Media Release - Local Council Debt - 24th July 2013

As of the end of June 2013, the Whangarei District Council’s external debt is approx $155 million, that is not including the $23 million of internal borrowing.  Debt reduction should be a key issue for the upcoming Whangarei District Council.  Along with other local government bodies throughout New Zealand, the time has come for significant changes in how we run and manage our cities and districts.

The Better Local Government Reforms that were announced in 2012 by Central Government focus on strongergovernance, improved efficiency, and better fiscal management at the local government level.  They have been set out in eight core stages:

  1. Refocus the purpose of local government
  2. Introduce fiscal responsibility requirements
  3. Strengthen council governance provisions
  4. Streamline council reorganisation procedures
  5. Establish a local government efficiency taskforce
  6. Develop a framework for central/local government regulatory roles
  7. Investigate the efficiency of local government infrastructure provision
  8. Review the use of development contributions

The first stage of the reforms, which were passed into law at the end of last year, has a significant impact on what responsibilities our councils will have in shaping the future of Whangarei, and more importantly, what we will not have. Its wording: to refocus the purpose of local government, which is now defined as the provision of ‘good quality local infrastructure, public services and regulatory functions at the least possible cost to households and business’?

The important words in the new purpose statement are ‘Local’ to differentiate from services better provided by central government and ‘Public’ to clarify that councils should not try to  replace services provided by the private sector.

Yes, the Reforms were a necessary response to the spiralling debts of councils throughout New Zealand, with some having quadrupled their debt levels in a relatively short time.

The immediate move, by most people, is to halt all non-essential spending, reduce staff and to locate cheaper materials or contracts.  Sometimes even making the decision to purchase from outside the region for a few saved dollars comes across peoples’ minds.

While there is nothing wrong with a bit of belt tightening when money needs to be saved, councils and other organisations need to consider the long term effects as well as the immediate financial savings of any cuts in spending or reduction of services. Providing a bare minimum of care and maintenance can only increase repair costs later, and as those in business would know full well, reducing the services you offer or scrimping on materials can have a greater negative effect on the bottom line than any short term expenditure you may have saved.

Rate increases cannot be seen as the fix-all solution to dig a council out of a financial hole – national figures show rates increasing by an average of 6.8% since 2003, which is more than double the rate of inflation. Add to that the Labour Cost Index figures showed salary costs for local government rising by 86% from 2003 to 2010 compared to an 8.7% increase in the preceding eight years (to 2002).[i]

The suggested sale of assets by some local councillors may provide an immediate liquidity, but could also prove more expensive in the future when development requires significant land resources no longer owned.

Looking at the eight areas that are outlined in the Better Local Government Reforms, there is plenty of scope and opportunity to become a more efficient and effective council. The sooner we embrace change and look at new and better ways to take our District forward, the less need there is for intervention from Central Government in how we shape our future.

Too often Whangarei’s Leaders have chosen to sell assets, increase rates or reduce spending.  These may work, but to go forward, we need to look outside the box of typical thinking.  Do you want Whangarei to grow bigger? How about to be known as the best place to live, work and play?  Then choose to put Whangarei First, as we have.

Choose Vince Cocurullo Mayor of Whangarei.

Data from Department of Internal Affairs document; “Better Local Government - March 2012” 22 July 2013