Council Wastes Ratepayer Funds

Published HBT 2 May 2015

The Te Mata Trust Board must be disappointed at having to abandon their proposed Peak Visitor Centre having already spent $320 000 on the project, but as Hastings District ratepayers will effectively be paying most of the bill, it is perhaps they who should be the most disappointed. 

At the same time the proposed $12.5 million Civic Square development also looks likely to be shelved, but again not before a million dollars has been spent. Shortly after I was first elected to the HDC in 2010 at least another $250 000 dollars was spent on the velodrome project, which was also abandoned when it failed to make even the short list for $7 million of government funding. 

The Hawke’s Bay Opera House also looks likely to cost ratepayers upwards of $20 million for earthquake strengthening, only a decade or so after $15 million was spent on a major upgrade. Since then ratepayers have been burdened with around $15 million more in operating grants and debt servicing costs, meaning with strengthening the total outlay will be around $50 million, or nearly the total rates income for the council for a whole year. 

These sorts of issues are not confined to the Hastings Council. The new $18 million museum in Napier has failed to deliver on it’s key promises with only about 5% of the annual 600 000 anticipated visitors actually paying to get in, whilst operating deficits could top $4 million annually. Also it is only able to store a fraction of the total collection, contrary to earlier assurances. 

There are other projects of questionable financial certainty embedded in the Hastings LTP including a proposed $5 million investment into a Hastings CBD hotel, surely suspect when no other developer appears interested, and especially risky when a similar competing private development is already underway in nearly Havelock North. A sixth aquatic facility costing between $10 - 20 million to build with unrevealed ongoing ratepayer implications is also included in Council Long Term Proposals.    

That Local government is responsible for providing parks, libraries, halls, infrastructure, and all manner of services is not in dispute. What needs to be questioned is the process councils use to decide on major investments when they fail to either deliver any meaningful benefit, or end up creating unplanned costs when completed. More basic and less ambitious projects generally seem to provide much greater value. The new facilities on Marine Parade in Napier, the new hockey turf at the Sports Park, the skate park in the Hastings CBD and the new BMX facility in Havelock North are all  examples of ratepayers money providing real and significant benefits with minimal on going cost implications.  

The enthusiasm behind these grand ideas seems to overwhelm both common sense and good governance. Rather than being demanded by the wider community, the drive for these ideas comes primarily from a small number of elected officials, frequently the Mayors, or council staff. Failure to correctly asses the risks and potential for costly failure, seem consistent with Local Government culture. Local government generally place the emphasis on cost control, because quite simply there are no corresponding income streams. Council staff are highly qualified, very skilled and very experienced in things to do with pipes, roads and many other areas, but generally lack experience in the world of consumers, markets, and competition. Unfortunately only a minority of councillors are experienced in the world of profit, loss, and risk as well. 

So in the case of both the Visitor Centre and Civic Square projects, funds were allocated and spent without any realistic consideration of market demand, operating costs, or other financial issues.  I also believe the justification for the proposed Aquatic Centre is superficial, inaccurate and misleading, and there have been no estimates of patronage, operating costs, revenues or the likely impact a new pool might have on the performance of existing pools. 

Committed councillors and staff create a very powerful alliance, and when combined with council processes and procedures a situation is created that is almost impossible to stop. For the record I have consistently voted against both the Civic Square and aquatic proposals and many others because I could see no real justification for them. I sometimes get the impression that the most enthusiastic are keen to see these achievements added to their trophies 

The private sector also gets things wrong but both shareholders and customers can opt out when dissatisfied plus mistakes can be offset through tax losses. Council mistakes are backed up by the unlimited access to the bottomless pit of ratepayer funding, and there is nothing those who are forced to pay can do about it. Misadventures waste money that can never be recovered, and opportunities for better uses of the funds are lost.  For instance the estimated $1 million spent on Civic Square could have paid for an extension to the 80 metre rock wall protecting the road to the Clifton Motor Camp, whilst the money spent on architects and other aspects of the Peak Visitor Centre project could have provided  permanent shade at the new CBD skate Park. Both these alternative projects are affected by financial restraints. 

If these sorts of mistakes are to be avoided in the future there must be a change in governance. Proposals that are not accompanied by full financial details including whole of life cost estimates and other critical information should never reach the council debating chamber and must be rejected if they do.  Failures must be investigated by independent authorities such as the audit office, with appropriate penalties for non compliance. 

If those responsible for these unwise decisions had to pay for their mistakes they might be more inclined to take greater care with other peoples money