Address to Henderson-Massey Local Board 10th May 2011
Madam Chair, Ladies & Gentlemen
I know there are people in this room who don’t like history, but from the early 1970’s I remember reading Planning Council documents expressing concern about the demographics of New Zealand and problems associated with an aging population, especially in the new millennium. That was 40 years ago. I think it was 1974 in a Time magazine, long before we had the fingertip accessibility of the internet, that I read of rapidly increasing property values in California giving rise to massive property tax increases and growing resentment by Californian homeowners. This led to a property tax revolt and in 1978 the introduction of Proposition 13, which effectively replaced property tax with a tax based on a property’s value in 1975 or the date it was last transferred to a non-family member.
This starved the state from big increases in revenue from properties and there was a great temptation to borrow to fund increasing expenditure on social services. By 2010 California, the 8th largest economy in the world was virtually bankrupt.
In New Zealand the Local Government Act 2002 was introduced and gave Councils powers of general competence. Unfortunately councils took on many services once provided by central government without pushing hard enough for accompanying funding. We now face the very serious problems of affordability for ratepayers in Auckland but projects unrelated to core services still continue to be promoted. 100 projects in 100 days said Mayor Brown while at the same time promising rate increases contained within inflation. The Long-term Plan 1 Nov 2010 – 30 June 2019 forecast a 2011/12 rates increase of 3.9%. Shortly afterwards Mayor Brown proposed a 4.9% increase that was strongly opposed by 8 Councillors. Even then this required $60m in savings to be identified. This hasn’t been done yet. In fact we’ve just been told we’re going to plonk in another $3m for the Rugby World Cup. This is atop the various so-called one-off charges various Councils charged their ratepayers before amalgamation.
Auckland Council must not repeat the pattern of its various component Councils venturing into projects in which it has very little expertise and too much decision-making is done behind closed doors. The Film Studios in Waitakere have halved the value of their investment in 3 years and we’ve just been told Sovereign Yachts that went into liquidation in 2009 has hit ratepayers up for a court-approved $15m.
When I was a boy my mum used to say “Look after the pennies and the pounds will take care of themselves.” I urge this Council it’s high time to look after the millions and the billions will take care of themselves. Unfortunately any ratepayer who dares ask sensible questions about Council investments is stonewalled and shut down at every turn.
Over the years when I’ve criticised rapidly increasing rates, I’ve been told we either increase rates or take on more debt. Not so, the third option so often overlooked by our elected representatives is to cut down on expenditure. Ten years ago it was considered in Waitakere prudent to ensure no more than 15% of rates income was required for debt servicing. Auckland Council is now saying a prudent maximum is 25%. The Transitional Authority recommended any borrowing should be done internally. Recently it has been decided to borrow money from overseas because of cheaper interest rates. That is a dangerous path subject to exchange rate fluctuations.
Massive borrowing and derivatives trading got the US into trouble. It led to sovereign nations Greece, Ireland and now only last week Portugal being bailed out.
Auckland won’t be the most liveable city in the world in ten years if we can’t afford to live here. We won’t be able to afford to live here if rates keep going up and we keep taking on more debt.