simeon Brown announced:

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.

No surprise.

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.

Debt to fund critical infrastructure is fine. Having 94% funded through rates is bizarre.

“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.

Wellingtonians voted for a Labour/Green Council and WCC proved a great example of how that works in practice.

Of the Council of 16, six are current or former Greens, and four are Labour. One is also former Te Pati Maori, so they are a living example of how well those three parties can do at governing.

David Farrar runs Curia Market Research, a specialist opinion polling and research agency, and the popular Kiwiblog where this article was sourced. He previously worked in the Parliament for eight years, serving two National Party Prime Ministers and three Opposition Leaders.