Charter Club Funding Fiasco

Published HBT 20 May 2015

The decision by the National Service Club members to reject a Hastings District Council merger proposal is an own goal for the council who seem to believe that if enough money is thrown at a problem it will go away. We have seen similar thinking with the Opera House and other recently delayed or cancelled projects. The most recent idea was to support a merger of various service clubs with nearly $2 million of ratepayer funding. 

Many chartered clubs are experiencing declining support. The Hastings, Napier and Napier Cosmopolitan Clubs have all closed. Members now tend to be older and a further strengthening of drink driving laws is likely to be eating into members involvement. The RSA, Hibernian and Heretaunga Clubs have already merged, the RSA premises in the centre of town have been sold and must soon be vacated, and new premises are proposed on the Heretaunga Club site away from the CBD. The National Service Club on edge of the Hastings CBD seem to be holding their own as evidenced by members rejection of the merger plan, although their premises will need some earthquake strengthening sometime in the future.  

The reasons for Council getting involved are unconvincing. The project was poorly conceived, poorly researched, and should never have been presented to council. The Mayor who was the driving force was in China and unable to attend the special council meeting called at short notice to supposedly discuss the issue. 

It has been reported that I had walked out of this public excluded council meeting when the issue was being discussed though I prefer to say I was not willing to continue taking part in a process I considered  farcical. I believed it wrong that both the media and public were prevented from hearing details of a proposal to spend nearly $2 million of ratepayers money. There was a lack of  transparency and an inability or unwillingness to answer many crucial questions, plus it was clear I was going to have no impact on the outcome. The entire process seemed staged to endorse an outcome that had already been decided on. 

Specifically some of my concerns were:

- The Clubs were not represented so councillors had no opportunity to question those running these organisations.

- The only accounts provided were for the RSA  March 2014 financial year. There were no forecasts, budgets or other estimates for the proposed combined clubs which meant councillors could not asses the financial viability of the new entity. 

- It was claimed a new city centre premises will benefit the Hastings CBD which clearly is already struggling, yet no evidence was provided to demonstrate linkage between the clubs and the CBD,  even though both the RSA and National Service Clubs are presently within walking distance of the shops. Additionally only the RSA will be shifting and the National Service Club will remain close to the CBD. 

- No membership history was provided so past and future trends could not be determined, nor was there any information on how many members use the facilities on a regular basis. 

- Claims the viability of the three clubs would have been enhanced failed to account for the additional risk of their taking on significant debt which could have imperilled rather than secured their future. 

- Some councillors claimed a similar combined facility in Blenheim proved it would work, yet no specifics on membership, financials, or other matters were provided. 

My own view is this matter has been handled in a highly unsatisfactory manor without councillors being given much of the information needed to make a wise decision. The cost in staff time is unknown but must be considerable and a figure of $10 000 seems possible. Whilst some public consultation had been proposed people are busy with their jobs, family and other issues, and rely on good governance by their councillors to make sure their money is spent wisely. Expecting widespread and representative community involvement in submissions is unrealistic. This yet another example of council being steamrolled into supporting an idea of doubtful benefit. Yet had it proceeded debt and rates for everyone would have increased. 

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

Missing Airport Directors

Published HBT 6 April 2015

The proposed name change for Hawke’s Bay Airport could be just a prelude of what may be following.  

At the recent March half year report to HDC Councillors, Board Deputy Chair Jim Scotland excused airport Chairman Tony Porter with the explanation he was in Christchurch. Six months previously board member Sarah Park provided a similar reason for the Chairman’s absence. These absences may or may not be connected but apparently Mr Porter is quite ill, and whilst we wish him a full recovery,  this situation is both irregular and highly unsatisfactory. 

It also appears that a second director Stuart Webster has left for the USA, without a return ticket. If so it means that two of the four appointed directors have ceased to function in their governance roles. Significantly there appears to have been no mention of either of these issues by the two remaining directors when meeting with either the Hastings District or Napier City Councils. It is not believable that the Mayors, senior staff and others are not aware of this situation. This raises a great many questions.

-Why have these issues been hidden from Councillors and the public?

-When did Mr Porter become ill?

-When did Mr Webster leave the country?

-When did either of these directors last attend a board meeting?

-Are the missing directors still being paid by the airport ?

-Why are they still listed as directors in the most recent airport accounts provided to councillors? (half year to 31/12/2014).  

-Are the Mayors and senior managers of the Hastings and Napier councils aware of the situation and if so when were they notified?

-What is the role of Government?

-Who else is aware of the situation?

Could it be that Government is planning to transfer their shares in the airport to Mana Ahuriri Inc as part of the Y55 settlement, and the failure to disclose is due to an expectation of the claimants taking up the board positions. Whilst this has been a possibility for some time it would effectively transfer total control of a vital piece of Hawke’s Bay infrastructure because Government actually owns slightly more than than 50% of the airport shares. The lack of transparency is unacceptable and it is high time those in the know, reveal what they know.

No Reason to Change Airport Name

Published HBT 27 March 2015

Meaningful consultation is needed before a final decision is made to change the name of Hawke’s Bay Airport. Discussions with Mana Ahuriri and the HDC were informal and in my view amounted to an ambush with insufficient warning given to consider the ramifications such as financial implications.

Most airports have aligned their names and 3 letter IATA codes with city names. Mangere was changed to Auckland(AKL), Rongotai to Wellington(WLG), Harewood to Christchurch(CHC), and Momona to Dunedin(DUD) to name a few. Hawke’s Bay Airport (NPE) is actually an exception though the brand Hawke’s Bay is well recognised. Australia also aligns airport and city names as in Sydney, Melbourne, and Brisbane. Whilst John F Kennedy Airport in New York (JFK) has been used to as an example of where alignment doesn’t apply, not naming airports after their host cities generally happens only in super cities with multiple airports such as in London (Heathrow, Gatwick, Luton, Stanford).

Adding the name Ahuriri to Hawke’s Bay Airport will be confusing and costly. To people outside of Hawke’s Bay the word is unknown except perhaps in North Otago where apparently there is another Ahuriri. The implications with GPS navigation systems, maps, telephone directories and all manor of things have not been considered, and the name may be ignored by the aviation industry.

By all means use the name Ahuriri for the access road to the airport industrial zone, the terminal building, or even the entire area of land uplifted during the1931 earthquake, but not the airport. That it is Te Reo is irrelevant. Renaming the airport Ahuriri simply has no merit. 

Big Income increases fora Few

Published HBT  10 March 2015

Government has overridden the Remuneration Authority decision to award a 5.5 % increase in MP’s salaries back dated to July last year. The Authority is an independent body established by Government to set the salaries of salaries for MP’s, Mayors, Councillors, Government Chief Executives, Heads of Crown Entities, and various tribunals.  

That a 5.5% increase was awarded means the Renumeration Authority had determined this was the extent of the movement in salaries for equivalent positions elsewhere. Clearly senior management have been receiving significant increases despite many other workers being limited to CPI increases, or changes in the minimum wage rate. 

Relativity is clearly the major driving force as demonstrated by the recent comment by authority chair John Errington “that the pay gap between ministers and executives in the private sector was growing and would have to be addressed”. To ensure the salaries under its durestriction are competitive the Authority consults with others, though exactly who is not clear. It seems likely however that professional salary surveys are a major tool, and it seems probably these surveys are contributing to the distortion of incomes that is occurring.  

These surveys are undertaken at regular intervals and produce a range of salaries for each category of job as defined by the knowledge and experience needed, certain dimensions such as turn over or number of staff, plus the freedom to make decisions, or level of authority. Most employers have a salary policy or preferred position in the range for senior staff. They may pay at the upper quartile, or the medium or somewhere else in the range. Few employer will admit to paying below the medium. 

When the review is undertaken the organisation inevitably finds it is paying below its preferred position, and as a result and almost automatically this becomes the reason for a salary hike. This of course is happening right across the country so there is a general upward movement. When the next survey is undertaken these increases are picked up, and again most organisations will find they are paying below their preferred position, thereby justifying yet another upward adjustment thereby ratcheting salaries to ever higher levels.  

Government may have justified the lust for fairness over MP’s salaries but the changes will do nothing to fix growing inequality.  Increases for Chief executives, judges, Government and Local Government Heads must also bought into line with the wider population. This must not stop some people being paid more because of greater the levels of skill and knowledge or stop salary increases for justifiable reasons including, improved performance and increased responsibilities. However the use of surveys is part of a system that feeds on itself to create compounding increases. 

Once those at the bottom were protected by trade union negotiated awards plus a more egalitarian attitude, but an abundance of lessor skilled workers means there is no pressure to improve their incomes. In fact the system now encourages those at the top to exploit those at the bottom with zero hour contracts and other income restraining measures. It also needs to be remembered that the people who have upheld this blatantly unfair system, including those in governance roles, are clearly part of the club that benefits. 

To some extent we should be grateful that we were alerted to the widening gap between the well paid and less well remunerated but doing something about this relatively small group does nothing to fix the growing disparity between those at the advantaged end of the gravy train and the rest. 

Air New Zealand final word

Published 13 March 2015

I must thank Air New Zealand’s Louise Struthers for her recent “Talking Point (23/02/15) plus the accolade of mentioning my name on 10 occasions.  Apparently she is upset by my comments regarding Hawke’s Bay air services,  yet actually confirms as accurate all the points I raised, including this area not being included in the new $29 “Night Rider” special fare deals, and the effective doubling the price of “stand by fares”. 

Later this year we will test her claimed commitment to Hawke’s Bay when Australian league teams the Dragons and Storm face off in Napier, an event that could easily be damaged by the lack of affordable airfares. Even the most committed supporters from Sydney or Melbourne are likely to baulk at paying $500 for return domestic flights.  

Ms Strutters needs to wake up to widespread dissatisfaction as often expressed in this newspaper including recent comments by 60 minutes TV Producer Belinda Henley(5/03/15). We need uncomplicated, affordable, readily available fares so we are no longer disadvantaged compared to the main centres,  Dunedin and Queenstown, where competition is better providing for travellers needs. 

Air New Zealand Must be Audited

Published 17 Feb 2015

Air New Zealand’s Louise Strutters latest effort to deflect criticism of their high Hawke’s Bay airfares have resulted in a response that is full of inconsistencies and inaccuracies, and is lacking in credibility. 

Their claims include:

1. Hawke’s Bay has not missed out on new nightrider flights.

This contradicts the company’s own official announcement that from February 20 through until March 19, every seat on additional late night services on selected regional and trunk routes linking Auckland, Nelson and Christchurch will be priced at $29 one way and Manawatu may included  later. We are now told that due to problems with Airways New Zealand, Hawke’s Bay presents challenges beyond their control.

2. Replacing 50 seat Q300 Bombardier aircraft with 68 seat ATR’s has increased capacity by 19% over the past 5 years. 

In fact if all flights had been upgraded the increase would be 36%. There is no way of knowing if their figures are true but the claimed increase does not tally with actual numbers through HB Airport. For 2014 there were 456 672 passengers compared with 406 000 in 2009, a 12.3% increase over 5 years.  However for 6 years from 2008 when passengers totalled 449 126 the increase was only 1.7%. 

3. Over the past year airfares on all three Hawke’s Bay routes, Auckland Wellington and Christchurch have been 10% lower than 5 years ago.  

In contrast on Feb 10 last year CEO Christopher Luxton was reported as claiming that average  fares from Hawke’s Bay to Wellington and Auckland had not changed in the previous 5 years. Additionally on Sept 1 he was reported as claiming regional fares had not changed significantly over the past 6 years,  yet at that time Informetrics pointed out official Statistics showed domestic fares had increased by 9.1% in the previous year alone. 

4. Hawkes Bay is benefiting from their new $ 169  “Got to Go “ fares available 90 minute before departure and introduced from Feb 1. 

In fact the airline discontinued $ 69 stand by fares on May 6 2013, and abandoned the Starfish program offering discounts of 15 & 30% for regular flyers on Feb 12 2014 meaning travellers are now actually worse off than previously.

Clearly the airline is simply plucking figures out of thin air every time they are challenged on the issue. In the light of these inconsistencies and widespread dissatisfaction it is high time the Commerce Commission, Government or some other official agency conducted a full audit of Air New Zealand’s regional operations.