Auckland Council’s Burgeoning Debt

 

In the early 1970’s property taxes in California reached a level that caused a revolt. As a result of this, Proposition 13 amended the Constitution of California in 1978, which severely restricted the state’s ability to raise revenue for parks, police, fire, schools and basic government services.

 

Although our rating system has been somewhat different in New Zealand, we are repeating similar mistakes. More and more traditional Central Government services are being foisted upon Local Governments without commensurate funding.

 

In recent years California relied heavily on debt expansion until it reached a level last year where the state bordered on bankruptcy.

 

In 2002 when the new Civic Centre for Waitakere was first publicly mooted, I had concerns about the debt and have kept an eye on Council accounts since that date. Too often the information fed to the public is misleading. To give just one example, try as I might I could not find the cost of relocating the Japanese Gardens from the old Civic Centre to the new Civic Centre. Silly me. I was looking at the accounts for the new Civic Centre but the cost of relocation was not charged against the new Civic Centre. It was charged against Parks & Reserves—31/3/06  (PK 05039A)  $2.093m

Then a year later – extra concrete for Japanese Gardens $250,000.

Such practice I have since found to be commonplace and can certainly not be regarded as being transparent.

 

In 2000 Waitakere City Council had a debt of $64.4m that equated to $370 per head. By 2010 that debt had blown out tenfold to $635m.

 

When the Super City was being formed ratepayers were promised accountability and transparency. The Auckland Transition Agency recommended any loan monies be raised within New Zealand. I applauded that decision. However, in February 2011 Auckland Councillors voted to allow overseas borrowing to keep interest rates down. Now that’s all very well, but what happens if we borrow when we have a high dollar and repay when our dollar has dropped. That’s a very highly likely scenario. Any interest savings can be wiped out by exchange rate fluctuations at the blink of an eye.

 

To make things even worse, on 16 December 2011 Auckland Council voted to increase its debt ceiling. The ratio of net debt as a % of total council revenue was extended from 175 % to 275%. I wish to congratulate the six councillors who voted against that move, namely Brewer, Penrose, Quax, Raffills, Stewart and Wood.

 

Often over the years when I criticised the rising debt in Waitakere City I was told “We either have to increase the debt or significantly increase the rates.” Not so – the third significant alternative often not mentioned, is to cut your suit according to your cloth. In other words cut down on extravagant expenditure.

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