Monday, March 05, 2012

Council debt tsunami now unstoppable

When the Great Recession first began hitting the country, everyone had two choices: either hunker down and beginning cut your cut according to your shrunken cloth, or keep spending like a drunken tailor and borrow to cover your rapidly increasing debts.

You can guess the approach every council in the country took. 

When Sandra Lee’s Local Government Act 2002 gave councils the power to do whatever the hell they wanted to (laughably called “the power of general competence”), to a man and woman virtually every councillor in the country began voting for grandomania.  Then as the Recession hit and revenues shrunk (even with their hugely inflated rates bills and development levies) they borrowed to keep their overspending going—sailing blithely along to disaster.

The result now is predictable as the Greek decision to do much the same. Total council debt has quadrupled from $2 billion in the Year of Sandra Lee to over $8 billion today.

And the rate of still growing: $500 million more in 2007, $800 million more in 2008, $1,100 million more in 2009, and $1,800 million more in 2010.

Most councils in the country now have an uncontrollable debt, no debt repayment programme, and no plans to rein in their spending.

Dunedin and Kaipara are merely the most high-profile froth on this torrent of irresponsibility.

Listen to whistle-blower

One of the few to pay this any notice, Larry Mitchell, who has spent the last 15 years analysing council’s books, reckons

the financial tsunami currently hitting the beach of some New Zealand territorial local authorities is unprecedented. You don’t have to be a rocket scientist to go through the figures and see that it has come time to activate the warning systems.

Listen to him talking this morning on Radio NZ [audio], after which Sir Humphrey steps up.

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1 Comments:

Anonymous Mort said...

interesting discussion indeed.

The figures speak for themselves with the amount of debt accumulated in the last decade blowing out. Could the debt be entirely proportional to the growth in population in the last 15 years? Unlikely, so can it be explained by looking at the quality of the expenditure, i.e. has 10M been spent when 3 would have adequately met the need, rather than the want?

Councils have lost sight of what they are there for. Social spending and flouncery need to be reined in. Wasteful expenditure like heritage committees or Urban design boards, or AGW masturbatory boards all need the axe.
In essence I support expenditure that is truly asset focused, and will result in increased numbers of ratepayers. Opening up new subdivisions, and servicing them will result in a greater spread of the costs involved and will also address housing cost issues.

The 2nd interview tries to address the number of councils , and flippantly decries that we have culled the number from 800 to 70 odd. But what is neglected often, is the actual salaries of the councillors and the duplication of administration that has occurred since the amalgamation process started. Did Councils have $300K+ salaried officers in the 80s?
Did Councillors actually decide stuff rather than just sign off what is handed to them?

3/06/2012 10:53:00 am  

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