A light-hearted look at what is going on in the engine room at the KDC - cartoons


Welcome to KaiparaConcerns. For some time there has been some discontent about the EcoCare wastewater rates that have been levied on properties in Mangawhai by the Kaipara District Council.  There have also been concerns about the proposed District Plan which many ratepayers believe will be a financial and planning disaster for the Council and Kaipara District.  There are also concerns about the financial accounting, reporting and monitoring of the Council and the true size of the public debt that has been incurred.

This website aims to bring these and other problems out into the open so that ratepayers can see exactly what their Council is up to.  Hopefully, we will get the story from both sides - from ratepayers and from Councillors.

Q&A:  Frequently asked questions about EcoCare rates with answers from Legal Eagle.

McKerchar resolution:  Read the background to the resolution and the actual wording.

McKerchar resolution - legal analysis by Legal Eagle.  It looks like a duck, it quacks like a duck, it smells like a duck, it is ........

SUIPs - the new units of demand (and the correct ones).

SOLGM Guide:  basically a guide on how to set rates in compliance with the law from the NZ Society of Local Government Managers.

Legal Eagle: An introduction.

Invalid rates:  A summary of why the Ecocare rates are invalid.

EcoCare rates for 2008-09/2009-10:  A detailed assessment of why they are invalid. 

EcoCare rates 2010-11:  A detailed assessment of why they are invalid:
- rates resolution
- funding impact statement
- rating information database
- Statement of Proposal

Auditor General:  Extracts from the AG's annual reports about setting rates in compliance with legal requirements.. 

What next?  What can ratepayers do if Council ignores their complaints?

KDC in the news:  Bad press for the KDC.

25 year payment option is dust.  Are Councillors jumping the gun?

The Guide to the Local Government (Rating) Act 2002 written by experts who helped draft the Act.





































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CHRISTMAS SPIN  24.12.2011
As we head into Christmas the spin machine at the KDC continues to churn out the rubbish. The smoke and mirrors syndrome affects nearly everyone who works there, and it is getting worse. Glennis Christie came from the Auckland City Council with the highest credentials. She is experienced and competent but unfortunately she too has succumbed to the scourge of Tiller-talk.

I had a few words to say about Glennis in an earlier piece in the hope that she could bring a sorely needed fresh approach to the Council's dealings with ratepayers. Sadly, she has succumbed to the bug. In her latest letter she states that one of the outstanding reviews is:

Independent Review of rating issues, that includes the first principles review (commissioned from Jonathan Salter, Simpson Grierson);

Remember that the review is not independent. It is commissioned solely by the Council, with terms of reference set by the Council, with the Mayor - the very person responsible for the chaos in the first place - having the right of veto.

It is also not a first principles review. It is very limited in scope and a "lightly- over".

How about an honest approach, Glennis?

And how about this to end the letter:

Going forward, you will appreciate that completing draft Long Term Plan is a particularly high priority for us in the New Year.

That ghastly going forward mantra again. Obviously the spin-doctors at KDC have decided that if that mantra is hammered home in every letter ratepayers will be duped into forgetting the misdeeds of the past.

As for he completing of the draft plan being a particularly high priority....... Well it is not a high priority, it is a legal essential, like putting out the annual report within the specified time-frame.

In respect of the annual report here is section 98(a) LGA:

Each annual report must be completed and adopted, by resolution, within 4 months after the end of the financial year to which it relates.

Two months late and still no annual report.

Even though it has been put "on watch" by the Minister Council still acts like it is a law unto itself.  It seems to think that the provisions of the LGA are optional.

I hope the new Minister is watching carefully.

$4 MILLION MISSING  24.12.2011
Council has done a check on its piggy bank and found that it is $4million short for last year. To see the Tiller-spin on this appalling performance go here.

I find it hard to imagine how Councillors have the gall to front up to the community having made yet another dreadful gaffe. How long will the incompetence be allowed to continue before the government steps in and euthanises this moribund body.

Legal Eagle has written a paper on Council's complete failure to comply with the requirements of the LGA by not going through both the decision-making process and the consultation process when amending the scope of the EcoCare scheme and increasing the EcoCare debt, over five years ago. 

The paper also considers the farce of the Segmented Debt policy whereby Council is trying to inflict the whole of the EcoCare debt on 1200 or so Mangawhai residents.

To see the paper in full go here.

Council is obliged to comply with those processes and if it does not then it is deemed to have acted ultra vires (outside its powers).  This creates yet another legal shambles that only the government has the power to fix.

The failure to go though the legal processes appears to have been a deliberate and cynical abuse of power by Council and one has to wonder how long it will be allowed to get away with the total abuse of the Rating Act and the LGA, and its contemptuous treatment of ratepayers.

In the 2008-09 rating year the KDC collected EcoCare rates of $811,063 even though there was no service available at any time during the rating year.  In the 2009-10 rating year the Council collected EcoCare rates of $2,659,864 even though the sewerage scheme was not available until part way through the year.  These figures come from the KDC Annnual Report for 2009-10.

Legally a local authority has no power to collect targeted rates for a service that is not available during the rating year.  Likewise, a local authority cannot charge a rate where a service is provided part way though a rating year (section 43 of the Rating Act).  This means that the rates were completely illegal. 

The total amount stolen from ratepayers was nearly $3.5 million.  All done with the knowledge of the Minister of Local Government, the Office of the Ombudsman, and the Office of the Auditor General.

If that was a private company then the Serious Fraud Office would be ripping the place apart.  But for some reason local authorities in New Zealand seem to be be able to operate with impunity outside the law of the land.

MORE SPIN  6.12.11
I recently criticised Glennis Christie the newly appointed Manager Policy and Governance for her comments on the so-called independent review of EcoCare rates. (See here)

It seems to me that all those who are in local government for any length of time find huge difficulties in seeing things as they are, viewing situations objectively, and facing up to the real facts. They quickly succumb to the arts of side-stepping, dissimulation, creating smoke and mirrors to disguise the truth, and seem to have no qualms about blatantly misrepresenting the real situation.

The perfect example of this is our Mayor Neil Tiller who has been in Council for ten years, and, in collaboration with his Chief Executive (and a bunch of sleep-walking Councillors), has wreaked havoc on the Kaipara district and has brought it to the edge of collapse. And yet the public utterances from the Mayor show a total failure to grasp the reality of the situation, and exhibit a blind bravado that is probably only matched by General Custer in his last few minutes at Little Big Horn.

In spite of my criticism of Glennis Christie, she is at it again. In a response to the MRRA official information Request she advises that the following review is underway:

Independent review of rating issues, that includes the first principles review (commissioned by Jonathan Salter, Simpson Grierson)

Let us be clear that an independent review means that the review is carried out totally independently of the body responsible for the situation that is the subject of the review. In other words, for an independent review of the rates set by the KDC it is fundamental that the KDC plays no part in the review at any stage. I do not think that anyone would challenge that statement. Unless of course you happen to be part of the KDC. Or, for that matter, you are the Minister of Local Government, or the Auditor General, who both seem to be unaware of the meaning of independent review and conflict of interest.

In this instance the review is based on terms of reference decided solely by Council, with the Mayor and a couple of Councillors having the right of veto over the whole thing. These are the very people whose performance in setting the rates is under review, and in a normal world, with normal values, should be totally excluded from any involvement.

Glennis Christie also suggest that the review "includes the first principles review". That sounds very grand and authoritative. The only problem is that it does nothing of the sort. A first principles review means that it must be a review that goes back to the very basics of setting the rates across the whole spectrum. What we have here is a superficial review of certain aspects of the rates, for only one year out of four, that have been selected by those responsible for the problems in the first place.

The request for an independent forensic financial review, to find out where the missing millions has gone, has also been met with the same unbelievable arrogance and disregard for the basic principles of judicial procedure. This is the reply from Council to this request:

As previously advised, we believe that your request for a Forensic Audit is unwarranted at this stage. If our financial review finds anything to suggest wrong doing, or if you have information to suggest this, then Council would consider it and take appropriate action.

Earlier Glennis Christie points out that the review is an in-house review. In other words the enquiry into the dreadful state of the accounts, and the missing millions, that have been criticised by the two experts who have examined the accounts and severly panned by the the Office of the Minister, is being conducted by the very people who were responsible for the financial shambles in the first place.

Does any ratepayer believe that the Council will point a finger at itself if anything untoward is found? Does the Minister and the OAG think it appropriate that the KDC should be allowed to get away with conducting its own enquiry into the missing millions?  You have to wonder what planet these people are on.

Local government in New Zealand has become a fantasy world where local authorities are basically a law unto themselves. They thumb their noses at the requirements of legislation, the principles of justice and fair play; they ignore the fundamental rules of good accounting practice, run the undertaking like a bunch of rank amateurs, and go through the motions of consultation without really consulting, knowing that the watch-dogs, the Minister and the OAG, are fast asleep and not disposed to interfere with a problem that is simply too big to let out of the bag.

A CASE OF DEJA VU? 18.11.11
Bill Barclay is a commentator on the goings-on in the Thames Coromandel District Council. Steve Ruru was the Chief Executive there for over 13 years and recently failed to be reappointed. He is the new CE at Kaipara.

Bill Barclay has his own website and the following comments have been unearthed:

• Dis-satisfaction with rates amongst rate-payers can generally be traced to the extraordinary decision in 2006 to proceed with the most extravagant and over engineered ($100m) wastewater plants anywhere in the country. One huge error which everyone will continue to pay for years to come.

• By way of a brief background, the decision to adopt “One District” charging for wastewater was made in 2003 on the basis that the cost of the new schemes would be no greater than $26.6m. But by the time the actual business case was completed in 2005, a cost of $62.5m was indicated – later increasing to over $90m.

• Council at the time should have had regard to the provisions of the LGA that require further consultation when such significant cost "blow-outs" become evident, but failed to do so, relying instead on the LTCCP consultation as compliance with the requirement. The resulting charges – amongst the highest in the entire country, were subsequently imposed on Thames and other ratepayers not connected to the new schemes on the basis of “unaffordability”. How fair was that?

• Steve Ruru has been appointed to the position of CEO of the Kaipara Council. See the press release.

Kaipara has a 14,000 rate-payer base against our 23,000, and is riven in controversy in regard to a recently constructed wastewater plant that has caused one of the highest per capita debt levels in the country. The plant services only 2,000 rate-payers and has cost some $60m. That makes ours look like a bargain!

It seems ironic in the circumstances - Steve's predecessor has had some 18 years in the job, and has a reputation for running the Council at his dictate. Steve will bring a new approach in that regard, but it is like the frying pan to the fire in regard to the W/W plant, and the debt.

Anyway, he goes with my best wishes - I think he was treated in a very shabby fashion here.

How coincidental that Thames Coromandel should have exactly the same problems with a wastewater scheme as Kaipara. And furthermore it appears that both Councils extended the scope of the scheme and the cost without complying with the Local Government Act. The only difference is that Kaipara ratepayers will steadfastly refuse to pay the cost of scheme that their Council has illegally foisted on them.


Council has reneged on the agreement that it had with ratepayers and has now initiated a review of the EcoCare rates in which Council alone
decides on the scope of review and the terms of reference and has the sole right to select the reviewer.  Ratepayers are not allowed to make any legal submissions.

For Legal Eagle's view on this travesty of an Independent review go here.

In a recent press statement headed Increase in Scope Sanctioned by Council October 2006 the KDC advised as follows:

Council is taking the concerns expressed by the ratepayers of Mangawhai seriously.

A number of concerns have been expressed that the decision to extend the scope of the Mangawhai Community Wastewater Scheme was not an authorised decision of Council. This is not the case. Council made the decision to extend the scope of the Mangawhai Community Wastewater Scheme nearly trebling its potential capability. This decision resulted in a corresponding increase in cost to Council.

At a Council meeting held on 25 October 2006 Council agreed to extend the scope of the Mangawhai Community Wastewater Scheme. The cost of the scheme at that point was projected to be $58 million. Increasing the scope meant an increase in the number of possible connections from approximately 1,220 to 3,300 with the potential to extend capacity even further when the need arose.

No name was on the press release but I presume that it was put out by John Burt, the Acting Chief Executive.

Unfortunately the information in the press release appears to be incorrect and misleading. It includes the following errors:

1. It suggests that the decision to increase the size of the EcoCare Scheme from 1,220 connections was not made until 25 October 2006. The truth is that in the EcoCare Statement of Proposal of February 2006 the figure of 1200 was not even mentioned. The figure quoted was 2,000 connections forecast as at June 2006, which one presumes was correct as it was only four months after the SOP was released.

2. It suggests that the decision to increase the scope of the scheme to 3,300 connections was also made on 26 October 2006. That is incorrect. The SOP of February put the projected number of connections for the scheme at 3,300 over the next 25 years. So the scope of the scheme was originally 3,300, and there was no change to the scope of the scheme in October 2006.

3. The press release says that cost of the scheme was increased to $58 million in October 2006. The reason given for this was that the scope of the scheme had been extended from 1200 connections to 3,300 connections. As we have seen, this was incorrect. The SOP of February 2006 projected 3,300 connections and gave the total cost as $35.6 million. So there was no increase in the scope of the scheme but the price had suddenly gone up by over $22 million without any genuine explanation.

Extracts from the SOP of February 2006 are set out below:

EcoCare Statement of Proposal (SOP) February 2006
This is what the SOP says about the number of sections:

Forecast Growth
In recent times there has been a rapid expansion in the number of sections being developed in Mangawhai. A key element in assessing the development contributions is the number of sections that can be established within the Drainage District given the current zoning patterns and making allowances for reserves, roadways and the golf course for example. Based on the above, the projected total number of available sections is approximately 3300.

The number of sections (allotments) projected to June 2006 is 2000 based on recent developments.

An important question that arises is how quickly will the 2000 grow to the 3300 lots?

Council is conscious that development rates fluctuate and therefore for modelling purposes have assumed a linear growth rate of some 2% per annum for the next 25 years which represents some 55 new sections every year for the next 25 years. This is considered to be a conservative assumption, but nevertheless prudent.

Council will continue to monitor this growth to ensure the accuracy of this assumption. (refer, below to section on assumptions)

Number of Sections 2,000 (Based on forecast number in June 2006)

Projected Future Growth 1,300 (Calculated Balance)

Total Number of Sections 3,300 (Based on average lot sizes and current zoning)

This makes it clear that the increase to 3,300 sections was part of the SOP and was not extended by a resolution of Council in October 2006.

But what of the cost?

Capital Costs of Project
The capital costs of the project are $35.6 M (excluding GST) but including capitalised interest and Council fees.

The capital costs for the EcoCare scheme, for a projected 3300 sections, in the February 2006 SOP was therefore $35.6 million.

But by October 2006 the cost for the same number of sections had soared to $58 million.


Council resolution
A request for a copy of the Council resolution of 25 October 2006 October has been made under the Official Information Act. So far it has not been forthcoming.

Council appears to be suggesting in the press release that it increased the scope of the project and the projected cost by $22 million by passing a simple resolution.

That is not possible under the LGA.

The EcoCare scheme is a strategic asset under the LGA and a significant activity.

Pursuant to section 97(1) of the LGA a decision to alter the intended level of service provision for any significant activity, or that will affect the cost to the local authority, must not be made unless the decision is provided for in the current long term plan AND the proposal is included in a statement of proposal under section 84. (Special consultative procedure with consultation with ratepayers).

The 2006/16 long term plan is not available to ratepayers so we cannot see whether the proposal was included in the plan.

I am not aware of any statement of proposal to increase the scope of the project or the cost of the project.


We cannot assess the situation until we can see the documentation that Council is trying to assemble, but it is looking increasing likely that Council did not comply with the provisions of the LGA in deciding to increase the cost of the EcoCare scheme and borrowing monies for that purpose. Council may well have acted ultra vires (beyond its powers) and, if that is the case, the whole legality of the EcoCare debt may be in issue.

Normally a lender will ensure that any debt is fully secured so that in case of default by the borrower the security can be sold to recover the amount of the debt. With local authorities the loan is often secured against rates.

Rates are regarded by lenders as a bottomless pit that usually provides adequate security. However, the lending institution would require a certificate from someone in the local authority (Chief Executive?), or the local authority's solicitors, to the effect that the provisions of the LGA were complied with when the decisions to extend the scheme in question and to raise finance were made, and that the rates had been set in accordance with the Rating Act.

If it turns out that there has been no legal compliance, that the provisions of the LGA were ignored when the decisions were made, and the rates did not comply with the Rating Act or the LGA, then whoever gave that certificate may well be in the gun.

If ratepayers refuse to pay the rates on the basis that the Council acted ultra vires in extending the scheme and extending the loan to finance the scheme, and also set the rates invalidly, then the lender will be aiming his shotgun in all directions looking for someone to carry the can for the failure to provide adequate security.

It will be interesting to see what sort of documentation Council comes up with in the next few weeks as a result of the Official Information request..

Ratepayers are complaining that although the new QV valuations of their properties have gone down the rates stay the same for the current rating year.  However, I hear no complaints about the rates staying the same when the valuation has gone up.

It is all to do with section 43 of the Rating Act.  That section states that rates must be assessed in accordance with the factors relevant to that property.  So when a Council sets a rate it is has to decide which of the factors listed in the Act is to be applied for setting the rate. 

The most common factor is the valuation of the property, and a local authority has a choice of basing the rate on the annual value, the capital value, or the value of the improvements. 

When it comes to rates for wastewater the usual factor is the number and nature of connections to the system.  So you pay a fixed charge for each connection to the system.

Under section 43 of the Act the status of each property is assessed for rates on 30 June in each year which is immediately prior to the commencement of the rating year on 1 July. 

Rates for the whole year are based on the factors as they are at that time.  So even if a factor changes during the year the rates cannot be changed.  The change can only be implemented when the factors are reassessed immediately prior to the commencement of the next rating year.

So, where the valuation is the basis of the rate, any change in valuation during the rating year has no effect on rates.

Likewise with other factors.  If there is no connection to the sewerage system immediately prior to the rating year then the rates are set for the whole year on the basis that there is no connection.  This would apply even if a connection was made a few days into the rating year. On the other hand, if a connection was removed part way through a year then no refund would be paid.

Section 43 can be seen here, and the relevant parts are:

(2)  For the purpose of subsection (1)(a) and (b), the relevant rating unit, values, or factors are those that have been corrected as at the end of the financial year immediately before the financial year for which the rates are set.

(3)  The rates are not affected by a change in the rateable value or factors of a rating unit during the financial year in which the rates are set.

Forgive me if I am wrong but I find that pretty simple to understand, and I am sure that readers will agree.  However, the KDC has acted as if the legislation did not exist.

For the 2008/09 rating year the KDC set EcoCare rates on the basis that the system would be up and running and connections available later in the rating year.

Question:  Can the Council do that?

Answer:  No.  The factor was connection to the sewer.  As no property was connected as at 1 July then KDC had no power to levy rates on any property in that rating year.

For the 2009/10 rating year the same thing happened.  The system was not operational at the commencement of the rating year but the KDC still charged rates for that year.

So, what does that mean?  Council can only set rates in accordance with the provisions of the Rating Act.  If it exceeds its powers then it is acting illegally, the rates are invalid, and have to be repaid.

Pretty fundamental really and not hard to grasp. 

Councillors are clearly choosing to ignore the illegality because the consequences for them personally and for Council are unpalatable.  But what about the Ombudsman ?  What about the Office of the Auditor General?  What about the Minister?  Why are they all choosing to ignore this blatant and fundamental breach of the Rating Act knowing that the Kaipara District Council has illegally rorted millions of dollars out of its ratepayers.

John Key, are you going to allow this to happen under your watch?

Legal Eagle has, for some time, suggested that local authority compliance with legislation and good governance is a Pandora's Box. It is well left alone by the authorities because once the lid is flipped the whole thing will explode and reveal a complete shambles that will embarrass the government, and show what a mockery of democratic and good governance
 local government is in New Zealand.

That is probably why the Ombudsman remains uninterested in pursuing complaints against the KDC, the OAG turns a blind eye, and the Minister claims he has no powers.

Legal Eagle has also harped on about the personal liability of a Chief Executive and his staff, and the Mayor and Councillors, for losses suffered because of their deliberate, negligent or reckless actions during their watch.

The latest news is that the ex Mayor of Hamilton may be pursued for $4 million paid to the V8s' failed initial promoters for which Audit NZ has found no evidence of authorisation. The article can be seen here.

It should be compulsory reading for the staff, Mayor and Councillors of Council, and all ratepayers.

Even the Minister supports such an action:

(The Minister) said he endorsed the council looking at its options for "pursuing any civil and criminal liabilities". "Should progress in addressing Audit NZ's recommendations be insufficient, the Government will look at a review process that could lead to the appointment of commissioners.

In respect of the liability of councillors the article quotes the current chief executive:

His further preliminary legal advice was that a claim against councillors for losses appeared unprecedented, and it appeared members of the council would have a legitimate statutory defence to any such claim.

I disagree. Although there appears to be no precedent in New Zealand where councillors have been held personally liable, there is nothing to stop that happening. Councillors have statutory obligations and also owe a duty of care to ratepayers.

They are in a similar position to company directors and actions against directors are in the news almost daily. The climate is certainly right for a test case to be taken against councillors.

There are indeed statutory defences under the LGA, but to invoke such a defence a councillor has to have acted in good faith. That is the catch.

The way a councillor voted on issues would be examined to test that good faith. It would also seem clear that a councillor is under a duty to obtain as much information as possible on any issue before casting a vote, and must believe that the course of action voted for is absolutely correct.

Any councillor who elected not to receive vital financial information, or legal opinions, or failed to make enquiries when contrary legal advice was provided, could be seen not to have acted in good faith and might well be in the gun personally for any losses suffered by council.

Hamilton today, Kaipara tomorrow?

If I was a Councillor of the KDC I would be getting very nervous about the missing millions lumped into the EcoCare debt. The suspicion is that Council may not have followed the correct legal procedure in extending the EcoCare scheme and substantially increasing the debt.

Ratepayers are waiting for evidence of legal compliance, but given Council's contemptuous attitude to legal compliance in respect of EcoCare rates and development contributions, and in other areas, the bets are on that Council failed to comply with the requirements of the LGA.

If that is the case then all hell will be let loose.

Rodney Hide must be well pleased that he only has a few weeks to go.

I understand that Barbara Ware, the Corporate Service Manager at KDC, is writing to all ratepayers who are refusing to pay EcoCare rates citing section 60 of the Rating Act.  This provisions states that a ratepayer cannot refuse to pay rates on the grounds that the rates are invalid unless the ratepayer has filed proceedings in the High Court.

Legal Eagle has received such a letter and I am appalled that Council should be using such high-handed tactics in the present situation.

The letter from Barbara Ware starts off by saying that Council is progressing the independent review of the rates. She then goes on to note that Council is not aware of anyone bringing proceedings in the High Court to challenge the validity of the rates, and because of that penalties for late payment will be imposed on the rates.

What a silly statement. Helen Curreen of the MRRA, John Dickie and myself negotiated with the Deputy Mayor earlier in the year the terms of the independent review into the EcoCare rates and ancillary matters. The basis of the review and the terms of reference were all agreed and Julie Geange undertook to proceed with the review on the agreed basis. (More on the progress on that in a later article)

Having negotiated that agreement why on earth would a ratepayer want to file proceedings in the High Court? We were happy to wait for the outcome of the review.

However, Council is clearly not so patient. Even though everyone in Council harbours serious doubts about the validity of the rates, Council simply cannot shed the entrenched confrontational approach of Jack McKerchar and is threatening ratepayers with the enforcement provisions of the Rating Act, rather than waiting for the outcome of the review to see if it is legally entitled to act.

The citing of section 60 of the Rating Act by Barbara Ware dates back to some bizarre legal advice received from Bell Gully, the Council's lawyers.

I had made submissions to Council to the effect that all the rate assessments for the EcoCare rates were invalid because Council had failed to include in the assessments all the information that, pursuant to section 45 of the Rating Act, must be included in the assessments.

This is a very important legal issue as it is the delivery of the rates assessment in the correct form that creates the legal obligation on the ratepayer to pay the rates (section 44). No proper rates assessment - then no obligation to pay the rates. Simple

Bell Gully advised Council that my view of the matter was correct and that all the rates assessments for the first three years of EcoCare were invalid. So far so good.

Bell Gully failed to mention the significance of section 44 and the delivery of a compliant rates assessment creating the liability to pay rates. Instead it referred to section 60 of the Act.

Section 60 A person must not refuse to pay rates on the ground that the rates are invalid unless the person brings proceedings in the High Court to challenge the validity of the rates on the ground that the local authority is not empowered to set or assess the rates on the particular rating unit.

Whilst acknowledging that the rates assessments were invalid Bell Gully argued that ratepayers still had to pay the rates because they had not brought proceedings in the High Court pursuant to section 60.

On the surface that interpretation of section 60 would seem to make sense. However it would make a mockery of the Rating Act. The Act sets out stringent requirements for the rating documentation that must be complied with. How ridiculous then to include a clause that gives a local authority the power to ignore all the requirements of the Act and yet insist on payment of the rates because the ratepayer in question had not filed proceeding in the High Court.

And yet that is the argument that Bell Gully put to Council, and that position was clearly accepted by Council. Non-compliance was irrelevant as section 60 was paramount.

There was no suggestion that the rates assessments should be corrected for the three years when they were acknowledged as being invalid because, presumably, that was irrelevant on the basis that ratepayers had to pay the rates anyway because of section 60.

Bell Gully did advise Council that the rates assessment form should be reviewed for the 2011/12 year to make it compliant with the Act. This seemed contradictory. Why bother taking trouble complying with the Act if Council could use section 60 to enforce payment of the rates? According to Bell Gully's argument the rates assessment could be made up of an extract from War and Peace and still be enforceable.

As it happened amendments were made to the format by the Chief Executive (without checking with Bell Gully) for the 2011/12 rating year, but unsurprisingly, given his track record, the new format still failed to comply with the requirements of the Rating Act.

That means that all rates assessments for all four years of the EcoCare rates are invalid and ratepayers have no legal liability to pay the rates.

So what of section 60?  I confess that I find it hard to understand what it means, especially the last part of the sentence. However, what is clear is that ratepayers are not compelled by section 60 to pay the EcoCare rates. There are two legal arguments.

EcoCare levies are not rates under the Rating Act
A local authority has no inherent power to charge rates or levies of any type. Such powers are created by statute and the requirements of those statutes must be complied with to the letter.

This dates back to Magna Carta days when the courts laid down the basic rule that any statutory power to levy a tax charge against citizens should be interpreted very strictly to prevent abuse of the system by the authorities.

The power of a local authority to set, assess, and collect rates is embodied in the Local Government (Rating) Act 2002 which is commonly referred to as the Rating Act. The Act sets out a rates procedure with very strict requirements for the drafting of the rating documents. Compliance is essential.

Although the word "rates" is bandied about quite freely, it actually has a special and specific meaning under the Rating Act. Section 5 of the Act gives a definition of "rate" for the purposes of the Act:

• rate—

(a) means a general rate, a targeted rate, or a uniform annual general charge that is set in accordance with subpart 2 of Part 1;

Subpart 2 of the Act specifies all the requirements for the rating documents.

Essentially this means that a rate is only a rate under the Act if it is set in accordance with the Act. If it is not set in accordance with the provisions of the Act, as is the case with KDC's EcoCare rates, then it is not a rate under the Act. The provisions of the Act do not therefore apply to it, including section 60. The ratepayer is not refusing to pay rates as defined by the Act, because no rates have been set in accordance with the Act.

So what is this so-called rate that KDC have charged? It is an illegal levy that Council has no power to make. Council has acted ultra vires (outside its legal powers) in charging the rate and is legally obliged to refund any payments. It may be guilty of misfeasance (negligent wrongdoing), and perhaps malfeasance (deliberate wrongdoing), and there is a potential criminal liability for theft and obtaining by deception or obtaining by threats under the Crimes Act.

Invalidity of assessments
The second legal argument is that section 60 does not apply because the ratepayer is refusing to pay the rates, not because the rates are invalid, but because the rates assessment is invalid. Even if a rate is clearly valid then there is no legal obligation to pay the rate if the assessment is invalid (section 44). The ratepayer is challenging the validity of the assessment and not the rate itself.

Advice to ratepayers
My advice to those ratepayers who have received such letters from Council is to respond as follows:

I advise that section 60 of the Rating Act does not apply to this situation because the EcoCare rates are not rates set in accordance with the Rating Act (section 5 Rating Act - definition of a "rate"). The enforcement provisions of the Act, including section 60, do not therefore apply.

I also advise that the rates assessments for all four years of the EcoCare rates are non-compliant with the provisions of the Act (section 45), and accordingly there is no legal liability on me to pay the rates (section 44).

I suggest that you refrain from any illegal enforcement action until you have a fully independent legal review of this issue.

Please let me know if you receive any threatening letters from Council.   Do not pay any rates that you do not understand or consider unreasonable.  You can contact me at:

The Hamilton City Council is in completer disarray and its future is in the hands of the Minister of Local Government.  The NZ Herald reported on 5 November that the Minister has been asked to sack the councillors and appoint the Mayor as a commissioner to run the Council.

A recent Audit NZ report criticised the Chief Executive and his deputy for "poor reporting, spending millions of dollars without authorisation, and keeping the council in the dark over significant issues".

The Herald also states that the report found that councillors had agreed to the deals relating to the V8 races without seing copies of the contract and had made too many decisions in meetings closed to the public.

Apparently there are further concerns about the mismanagement of other projects and the total spending on one project being manipulated.

No doubt the councillors of the KDC will be watching the case with interest.  As will Kaipara ratepayers.

The question of legal liability for councillors has again cropped up in the news.  In addition the practice of councillors being involved in the review of their own prior questionable actions has been seriously queried.

In the NZ Herald report of 31 October Michael Redman, who resigned from his top post with the Auckland City Council after a damning audit into the failed V8 street race, and the former Mayor of Hamilton Margaret Evans, have both called for the resignation of councillors and managers of the Hamilton City Council.

Margaret Evans called it "daft" that the council was still taking advice on how to solve problems from staff who were responsible for getting them into the mess. 

She added that "the entire financial mis-management over the last 10 years is a case study of ineptness".

It appears that daftness and financial mis-management are not the sole preserve of the KDC.  It also seems that the concept of independent reviews is a very rare animal in local government.

Serious questions need to be asked about the conduct of the Auditor General's Office in relation to the dreadful performance of the Kaipara District Council.  Several ratepayers lodged complaints with that Office concerning the illegal rating practices of the Council in setting the EcoCare rates for the Mangawhai sewerage system.   The Office of the Auditor General (OAG) chose to turn a blind eye to the matter even though there was clear evidence that the KDC failed to comply with both the Rating Act and the Local Government Act for three years in virtually all of its rating documents.

Not only were the rates non-compliant with the legislation, there is ample evidence to suggest that the Council was verging on criminal activity.

For instance: 

* Council levied a targeted rate in 2008-09 for a service that was not available, and that it knew would not be available at any time in that rating year.  Obtaining by deception under the Crimes Act (here)?

* Council levied rates for part of the 2009-10 rating year when the legislation clearly forbids this.  Obtaining by deception under the Crimes Act?

* Council created a whole new concept of rating separate units (SUIPs) under the farcical "unit of demand" regime which has no legal basis whatsoever, and yet ignored every bit of legal advice on how to levy the rate legally. Obtaining by deception under the Crimes Act?

The only action that the Office of the Auditor General took was to recommend an independent first principles review.  That was well over a year ago.  The independent review was captured by the Chief Executive (with the support of his side-kick the Mayor and abetted by unquestioning Councillors) and has still not been commissioned.

The OAG remains disturbingly silent on the matter,

It is difficult to understand why the Office of the Attorney General has allowed such flagrant breaches of the law to continue without taking any action.  Legal Eagle has previously highlighted the fact that Audit NZ (part of the OAG) which carried out the audit of the last long term plan of Council failed to pick up major matters of non-compliance and omissions in the funding impact statement which is a fundamental part of the rating process.  Some of these omissions were also commented on in the report by PJ Associates.

Is the OAG keeping silent about Council's ineptitude and invalid rates because its own failings contributed to the debacle?

Or is the system of local government so fraught with problems that the statutory authorities are staying well clear of this Pandora's Box?

Legal Eagle has taken some time out to watch events unfold.  We have seen the Mangawhai Residents and Ratepayers Association holding two public meetings in opposition to Council's handling of the EcoCare debt and ancillary matters. 

At the first meeting we saw Mayor Tiller yet again making a fool of himself and bringing Council into disrepute by making comments that were palpably untrue.

It was also good to see that some Councillors attended the first meeting even though there was an unofficial ban on doing so from the Chief Executive.  We have yet to see whether any of the Councillors (besides Councillor Larsen) can hear the songs being sung by ratepayers.

Jack McKerchar packs his briefcase today and finally leaves the building. I am sure that it will come as a great relief to Councillors, Council staff, and certainly to all ratepayers.

For a while there was uncertainty as to whether he would actually go. The Mayor is so unpredictable and the Councillors so lacking in resolution that the odds were on him staying on as a consultant.

I am sure that most ratepayers will agree that we are well shot of the man. He has created a legal chaos in respect of the EcoCare rates (in collaboration with a Council that blindly rubber-stamped his feeble attempts at legal compliance) that will need government intervention to sort out. The debts owing because of EcoCare and other botch-ups have yet to be genuinely quantified but I suspect that he has left behind a Council that is completely insolvent and that is going to struggle to meet its financial commitments.

At this stage ratepayers, and let's be honest, the Mayor and Councillors, do not have the foggiest where all the money has gone. The Mayor and Councillors are clearly prepared "moving forward" (their new catch-phrase) to turn a blind eye to the past incompetences and failings and obviously are not interested in finding out whether the missing millions have been lost because of incompetence or for other reasons.

Ratepayers are not silly. They are well aware of Mayor Tiller's attitudes and they know that he will dump as much of the the huge Council debt as he can on the ratepayers of Mangawhai, knowing that his Councillors and the ratepayers of the West - who are in a majority - will support him. After all, not one single Councillor pays the EcoCare targeted rate.

I am sure the MRRA will not allow that to happen. There is a graveyard of skeletons in the cupboards in the Council's offices and I am sure that Mangawhai ratepayers will insist that the Minister carries through a thorough investigation to find out if Council has acted appropriately in relation to the EcoCare debt and other matters.

I am also sure that ratepayers in Mangawhai will ensure that if there is any evidence of incompetence or inappropriate behaviour then those responsible will be brought to task by the appropriate authorities

Legal Eagle has long made the point that councillors are responsible to ratepayers in the same way that company directors are responsible to shareholders. They have the same duty of care. Almost every day in the newspapers there is a report on wayward directors failing to comply with their legal obligations.

In today's NZ Herald councillors have their turn at being roasted. In an article on the audit report into the Auckland City Council's handling of the V8 races the following comments are made:

"Peter Davies (the Director of Audit New Zealand) also criticised the city's councillors, who he said should have challenged the number of public excluded meetings held, demanded more information and asked for copies of contracts before making any decisions."

That will ring some bells with Kaipara Councillors who have set a pattern of deliberately ensuring that they are denied access to financial information and to legal opinions. Presumably, this is on the basis that if they don't know then they can't be liable.  It may well be that such behaviour will come back to haunt them.

Acting in "good faith" does not mean acting in ignorance. Councillors have a legal duty to enquire into every aspect of council's activities and obtain all the information that they can so that they can make informed, independent decisions.  If they fail to do that then they have breached their legal obligations as councillors and could find themselves legally responsible if things go wrong and losses are suffered.

In an article in the NZ Herald headed Shape up or go, directors told, the Institute of Directors warns directors to shape up or ship out.

We have already seen how elected Councillors have similar responsibilities in law to company direcctors, and this is a timely warning for those Councillors of the KDC who believe that they are free to endorse the opinions and actions of the Chief Executive without any personal enquiry or understanding of the situation.

The article refers to the recent court decisions setting out the legal responsibilities of directors and a note released by the Institute of Directors warning directors of their legal responsibilities.

The Insititute's chief executive, Ralph Chivers, stated: "If someone doesn't understand the business they are on the board of or they struggle with the accounts [they need to remedy that] because they are going to be held liable and potentially prosecuted if a company fails and they're found to have breached their duties."

Not only do the Councillors of the Kaipara District Council not only not understand what is going on with Council finances, they passively accept the fact that they are denied access to many of the accounts and financial workings by the Chief Executive,  The whole thing is a charade and Councillors, in ignoring their legal responsibilities, are playing a very dangerous game.

The Chief Executive has admitted to another serious and costly gaffe in respect of the statement of proposal to replace the EcoCare one-off rate that was adjudged invalid by Bell Gully for the first three years of EcoCare.

Earlier this year Bell Gully agreed with Legal Eagle's contentions that one-off rate was invalid because of the failure of the Chief Executive to comply with the requirements of the Rating Act. Ironically the Chief Executive's attempt to remedy the situation by using the replacement of rates procedure in the Rating Act has now been declared to be invalid as well.  See the rest of the article here.

The Kaipara Lifestyler has an article on the proposed MRRA public meeting this weekend about the EcoCare rates.  The Chief Executive is reported as making the following comment:

“(Council) has given an undertaking to the Mangawhai Residents and Ratepayers Association and two other individuals, that it will carry out an independent review of the scheme,” Mr McKerchar says.

“It does not want to impair that process.“

The review is in fact the independent review recommended by the Auditor-General into the legality of the EcoCare rates.  It is not a review of the scheme itself or the EcoCare debt.

What the Chief Executive does not say is that the Auditor General recommended the review over a year ago and the Chief Executive has dodged the bullet for over a year.  Why?  because he knows that any independent review is going to reveal to the world the ghastly mess that he has made of the EcoCare rates over the past four years.

Slowly, Councillors are beginning to realise that when it comes to rating their Chief Executive is still in Primary School.  Firstly, the one-off rate was declared to be invalid.  Secondly, the rates assessments for all three years of EcoCare were held to be invalid.  And in the Agenda for the next Council meeting It has just been revealed that Bell Gully has confirmed Legal Eagle's submissions to the effect that the statement of proposal that the Chief Executive prepared to fix up the illegal one-off EcoCare rate was also non-compliant with the legislation. 

Believe me, there are many, many more matters of legal non-compliance waiting to see the light of day.

But more about the latest bungle later.(See the comment above)

The Mayor argued that Council had relied on a template from the Society of Local Government Managers when preparing the rates resolution for the current year.  A request under the Official Information Act has established that there is no such template.  There are other guidelines quoted by Council but they contradict what the Mayor says. For more go here.

The Mangawhai Residents and Ratepayers Association (MRRA) has moved into action.  It is holding a public meeting in Mangawhai on 25 September to discuss ratepayers concerns about Council's handling of the EcoCare debt and other matters.

It is unsure at this stage if anyone from Council will attend.

The notice of the meeting can be seen here.


So how did the Minister come out of his meeting with the Mayor?

I am sure that many would be disappointed that the Mayor got off with a severe reprimand and a brutal beating with a soggy page from the Local Government Act.

But there was little else the Minister could do at this stage. Local authority governance in New Zealand is in a dreadful situation. It is based on a bunch of amateurs with no qualifications or appropriate expertise running a massive undertaking that rivals some large public companies. Invariably it presents opportunities for a skilful Chief Executive to hijack the undertaking and for consultants to take over the effective running of the local authority.

I imagine that the problems facing Kaipara could be duplicated all over the country in other local authorities to a greater or lesser extent.

If the Minister was to admit each of these as a problem then the whole system of local government would collapse.

We need to look at the positives. The Minister is well aware of the problems. In his letter of 23 August 2011 he says to the Mayor:

I am aware that the Council is facing criticism over how it is managing its finances and other matters, including the funding of the Mangawhai Wastewater Scheme, its rates setting practices, and the Review of the District Plan. Concerned ratepayers have asked me to intervene in how the Council is being run.

He shows an awareness of the PJ Associates report and the problems identified in that report. He seeks further advice on the steps being taken by Council to address those problems.

He is au fait with the EcoCare rating problems:

I am also aware of continuing concerns about the process the Council follows to set its rates. as I have mentioned in previous correspondence, I cannot comment on the validity of these procedures or on the steps you have taken to resolve the problems that were identified by your legal advisors earlier this year. However, I am advised that, at least on the surface, your rates resolutions for 2011/12 seem to have perpetuated some of last year's issues. I would like information about what the Council is doing to ensure that problems do not recur and that elected members and staff have the skills necessary to deal with this important responsibility.

The Minister has decided not to take immediate action.  He wants to give Council the opportunity to sort its own problems out.  In his press release of 8 September 2011 he states:

But progress needs to be made. I told the Mayor the Council is on watch.

“I have asked my officials to continue monitoring the situation in Kaipara and to keep me apprised of progress. I have also asked the Mayor on behalf of the Council to report progress to the new Minister of Local Government by 30 April 2012.

That is an awful long time to allow Council to fix up the problems that it created itself.  The Minister has not just kicked the ball in to touch, he has kicked it over the grandstand.

It is now over to ratepayers to decide if the existing Council has the competence and the attitudes to resolve all the problems.  If they feel betrayed and have no confidence in Council then they need to make this clear, en masse, and tell Councillors in plain terms how they feel.

And if they think that it is appropriate for the Minister to appoint a review authority to investigate certain aspects of Council then they need to argue their case and put pressure on the Minister to take action immediately.

Only a really squeaky wheel will get oiled.

It is always fascinating to see the positive spin our Mayor puts on events that every sane person sees as an unequivocal criticism of his stewardship of Council. The report of PJ Associates panned the Council for its financial management, for its accounts riddled with errors and inconsistencies, and yet the Mayor proclaimed to the world that the report established that "Strong Governance Gives Strong Financial Management".

On Friday the Mayor was called to the Headmaster's study for a severe reprimand because of the unacceptable standard of his schoolwork. He received a far gentler admonishment than he deserved but he was made very aware that his performance was not up to scratch. He was told that he was "on watch".

Most of us in that situation would have felt that we had not only let ourselves down but also that we had let our ratepayers down. We would have felt duly chastised and a little ashamed.

Not Mayor Tiller. According to the Northern Age (here), he proudly declared that "It was a bloody good meeting". That suggests a certain amount of relief at the result of the meeting. I am sure that the Mayor expected that it would end with his blood on the floor and that he might be joining his henchman with a one way ticket back to his farm.

He also added: "We are not the only council in the country to be in this position".

He may find some personal justification in that, but most of us would find little to celebrate in the fact that we had just been relegated to the bottom class of non-performers with a bunch of third rate no-hopers.

What happened to his dream of Kaipara becoming the "best little council in New Zealand" under his leadership? Legal Eagle suggested at the time that more likely his legacy to the people of Kaipara would be to make it the WORST council in New Zealand.

His last pearl of wisdom is that "we are taking the right steps to address the issues."

But, Mr Reasonable would say to me: "Isn't this the same joker who caused all the problems in the first place. Wasn't he the guy who turned a blind eye to the excesses of his Chief Executive and gave him carte-blanche to wreak his havoc on Council?"

"Why would you allow someone who was responsible for the shambles that has been created another seven months to try and fix up the mess that he himself is responsible for?

Yes Minister, a good question. Why?

Next: Part 2 - the Minister

Often you never quite know what a manager or a leader is like until they actually leave office and the experts are freee to scrutinise the records that they have left behind.

I don't know much about Tony Blair the ex Britsh PM but he seemed a decent ehough sort of chap in an innocent Cliff Richard sort of way.  Smart and charming with an attactive wife who was a QC.  He even described himself as "a pretty straight kind of a guy".  He was in NZ recently and I am sure that he charmed everyone.

The reality is that he was about as straight as a boomerang.  That is how he is described by Peter Bills in a NZ Herald article of 10 September 2011 in a review of a book by Andrew Rawnsley entitled:  The End of the Party: The Rise and Fall of New Labour

According to Bills, the book lays bare Blair's evasions, private wars with colleagues and deceits during a decade in power.  It chronicles a series of appalling lies, misjudgments, prevarications and abuses of power at the heart of the British government.

The book suggests that the Blair and Gordon Brown team created a cancer that destroyed Britain.

Bills goes on to say :

If ever you wondered how inferior people got into power, kept it and abused it, aided by an acquiescent Cabiinet which had been neutered by by both men from the start, then Rawnsley's book is essential reading.  

It couldn't happen here, could it?

So what was the outcome of the big meeting today?

See Legal Eagle's spin on it ..............


[For previous Job Application cartoons go here]


There have been suspicions that the McKerchar-Tiller regime has always been more interested in looking after the best interests of its consultants rather than its ratepayers.  There have been suggestions that Council has been "captured" by consultants.

Councillor Larsen has recently raised questions about the massive overrun in costs for the EcoCare Scheme and where all the money has gone.  No one seems to know, except the Chief Executive and he is not telling.

Ratepayers are left to speculate.

Then, out of the blue a story emeges about Beca, one of the Council's principal consultants, allegedly underestimating the costs of a sewerage upgrade for the Masterton District Council which could result in a blow-out of $6.6 million.

Council has instructed a QC and is now looking at suing Beca for inaccurate advice.

The Mayor Garry Daniell says news has left the district "in a state of disbelief and anger".

Mmm.  Compare the reaction of our Mayor to an overspend of at least $27 million on our EcoCare sewerage scheme with no hint of where the money has gone.  Not a whimper from him.  No Q.C.  No involvement of ratepayers.  No concern.  No legal action.  Just total acquiescence. 

To read the article in the Wairarapa Times-Age go here

More on the liability of Councillors for losses under the Local Government Act.  Extracts:

When it comes to legal advice, members are entitled to rely on it. However, they are not entitled to rely on the Chief Executive's representations of what that legal advice is. They must see it for themselves. In a situation where the legality of a proposed action by Council is being challenged, members have a duty to scrutinise the legal advice for themselves. Relying on vague, misleading advice from the Chief Executive that Council was acting on advice from the Council's solicitors is not going to cut the mustard in a court of law.

Passing a resolution to deny themselves access to the legal opinions of Council's lawyers is a clear indication that members have abdicated from any responsibility for Council's actions and abandoned all pretences of acting in good faith.

Go here for the full article.

Go here for another article on the Nathan Finance case and the duties of company directors.  Councillors of KDC could be legally responsible in the same way if it could be established that they too had failed to carry out their duties in compliance with the law..

According to the NZ Herald former French President Jacques Chirac is facing a prison sentence for offences committed when he was Mayor of Paris from 1977 to 1995.

He faces charges of misuse of public funds, breach of trust and illegal profiteering.  The main accusation is that he put 21 cronies and party loyalists on the city payroll.

If convicted he faces up to 10 years in jail and a fine of up to 150,000 euros.

The Kaipara pool has serious financial problems and may not open this coming season.  See the article in the Kaipara Lifestyler here.  Another of the Chief Executive's successes that he mentioned when he resigned recently, according to the Northern Advocate :

Other highlights he noted included ..........the Mangawhai wastewater scheme and the new swimming pool in Dargaville.

That must be the white elephant and the blue elephant.

Legal Eagle looks at the legal liability of elected members (councillors) where a council has lost monies because councillors failed to perform their legal duties adequately. 

The Nathans Finance sentencing sends a warning to all those who owe a duty of care to ratepayers.

Go to the article here.

No news yet on the SOLGM template that the Mayor claims was used to prepare the incomprehensible, mistake-ridden and legally non-compliant rates resolution for this year's rates.  I have made an application for a copy under the Official Information Act.

I wonder if I will get a response or whether they will claim legal privilege.

I must add candles to my shopping list.

While in Australia recently an ex Kiwi taxi driver asked me how things were getting on in the old country.  We started talking about rorts and somehow we got on to the Kaipara District Council.  I told him briefly what was going on in Kaipara.  His was staggered and wanted to know what the government watchdogs were doing about it.  I pointed out that it was the Rugby World Cup and the ombudsman, the Auditor General and the Minister had kicked the ball into touch, and seemed quite relaxed about a council acting completely outside the law and incurring a humungous debt without being able to explain where the money had gone. 

"But what about the Councillors?' was his next question.  "How could they allow such things to happen?"

We mulled over various reasons why a group of individuals elected for the task of protecting the best interests of their ratepayers chose to turn a blind eye to the illegalities, the incompetence, and shady goings-on of the Council.

In the end we agreed that it was beyond rational understanding.

If you tell the truth you don't have to remember what you said.  But if you are given to spin, and a smoke and mirrors mentality, it is very hard to be consistent.

We have heard all sorts of figures about the size of the Mangawhai debt and the core KDC debt.  Legal Eagle has suggested in a previous post that given the state of the Council's finances it is impossible to hazard a guess at what the true Council debt is and how much of that is because of the EcoCare debt.

In an article in the Dargaville and District News of 31 August 2011 Barabara Ware of the KDC states that the EcoCarebdebt is now $60.1 million which is huge increase on what we though it was earlier in the week.  No doubt Barbara will be dragged over the coals for the loose comment, but it only goes to show how out of control the McKerchar circus is.  Given the supposed expertise of the Chief Executive, his staff, auditors, consultants and Uncle Tom Cobley and all, it is sobering to know that the Chief Executive has not got a clue how large the actual debt is.

Equally alarming is the Chief Executive's naive admission that he knew all along about the EcoCare debt problems.  In the same article referred to above he says that he knew the EcoCare debt was going to be high as far back as 2003.  He has also admitted in the Chief Executive's report for August 2011 that he knew there were caveats on the debt at its inception.  In addition he received two financial reports from Larry Mitchell that sounded serious warnings about the debt........ 

All this knowledge and information. All these warnings.  So, what did he do?  What steps did he take to monitor the situation and re-examine the financial models?  What steps did he take to keep the Finance portfolio holder up to date with the situation?  What steps did he take to let the Councillors know of the situation and seek their input on these serious matters?  What steps did he take to bring the matter to the attention of the ratepayers in the draft long term and annual plans so that they could have some understanding of the problems and have some input into solutions (after all it is the ratepayers who have to repay the debt)?  WHAT DID JACK McKERCHAR DO?

Everybody knows the answer.  He did absolutely nothing.  While the debt was cranking up at an alarming rate the Chief Executive remained stumm about the whole thing.  He took no action.  He issued no warnings.  He let the fire burn and simply watched.

And what about the legal duty of care that he owes Council and the ratepayers? 

It was buried in his bottom drawer with the Larry Mitchell reports, the EcoCare financial models and the legal opinions that he will not let Councillors see.

(Note in the same article, how the Chief Executive puts the blame on the Government's change in policy.  A fine example of smoke and mirrors technique to cover up his own incompetence and abdication of responsibility.)

Legal Eagle is not impressed with Mayor Tiller's response to claims that Council turned a blind eye to the defects in the rates resolution for 2011-12 and did not act in good faith.  The usual smoke and mirrors that we have come to expect from a Mayor who is becoming more and more detached from the realities around him.

Read the latest posting on Tillerspin (here) and the warning to the Mayor and Councillors, and the Chief Executive, implicit in a letter from the Minister of Local Government, The letter suggests that Council staff and elected members need to ensure that they have the skills necessary to deal with the important responsibility of setting rates in compliance with the law.

Tough words from the top.  Are you listening Councillors?

Chief Executive Jack McKerchar is facing criticism from all quarters for his failure to release the Larry Mitchell report to Councillors immediately it became available in February this year.  By denying Councillors access to the document none of the urgent matters highlighted in the document were given any consideration during the draft annual plan round earlier this year.

Even those Councillors who are stalwart supporters of the Chief Executive, and who have largely chosen to turn a blind eye in respect of his incompetence in the EcoCare rating area, are now beginning to question his motivation in this instance.

Perhaps of equal significance is the fact that the Chief
Executive obtained another report from the same author in May 2009.  If that report, which I understand was also kept secret, contained similar caveats about the EcoCare debt, and the Chief Executive failed to disclose them to Council, at that time, then that would suggest that there has been an ongoing breach of the duty of care that he owes Council as its Chief Executive.

For the story as reported by the Northern Advocate go here.

The Deputy Mayor, Julie Geange, acknowledges that she did not know of the February 2011 report.  She is the Finance Portfolio Holder and would no doubt, in private, be furious that she was treated so shabbily by the Chief Executive.

I have a fairly basic knowledge of financial accounts based on owning several businesses, so I am no expert in these matters, but I reckon I can recognise a “pup” when I see one. There are two that leap out at me.

One is the segmented debt concept that we are hearing so much about (and which I suspect is going to be the ruination of Council). How is that when it comes to a council’s "core" debt there are the benchmarks of prudence and considerations of sustainability that dictate how much can be borrowed, but once a debt is entitled a "segmented" debt all those benchmarks and considerations become irrelevant. It strikes me as being nothing more than a financial sleight of hand that does not bear close scrutiny. 

Keep an eye out for all the tricksters.  The smoke and mirrors department at the KDC is apparently in overdrive.

The other is this comment from Larry Mitchell in his report:

This capital introduction is the ‘other side of the debt story’. That is, the increased KDC debt is offset by matching (Mangawhai) assets.

In other words, you borrow $53 million to buy an asset but that is balanced out by an asset worth $53 million as capital in the books. Hold on!  What if the asset is a second hand, second-rate, out of date, poorly built, badly connected sewerage plant that was grossly overpriced in the first place? The amount you borrow to buy or build an asset bears no relation to the value of the asset in the books.

If "Arfur" Daley from Minder were around you would be lucky to get a fiver for it.

Watch for the next round of accounts to see how this asset is treated and how much devaluation is ascribed to it. Also expect some creative accounting to disguise the true situation. Desperate people, desperate measures.

Note also this comment from Larry Mitchell:

One additional point. Added assets, for which the KDC becomes responsible, can be a burden even though KDC‟s net worth is improved. This is due to the extra asset maintenance commitments and no doubt substantial added administrative overheads associated with this complex EcoCare project.

In other words, white elephants often have healthy appetites.

This is what Larry Mitchell really said in his report:

[My highlighting]

 In spite of all safeguards and in addition to the dangers of policy amendments (above), the reality is that financial failure of Mangawhai’s ratepayers, the personal residents, developers and commercial property owner’s may emerge, (have started), legal actions could bring challenges, (they have already appeared) and bad debts may continue to increase, (as pointed out elsewhere they have, to June 2010 increased in one year by $3.6 M to $5.0 M).

In addition, debt servicing (interest and some principal) costs are rising steeply, up $1 M to $3.8 M in June 2010 and are reportedly increasing in the current year, largely as a result of EcoCare debt. Note also amongst this report’s debt graphs the core KDC debt, (excluding EcoCare) is itself ‘amongst the third highest’ debt level of the KDC peer group of 10 similar Councils. All in all ... ‘hang onto your hats’.

Note this quote from the Northern Advocate (here):

But earlier this week Mr Mitchell told the Northern Advocate the council would have to make some tough decisions in order to address its"unsustainable" debt, which he described as presenting similar crises to those threatening the European Union.  [my highlighting]

Now Larry Mitchell knows what he is talking about. He is an expert in his field. He reviewed the finances of Kaipara District Council. He wrote the report. Presumably as a financial analyst he is well aware of the problems facing the European Union. What he is saying therefore is that like Greece in the European Union, and perhaps Italy and Spain, Kaipara is a cot-case and URGENT action has to be taken to salvage it.

Meantime the person who created all the problems is still in the seat of power, still making meaningless promises, and amazingly negotiating a new employment contract with the council that he has served so appallingly.

When will all this madness stop?

The relevant extracts from the Report can be seen here.  Read what Larry Mitchell has to say himself about Council's dire situation and then compare how the report looked after it had been through the McKerchar-Tiller spin factory (here ).

And for those in Mangawhai who are connected to EcoCare, start gritting your teeth now because you are going to have to foot the whole bill for the Council financial cock-up. Larry Mitchell even suggests tying it up legally so that not a cent of the EcoCare debt is paid by the rest of Kaipara. 

Why was the Mitchell report kept secret?  What did the Chief Executive have to hide? See the list of questions that ratepayers are asking here. 

For years Legal Eagle has been lambasting Council about the legally non-compliant EcoCare rates and the legally non-compliant development contributions.  I have issued dire warnings about the consequences of failure to comply with both the Rating Act and the Local Government Act, and warned that the courts will take a very dim view of such illegal activities. 

Of course my comments have been completely ignored by the Chief Executive and the Mayor who both claim to be "unaware" of the legal chaos they have created.  How bizarre, therefore, that in the Chief Executive's report of 24 August 2011, the Chief Executive includes this priceless snippet:  (go here)

Go Here and click on PJ Associates Report and you will find articles about that debt, including why EcoCare was doomed from the start. 

Also, Legal Eagle asks some important questions about the true size of the KDC debt (behind all the smoke-screens). 

He also questions the whole concept of "segmented debt" and muses that it is simply a ploy to avoid the rigours of the industry benchmarks for debt.

Finally, there is a reflection on the role of the auditors and why they completely ignored the financial debacle that was unfolding.

So what is this segmented debt business that all the financial reports are talking about?  Since the Chief Executive announced his retirement financial reports have been coming out of the woodwork and they all talk about segmented debt.  In the first of a series of articles Legal Eagle looks at the concept of segmented debt and explains what it means.  In subsequent articles he will examine the EcoCare debt and why it failed.  He will also be looking at the conflicting advice from the experts, and whether the Kaipara District Council should be trusted to resolve the financial problems that have arisen because of its own incompetence.

For the article on segmented debt click here and go to PJ Asociates report.

We are going to hear a lot in the next few weeks about the massive debt that the McKerchar-Tiller-Geange.triumvirate have left as a legacy to the ratepayers of Kaipara.  Or is it just to the ratepayers of Mangawhai?  Legal Eagle has been probing into the intricacies of segmented debt and how the Council managed to impose a $53 million of debt on the thousand and so ratepayers in the Mangawhai
EcoCare Zone, and get away with it.  And now that same Council is secretly deciding how it is going to try and worm its way out of the problem without consulting the ratepayers.

Council has two financial reports before it, both highlighting the shambles that it has created.  Both are very matey, lightly over, obviously with limited access to vital information, and with very limited terms of reference.  Both reports highlight the same problems but they each offer different solutions.  One suggests that the EcoCare debt is spread over the whole district, whereas the other insists that the EcoCare debt must be ring-fenced and paid by Mangawhai ratepayers only.

Before I get into that, it is worth having a look at the letter of Garry Hooker in the Kapara Lifestyler about the responsibility for the debt and the Mayor's response to it.  Should be compulsory reading for the Mayor at breakfast time.  As Garry says, why did the Mayor and the Councillors not pick up the financial problems long ago and take some remedial action?

The Annual Plan has just been adopted.  There is absolutely no hint in that document of the massive problems that have apparently appeared out of nowhere. 

Who was sleeping on the job?  Or who was completely out of his depth?

 Don't forget to keep up with the posts of Workboot and the comments from ratepayers at the Workboot website

I was fascinated by Michelle’s post on Workboot’s site about the book Practical Intelligence and the “Groupthink” mentality.

Most of those who are critical of the Council are amazed by how accurately it describes the behaviour of some of those charged with running the Council, especially now that there is some clear opposition to the way that they have been running things in the past.

But the interesting question is: Do those people who we see as exhibiting the “Groupthink” tendencies see their own reflection in this mirror, so to speak?   

Chances are that they do not.   Those who follow certain common human behavioural patterns are probably the last to realise that they are driven by their genetic make-up and basic human tendencies. 

The other point is that it is highly likely that those who demonstrate "Groupthink" tendencies will elect to stay clear of all comments and criticisms of their actions and attitudes.  I imagine that  those who are so predisposed have not read the comments on Workboot's site.  I suspect that they do not read the comments on Kaiparaconcerns, or the free legal advice that I send them.  

May I suggest that if anyone reading this article personally knows one of the people in Council who they think has a "Groupthink" mentality then it might be interesting to refer the "Groupthink" post to them and see if they they consider that it could refer to them.  The responses would be interesting.

Or any person in Council with "Groupthink" tendencies might want to contact this site and share some of their feelings. (See Contactus in the column to the right.)

The adverts are out for a new Chief Executive.  It is always interesting to see the qualities that are required from the new applicants and then look at the departing incumbent and see how well he would have scored.

The advert is headed with three clear requirements:

Inspirational leader

Passion for rural communities

Practical and "down to earth'

The advert goes on to list list key elements of success in the role:

* a forward thinking approach in promoting our district and regional vision,

* an ability to build strong strategic alliances with neighbouring Councils,

* a willingness to engage and build trust with our communities,

* skills at managing iwi relationships.

I am sure that many ratepayers will have their own views on the relevance of these qualities for Kaipara in its present state, and also how Jack McKerchar would measure up to the listed requirements.

The appointment of this new Chief Executive is so vital for Kaipara.  The departing Chief Executive has left a Council in a financial mess with a massive debt that I suspect is still seriously understated. 

He has created a shambles of the EcoCare rates and development contributions which have the potential to blow out the debt even further. 

He has bequeathed us a new gold plated, legally non-compliant proposed District Plan, that we do not want, do not need, and cannot afford, and the only people smiling are the Council lawyers and consultants who stand to benefit hugely from it.

He has left us a Council that has an appalling record for service, that has a reputation for arrogance, lack of governance, and little regard for compliance with the Local Government Act and the Rating Act.

Add to that the reputation that Council has assiduously earned for being hostile to development - which is so incredibly ironic when it is only development that can salvage Council from the financial morass that it is in.

Finally, he has left Council itself in a dreadful shape.  We have elected representatives who have compromised their duties and obligations and no longer function as they are legally supposed to function. Morale is low amongst staff and Councillors and there is an atmosphere of uncertainty and discontent.

All commentators agree that if Council is to survive then there have to be massive changes.  The first esential change is to get Jack McKerchar out of the building.  He has taken 18 years to get Council into the dreadful situation it is in and he is not going to suddenly fix all the problems in the two and a half months that he has left.

He should pack his bags and go immediately.

The next thing is that we should be looking for a Chief Executive who knows exactly what he is letting himself in for.  This is a seriously dysfunctional Council with massive financial  and governance problems and we need someone with exceptional skills to come in and put things right.  We need a Red Adair equivalent.  He was the guy who specialised in fixing fires in oil wells.

Getting a new Chief Executive who is unaware of the problems facing Council and simply does not have the appropriate skills is a hospital pass that we must avoid.  The Mayor and the Deputy Mayor need to redraft the advert and ensure that we attract the right sort of person. 

With the council amalgamations there must be a lot of experienced Chief Executives floating around and there may be one who would relish a real challenge like sorting out the mess at Kaipara.

Finally, we need the Mayor, the Deputy Mayor, and the Councillors to step up to the mark.  Some of the Councillors are relatively new but some have been there for some time. There needs to be a dramatic change in Councillors' attitudes, and that change needs to be immediate.  They need to make a list of all the urgent problems - the financial problems, the proposed District Plan, the legal compliance of rates and development contributions, etc - and get a full disclosure from the Chief Executive of all reports, legal opinions, details of legal actions etc, that they need to asses the current situation of Council. 

With Jack out of the building Councillors would be compelled to think independently and might start looking at the real problems and acting cooperatively with each other.  

The Herald on Sunday has an article about Kaipara District Council's debt spiralling out of control.  The article states that Kaipara "heads a grim list of councils that have laden their ratepayers with massive levels of debt".

To see the article click here.

Carrying on from the previous post, Legal Eagle explains in simple layman's terms how easy it is to set legally compliant targeted rates, and why it is so hard to grasp how the Chief Executive, his staff, the Mayor, the Deputy Mayor and the Councillors mades such a botch-up of it.

Legal Eagle also asks who can ratepayers trust to fix up the mess.

For the article go here.

Legal Eagle has written to the Mayor and each Councillor asking why they passed the rating resolution on 22 June 2011 when they were warned that there were serious legal errors and a simple perusal by a layman would have picked up some of those errors.  By passing the resolution when they were on notice that there were serious errors, they could no longer be said to be acting in good faith.

To see the letter go here.

I have set up a new page for the Proposed District Plan.  I am moving towards having a separate page for each of the major problems confronting the Council.  This new page includes the press release by a group of concerned ratepayers plus the legal opinion obtained from Paul Cavanagh QC.  Also included are the notices of motion of Workboot that relate to the proposed District Plan.

At the meeting of 27 July 2011 Council gave the go-ahead for the independent review of EcoCare rates by a barrister.  It is nearly a year since the review was recommended by the Auditor General.  In that time another year's rates has been illegally set.

This review comes at an interesting time.  In the last week or so we have seen the release of a financial audit from PJ Associates which is highly critical of Council's debt and its poor financial reporting and monitoring, and an opinion from Paul Cavanagh QC which is highly critical of Council's approach to the proposed District Plan.

It is amazing how some independent scrutiny can shed some clear light on the murky goings-on in Council's offices.

I have no doubt that the independent review of EcoCare will do the same.  I suggest that it will reveal a legal shambles that is almost unbelieveable.

To see the latest Council resolution go here.

Farmers of New Zealand says that the government should appoint a statutory manager for the Kaipara District Council.  For the full article in the Northern Advocate go here.

Council has made another major botch-up in respect of wastewater rates.  This time it is not the EcoCare rates but the wastewater rates for the rest of Kaipara.  Council has set the rates per pan even for residential properties.  Not only that, by means of an amendment that was made without Councillors' knowledge it has attempted to set a new one-off wastewater rate for the rest of Kaipara.  Devious or incompetent?  Legal Eagle suggests the latter.  For the full article go here.

That is how the Northern Advocate describes Mayor Tiller's attempt to block Councillor Larsen's notices of motion last week.  For the full article go here.

The Chief Executive of Kaipara District Council, Jack McKerchar, has resigned, effective 31 October.  The announcement can be viewed on the Council website here.  It is also reported in the Kaipara Lifestyler.

It is nearly a year since the Auditor General rejected complaints from ratepayers about the illegality of the EcoCare rates, but suggested an independent first principles review.  Earlier this month Councillor Larsen complained to the Auditor General about Council processes and the lack of financial information.  Interestingly the Chief Executive met with the Auditor General last week.  Methinks something is afoot. 

To read Legal Eagle's views on all this go here

Legal Eagle is concerned about the comments made by the Mayor in his Press Release of 14 June 2011.  He made comments about the financial report on Council's financial health and sustainability that had just been made available to the Council but not publicly released, at that stage.

The Mayor's Press Release was headed Strong Governance Gives Strong Financial Management.  One would therefore expect that this was the message to be gleaned from the financial report.  Nothing could be further from the truth.  In fact the opposite could be said.

That being the case, the Mayor either completely misunderstood the report, or he deliberately misrepresented its contents to the press and the public.

For the full article go here.

This is the heading of an article in the Northern Advocate.  To read the article go here

Legal Eagle did not think it would happen but the audit report on the health and sustainability of the KDC has been publicly released.  The audit is far from the glowing report suggested by the Mayor in public statements. 

It highlights the poor financial reporting by the Chief Executive and his staff and the errors in assessing the true amount of debt owed by the Council.  It suggests that Council needs expert help and a new strategy with strict reporting and monitoring systems if it is to cope with the increasing debt burden.  The ratio of interest payments to rates is way above the recommended upper limit.

 It singles out the EcoCare scheme as the basis of most problems.  It also mentions the review of the District Plan as being a cause for concern, but its comments in this area are disturbingly vague.  One suspects that there is a lot more to be said about the impact that that questionable venture is going to have on Council coffers.

The audit tends to hint at problems rather than express them openly.  Thus it raises the question of invalid rates, as if it is of no consequence, but acknowledges that the the policy on development contributions is legally non-compliant and puts Council "at risk".  But it does not spell out that risk.

It suggests that the debt is manageable, just, with expert advice, but one gets the feeling it has been very optimistic in its projections and has under reported the possible downsides.  I suspect that when the true cost of the EcoCare rates debacle emerges, the cost of having to refund all the development contributions, the hidden costs of fixing up the shortcomings on the EcoCare infrastructure, the true costs of the review of the District Plan (that have been glossed over), I get the feeling that the debt will balloon way beyond what the audit projects.

The audit has no suggestions of how the interest bill is to be paid except for a brief dicussion of ratepayers' capacity to pay it.  And, of course, there is no mention of how the capital is to be repaid.  There seems to be little hope of that.  That will be with ratepayers for ever and ever.  That is the legacy of Jack McKerchar, Mayor Tiller and his Councillors to the Kaipara ratepayers.

To read the report go here

To see Workboot Councillor's comments go here

To see Legal Eagle's summary of the report and his comments on the report go here

An article by Rob O'Neill in the Sunday Star Times of 24 July 2011 struck a chord with me.  It was headed "To heal or not to heal, that is the question".  The article reflects on the lessons to be learned from the News of the World and News Corporation scandal for companies that are trying to hide a few skeletons in the cupboard. 

The comments about News International could apply to any organisation facing problems, including local authorities.  Here are a few examples: 

To heal you firstly have to recognise there is a problem.  News International at the very least has taken forever to do that.  But what you do then is just as important - you have to face up to it.  You can't pay for it to go away through settlements, legal threats or public relations. 

+  Hiding a problem does not solve it. 

+  If "bed-wetting liberal" employees were uncomfortable he could arrange to have them "outplaced". 

+  This appears to be a company out of control.  Light on process, governance and ethics and heavy on macho posturing.

Food for thought.

The Kaipara Konnection has a very interesting letter this week from Bruce Rogan who served as a KDC Councillor a few years ago and led the opposition to the EcoCare Scheme.  He recounts how he was dealt to for having the audacity to rock the boat, very much as Councillor Larsen is trying to do now.  It is good to see a few skeletons climbing out of the cupboard and telling their stories.



Ratepayers may not know it but in March this year Bell Gully, the Council's lawyers, acknowledged that the rates assessments for all three years of EcoCare rates were invalid because they failed to include all the information required by the Rating Act.  Council kept the matter very quiet but assured that the defects would be fixed for the new rating year.  The assessments have just been sent out and, surprise, surprise, they are in the same defective format as previous years.

Following on close on the heels of the defective funding impact statement, the defective rates resolution, and the defective statement of proposal for replacing the defective rates, one wonders how long Councillors are going to turn a blind eye to what is going on.

For the full article go here.

Legal Eagle has made a formal request under the Official Information Act for a copy of the final report of PJ Associates relating to the financial health of the Kaipara Council.  I will let you know what happens.

It is interesting to watch the growing chaos in Council caused by the rift between the McKerchar-Tiller-Geange faction representing the old guard and the new broom represented by Councillor "Workboot" Larsen.  The problem is that Council is at crisis point and it is going to need some very open appraisal of the severe problems created by years of poor planning, incompetence, secrecy and poor governance.  Councillor Larsen has demanded that all the cupboards should be flung open and the skeletons lurking therein introduced to a bit of fresh air and a dose of independent advice.  It will be interesting to see how the new Councillors respond to all this.  Get the latest at Workboot's website

PJ Associates have just completed an assessment of Council's financial health.   It is with Councillors at the moment and I suspect that it is going to cause a lot of discord in the corridors of power in Dargaville.  I expect the Mayor and his Deputy to do all that they can to keep the contents from the public.

The  EcoCare Scheme appears to be causing the most concern because of the massive and ever-increasing debt associated with it. Legal Eagle looks into the financial background to the scheme and the problems facing it:

 EcoCare:  financial concerns  
The financial model on which the EcoCare scheme was based was seriously flawed.  The fundamentals of that model were that specially targeted EcoCare rates on existing properties in the EcoCare area would fund interest payments on the loan in the interim, then in future years, with more and more sections being developed within the drainage area, there would be sufficient income from the targeted rates and the development contributions on those new sections to meet interest and capital payments. 

The first problem was that there was a huge cost overrun.  The debt has ballooned way beyond what anyone anticipated. 

Then the projected development did not happen.  Certainly the current financial climate has had a lot to do with that, but a lot of the blame can be laid at Council's door.  In spite of the Council desperately needing development to fund the EcoCare Scheme, the KDC has developed a reputation for being "developer unfriendly".  There seems to be an attitude amongst Councillors and the Council staff that developers are the "enemy".  I venture to suggest that there would be few developers, past and present, who have not had major problems dealing with the Chief Executive and his staff.  I suspect that there are files full of legal disputes, with lawyers baying at the Council door and the Court door, that Councillors are probably not aware of.  It is going to take an incredible about-turn for Council to change its approach and its attitude and woo developers back. 

The other major problem, and this is one that I am sure that the latest financial report from PJ Associates has not even touched on, is the importance of a steady cash flow from EcoCare rates and development contributions.  That is the life blood of the  EcoCare Scheme.  If that stream is cut off then the EcoCare debt, and consequently the Council debt, is going to become completely unmanageable, and Council will no longer be able to function. 

The problem is that Council has already made a hash of the EcoCare rates for the first three years that they have been charged.  Council has acknowledged that the one-off rate was invalid for all three years, and that the rate demands for all three years were also invalid.  The problems go much deeper than that.  The annual EcoCare charge is also invalid, and Council's development contributions policy does not comply with the requirements of the Local Government Act.  Council has just set new EcoCare rates for the 2011-12 that include all the same defects as previous years, in spite of legal advice and advice from the Auditor General.   

So far Council has refused to acknowledge the enormity of the problem, but sooner of later, whether as a result of the independent review of EcoCare rates by a barrister, or a decision of the Court, Council may well find that it will have to refund to ratepayers most of the EcoCare rates that have been charged over the past three years, and all the development contributions.  That is when the bottom of the financial bucket completely falls off. 

Given these circumstances, it would seem to me that it is now time for some very serious consideration by our elected Councillors.  Now that Councillor Larsen has turned on the spotlights in Council offices, ratepayers should be demanding a full and frank disclosure of the Council's financial situation, and some very serious action, if that is what is needed to try and salvage the situation.   

The Chief Executive, the Mayor, and the Deputy Mayor are going to have to change their spots, and very quickly.

Mayior Tiller has finally responded to Councillor Larsen's concerns expressed on his website and in a letter to the Mayor, by issuing a statement to the press, rather than responding to Councillor Larsen directly.  The press release is not well drafted - like all Council's rating documents - and is basically an attack on Councillor Larsen rather than a response to the issues that he raises. Have a look at Councillor Larsen's blog on his website and the Mayor's press release.  To see the report in the Northern Advocate, go here.

In the draft rates resolution set out in the Agenda for the 22 June 2011 Council meeting, the annual rate for residential properties was set at "per pan per annum".  This was a fundamental error as the rate has always been a fixed rate "per annum" for residential properties.  Thanks to Councillor Larsen the so-called "typo" was corrected.  Or was it?  I was surprised to see the wording of the resolution that was passed according to the published minutes.  Take a look:

Uniform Annual Charge                                       

Residential: per annum, per unit of demand             773.00 

 Non-Residential: per pan per annum                       773.00 

Vacant Lots                                                         386.50

Note that the residential charge is now "per annum, per unit of demand".  So "per pan" has been dropped and replaced with the Chief Executive's pet phrase "unit of demand".  

The use of the expression "unit of demand" in rating documents is completely inappropriate.  It is an expression that is solely used under the Local Government Act for assessing development contributions.  It has nothing to do with rating.  It is not mentioned anywhere in the Rating Act and this is the first time it has been mentioned in any rating document.   

Legal Eagle has emphasised to Councillors on several occasions that the expression has no place in the rating process.  The Auditor General and Bell Gully, the Council's own solicitors, have also added their own warnings about using "unit of demand" in rating documents.

The problem is that under the Rating Act a local authority only has the power to levy rates in respect of rating units or separately used or inhabited parts of a rating unit (SUIP).  Nothing else.  A rating unit is defined as all the land in a certificate of title.  It is the standard way of rating adopted by the Kaipara District Council.  Take a look at the other rates that have been set in the rates resolution (at page 10) and you will see that the expression "rating unit" has been correctly used. 

The other option is to charge rates in respect of SUIPS.  But before a local authority can do that it has to state clearly in the statement of proposal that it intends to do this.  This option must also be identified in the funding impact statement in the draft plan, and a clear definition of a SUIP must be provided.  The rates resolution must also indicate that SUIPs are to be targeted. The Council has failed to do that for all three years of EcoCare.

Under Uniform Annual Charge there is no mention of "rating unit".  There is no mention of "SUIP'.  The only reference is to "unit of demand".  Unfortunately for the Council, section 18 of the Rating Act states that liability for a targeted rate must be based on one of the factors set out in Schedule 3 of the Rating Act.  "Unit of demand" is not one of those factors.  Accordingly the provision does not comply with the Act and the rate is therefore invalid. 

Councillors are well aware of the problem.  They have recently acknowledged that the one-off EcoCare rate is invalid for all three years that it has been set.  In that instance it was because it was levied in respect of categories of land that were not defined in terms of Schedule 2 matters as required by the Rating Act.  They have now gone and made a similar mistake again.

The legal consequences of such basic errors are enormous. In the end, of course, it is the ratepayers that will have to foot the bill for the legal costs in trying to fix up Councillors' mistakes.  How long is this state of affairs going to carry on?  When are Councillors going to acknowledge that they have fundamental problems within Council and start addressing the real issues?

Legal Eagle made submissions to all Councillors detailing the defects in the rates resolution prior to the 22 June Council meeting.  At the meeting two defects were amended, and acknowledged as "typos" by the Chief Executive, but all other errors were ignored. 

The fact that there were two very glaring "typos" speaks volumes for the competence of the Chief Executive and his staff.  The rates resolution is the document that sets the rates in concrete.  It is the document that forms the basis of the assessment of rates, and the charging of rates.  If you get the rates resolution wrong, if you get the wording incorrect, then you have a very serious problem and run the risk of the rates being invalid. 

The Society of Local Government Managers (SOLGM), which provides training for local authorities' staff, and provides modules for drafting rates, emphasises how essential it is to get the rating documents word-perfect so that they comply with the law and so that the rates are "set" in the way that was intended by the local authority. 

The Chief Executive appears oblivious to all this.  He seems to take the view that the wording of the rates resolution and other rating documents is completely irrelevant.  Legal compliance is optional, and can be ignored.  Rates are charged on the basis of what he deems appropriate. 

Ratepayers may wonder where Councillors stand in all this.  The truth is that the Councillors are responsible for the rates.  They are the ones that pass the rates resolution.  Certainly they rely on the Chief Executive to present the rating documents in an accurate, legally compliant format, but they have the responsibility for satisfying themselves that the rates are in order before they pass the resolution.   

One would therefore have thought that Legal Eagle's warnings of major defects in the rates resolution might have triggered some deep concern about the drafting of the document.  Not so.  I do not believe that any of them took the trouble to read my submissions.  If it had not been for Councillor Larsen I do not think they would have even worried about the two obvious defects that were actually amended.  Those two defects were not just "typos".  They were major defects.  A one-off rate suddenly had become an annual rate.  An annual charge for residential properties had become a "per pan" charge.  Yet, except for Councillor Larsen, none of the other Councillors apparently showed the slightest concern. 

I get the distinct impression that the Chief Executive could use an extract from "War and Peace" for the funding impact statement and none of the Councillors would notice.  The Chief Executive could take the rates resolution from "Mickey Mouse's Adventures in Wonderland" and the Councillors would still pass it, unconcerned.  And I have no doubt that they would still levy the EcoCare rates as if they were totally legally compliant. 

I only hope that the Councillors listen long and hard to what Councillor Larsen is saying to them in his blogs and take it on board.  Councillor Larsen is spot on in his assessment of Council, the Chief Executive, and Councillors, and I am sure that ratepayers are agreed that they finally have a Councillor who is acting in their best interests. Councillors are at the crossroads.  They have to decide whether they are going to abjectly follow a Chief Executive, who is being exposed more and more as being out of his depth, or to listen to the independent advice about the problems that Council is facing that is available to them in bucket loads, free of charge, if they would only open up their eyes and see, and open up their ears and hear.



Ratepayers in Mangawhai may be "relieved" that they are not paying EcoCare rates on two or more toilet pans, thanks to Councillor Larsen's intervention at the eleventh hour. However, the ratepayers in the rest of Kaipara are not so lucky. For the past three years at least they have been rated on a "per pan" basis, but they didn't know it.

Take a look at the rates resolution for last year (25 June 2010).

  On page 10 under (e) Wastewater Disposal Rates you will find the general wastewater provisions that relate to the whole of Kaipara except for Mangawhai. Beneath the general provisions are the specific charges for each separate drainage district. (Mangawhai has been included in error here as it has completely different provisions to the rest of Kaipara. It should have been listed separately.)

You will see that there are two charges. The first is a "connection charge" to be levied on rating units that are actually connected to the sewer. This is described in the first paragraph of the general provisions. The second is what is called a "non-connection charge" which is to be levied where a property is not connected to the sewer but a connection is available. It is half the connection charge and will normally apply to vacant sections that have a sewer within 30 metres. This is described in the second paragraph.

The problem is that in the first paragraph the rate is set for "each WC or urinal in respect of each rating unit". There is no distinction between residential or non-residential properties, so the per pan charge clearly relates to residential properties.

This error goes back to at least 2008 and perhaps beyond. (Earlier rates resolutions are not on the Council website.)

There is also another major error. Note how the connection charge in the first paragraph applies to each "rating unit". That is the correct terminology under the Rating Act. A "rating unit" is all the land comprised in a certificate of title. However, in the next paragraph the rate applies to "premises". This is an unfortunate word. It means "land and buildings". So the non-connection charge only relates to properties that have land and buildings on them. It does not apply to vacant sections - which were clearly meant to be targeted.

This means that any non-connection charge levied against vacant sections for the past three years or so is invalid.

If the draftsperson had used the statutory expression "rating unit" then there would not have been a problem. That expression encompasses either properties with buildings or vacant sections.

Note also that the name given to the charge in each paragraph is completely different. One is "a targeted annual rate" and the other is "a Uniform Annual Charge". Why? They are both the same rate.

Finally note how the second charge is called a "Uniform" charge. It is nothing of the sort. Take a look at the charges for each rating district and you will see that it is a differential rate based on the location of the property.

Ratepayers need to approach their local Councillors and ask them why they allowed this to happen and what they intend to do to fix the problem.  There is also the question of overpaid rates if Council has charged per pan, and where vacant sections have been charged the non-connection charge.

What an absolute shambles it all is.


The minutes of the Council meeting last week (22 June 2011) were on the website within a week.  This is a vast improvement on previous practice.  The March meeting minutes took 6 weeks to get into cyberspace.  The Chief Executive has set a deadline of five days for getting the minutes onto the website.  So far, so good.

It is quite fascinating to see how the Council blunders from one disaster to the next. Its own lawyers have acknowledged that the one-off rate is invalid for all three years of EcoCare.  The quick fix by the Chief Executive for this problem did not comply with the simple basic requirements of the Rating Act and was also invalid. (see here)

Council has also acknowledged, again after receiving advice from its solicitors, that all the rates assessments for the first three years of EcoCare were also invalid.

Now, after advice from its own solicitor, advice from the Auditor General, advice from Legal Eagle, and after promises from the Chief Executive to remedy the defective documentation, the Council has again failed to set the EcoCare rates for the 2011-12 rating year in compliance with the Rating Act and the Local Government Act.  This means that four years of EcoCare rates will be invalid.

It is clear that the Chief Executive, with all his experience in Local Government, simply does not understand how the rating process works.  One suspects that he comes from the pre 2003 era and has not caught up to date with the huge changes in rating made by the 2002 Rating Act. 

However, given that he has made such a hash of the Ecocare rates, it is hard to understand why he has not done something about his poor performance.  He is very quick to appoint consultants in other areas which are far less important than setting rates.  Rates are the lifeblood for a local authority and one would have thought that legal compliance in setting the rates was an absolute priority for the Council.  After all it would only take an expert a very small amount of time to draft the rating documentation accurately and in compliance with the law.  Money well spent.  But to set rates for four years in a row that are defective and invalid (and the same with the rates assessments) creates a legal shambles that is going to be expensive to fix (if it is fixable) and will likely result in the loss of millions of dollars in rating income. 

The Chief Executive has already obtained three legal opinions (at least) from Bell Gully to try and justify his invalid rates, and I suspect that there will be more.  There will also be the cost of the independent review of EcoCare rates which is essential if Council wants to get to grips with the full extent of the EcoCare rating mess.  The costs go on and on.  I am sure that Councillors are looking for scapegoats to blame for these costs, and I suspect that people like myself are in their sights because it is our complaints that triggered all these costs.  However, what Councillors need to understand is that the responsibility for these expenses cannot be laid at the door of complainants like myself.  They come about quite simply because Council did not set the EcoCare rates in compliance with the law.  And that came about because Council relied on a Chief Executive who was completely out of his depth in drafting the rating documents.

More on the defective rates resolution to come soon.

According to the Workboot Councillor the Kaipara District Council has passed the draft rates resolution for the 2011-12 rating year without any changes, except for a couple of "typos".

That means that for a fourth year in a row the Council has passed a defective rates resolution.  This is after the Chief Executive acknowledged earlier in the year that the previous years' rating documents were "flawed" and that he would ensure that this would be remedied for this coming rating year.

There are two vital documents for setting rates.  

The funding impact statement in the draft plan sets out the details of the proposed rates for the purposes of public consultation. In spite of the Chief Executive's promise to fix things, the funding impact statement for the 2011-12 rating year is in the same defective, incomprehensible format as in previous years.  Not a word has changed. 

Legal Eagle made submissions on the Draft Annual Plan pointing out that the funding impact statement was unintelligible and did not comply with the Rating Act or the LGA.  Those submissions can be seen here.  Council ignored all those submissions and adopted the plan (and the funding impact statement) in its defective form.

The rates resolution is the document that actually sets the rates.  Rates can only be set "in accordance with the provisions of the funding impact statement".  This means that the provisions of the two documents must be exactly the same.  Thus if the funding impact statement is defective then so is the rates resolution.

To set the rates (an expression introduced by the 2002 Rating Act) means that, on the passing of the rates resolution, the rates become legally binding in the exact form as set out in the rates resolution.

The exact wording of the rates resolution is therefore of the utmost importance.  Rates can only be assessed in respect of individual properties according to the exact provisions of the rates resolution.

Again, in spite of the Chief Executive's promise to rectify the rating documentation for the new rating year, the rates resolution has exactly the same defects as in previous years.  Not only that, there are some basic "typos" that suggest that not a lot of effort went into drafting the document.

That is a tragedy.  Rates are very easy to set but once they are set then they are set in concrete. That is why rating documents have to be drafted by someone who has experience and expertise in the area and has a full understanding of the Rating Act and the Local Government Act.  Most local authorities have an audit or compliance section to ensure that the rating documents are totally compliant with the law before they are adopted or passed.  If they are not then the rates may be declared to be invalid and the rates income will be lost to the local authority.

Only minor irregularities can be remedied using the resetting or replacement provisions of the Rating Act, and that procedure is cumbersome and expensive.  The major defects and matters of non-compliance in setting the EcoCare rates cannot be fixed. It is likely that Parliament did not provide a remedy because it probably did not anticipate that a local authority could make such a hash of setting its rates.

Have a look at what the Workboot Councillor has to say:

To see a copy of the document that Legal Eagle sent to the Mayor and Councillors before they passed the rates resolution go here

Councillor Jonathan Larsen has just launched his own website.  It is reported here in the Kaipara Lifestyler.  The website is:

Councillor Larsen says:


"As a local Kaipara District Councillor I have launched a website, “The Workboot Councillor”.

 I put this together with the aim of directly communicating with ratepayers. I have become, since joining Council last year, increasingly concerned about the way Council conducts it proceedings.  Simply, as one commentator has said, too much is a done deal – presented and approved with little discuss."

And so say all of us! 

It is a big day for ratepayers in Kaipara.  Councillors are due to make some very important decisions at the Council meeting set down for today, 22 June 2011.

I expect some fiery debate over Councillor Larsen's notices of motion.  I understand that he filed quite a few but only three notices of motion have survived the culling by the Tiller-McKerchar faction.   (Those that were culled can now be viewed at ) Those that survived the culling are:  

  1.  That an independent consultant be appointed to review the EcoCare project. 

2.  That a mediator be appointed to liaise between Council and applicants for consents under the Resource Management Act.

 3.  That a disputes procedure be established to resolve disputes relating to RMA matters. 

I am sure that ratepayers would endorse all of these motions.   

EcoCare has been criticised from all different angles and it is about time that we had some truly independent feed-back about the performance of the Scheme.  The EcoCare debt grows and grows and the projected development that was supposed to fund it via rates and development contributions is simply not happening.  It looks likely ratepayers are going to be landed with an unbearable debt for a second-rate Scheme long after the Chief Executive has moved to greener pastures. 

One Councillor expressed concern to me that in the future the EcoCare Scheme was "going to come back and bite us in the bum."  If that detailed, anatomical analysis is correct then it is essential that we get totally independent advice about the Scheme as soon as we can. 

One of the reasons for the other two motions is the poor reputation that Council has in the eyes of developers.  It is seen as unhelpful and obstructive.  That is one of the reasons cited for the dwindling amount of development in the district.  And remember that Kaipara needs development to pay its debts.  Councillor Larsen's proposal appears to be that there needs to be a much fairer and simpler method for obtaining RMA consents so that developers are encouraged to remain in Kaipara.  It makes sense. 

From the comments in the Agenda for the Council meeting it appears that the Chief Executive is not too happy about the notices of motion.  Independent scrutiny is not something that the Kaipara District Council is noted for.

To see ALL the notices of motion of motion of Councillor Larsen go here.

It also appears that the independent review of all aspect of the EcoCare rates that Council agreed to in March is in the balance.  The terms of the review were agreed by Council and ratepayer representatives over four weeks ago but no action has been taken.  However there is a Public Excluded item in the Council meeting of 22 June 2011 relating to the review.  Legal Eagle suspects that the Chief Executive will be making a last bid to stop the review going ahead.  

The Auditor General has highlighted deficiencies in the rating process and recommended an independent review.  The Council's own lawyers, Bell Gully, have acknowledged that the one-off Ecocare rate was invalid, and the EcoCare rates assessments were invalid, for all three years that EcoCare rates have been charged, because of poor drafting and failure to comply with legislation.

Legal Eagle believes that there are many more defects still to be acknowledged and an independent review is the only way forward. 

The debate on the matter is secret, although no doubt the final outcome will be made public.  For ratepayers it is an interesting test of Councillors to see if they will endorse their previous decision to instigate a review, or whether the persuasiveness of the Chief Executive will win the day.

Council is about to pass the rates resolution for the 2011-12 rating year.  The rates resolution actually sets the rates and makes them legal.  Properties can only be assessed for rates and charged rates on the basis of the provisions in the rates resolution. It is therefore a vital document and it is essential that it is drafted correctly.

In the first three years of EcoCare the document was poorly drafted, had many defects and did not comply with the legislation.  Earlier this year the Chief Executive acknowleged that the rating documentation was "flawed".and gave an assurance that things would be different for the 2011-12 rating year. 

That has not happened.  The draft rates resolution is in the same defective format as in previous years.  The funding impact statement in the annual plan, which sets the basis on which rates are to be set, is also in the same non-compliant format as in previous years.  This is quite amazing given the advice that the Chief Executive received from Legal Eagle, Bell Gully and the Auditor General. 

One would have thought that the Chief Executive would have drafted in an expert to ensure that the rates were set legally.  Setting rates is simple as long as you follow the correct procedure.  An hour of an expert's time would have ensured that the EcoCare rates would be totally compliant and beyond any challenge.  However, the legal ramifications of non-compliance are immeasurable.  It is not a road that many local authorities go down because they ensure that they get their rating documentation right the first time. 

Councillors are faced with a huge dilemma.  Even if the rates resolution is amended so that it is in order, the EcoCare rates will still be invalid because the rates resolution must have the same provisions as the funding impact statement in the annual plan.  That document is seriously defective and non-compliant.  Legal Eagle made lengthy submissions to Council in this regard when it was in its draft form.  Those submissions were completely ignored and the annual plan was adopted with the funding impact statement in its non-compliant form.  That is now set in concrete and cannot be changed without going through the special consultative procedure all over again.  That takes time.  There has to be a public notice and time for public submissions.  The problem is that the rates resolution has to be passed by 30 June so that they can take effect from 1 July 2011.

So, inspite of all the legal advice that Council has received, it looks as though the fourth year of EcoCare rates will be invalid along with the first three.

To see what happened at the Council Meeting and the Workboot Councillor's comments go here.

Does the Chief Executive have a SUIP aversion?  SUIPs are separate units under the Rating Act - separately used or inhabited parts of the a rating unit.  Remember that a rating unit means all the land in a certificate of title.  It is the standard way of rating land.  However, a local authority may rate SUIPs (they can be separate flats, or perhaps a workshop) provided that this is indicated in the statement of proposal and the funding impact statement. It is also essential that the local authority provides a definition of a SUIP in the funding impact statement in the draft plan so that ratepayers have an opportunity to make submissions. The final step is to ensure that the rates resolution sets the rates in respect of SUIPs.

Surprisingly none of the rating documents for EcoCare for the past three years have mentioned SUIPs.  There is no definition of a SUIP.  The Chief Executive introduced a completely new concept of calling separate units "units of demand" and providing a definition outside the provisions of the Rating Act.  This process was completely illegal but did not stop the Council levying rates on that basis. 

Legal Eagle has pointed out the illegality of the 'unit of demand" charges, and that the failure to mention that SUIPs are to be targeted in the rating documents, and to provide an appropriate definition, mean that Council has no power to levy rates in respect of SUIPs. Bell Gully, the Council's solicitors, has skirted around the issue, as you would expect given its role of defending its client's legal position.  The Office of the Auditor General has been blunter:

Also the Council needs to include a definition of "separately used or inhabited part of a rating unit" in its funding impact statement when setting targeted rates on that basis.

That advice is simple and succint.  An yet it was completely ignored by the Chief Executive when drafting the rating documentation for the 2011-12 rating year.  SUIPs are not mentioned in any rating document.  There is no definition of a SUIP in the funding impact statement. (Interestingly there is also no mention of the expression "unit of demand".)

Readers can form their own views on this bizarre behaviour  To me it suggests that Council has a very serious problem that it needs to fix urgently.

At the meeting of 19 May 2011 Council deliberated on the submissions from ratepayers concerning the draft annual plan.  One of the matters to be considered was the organisational review costing $250,000.  In an earlier comment Legal Eagle said that the decision was done and dusted before the ink on the draft plan was dry.  That turned out to be completely correct.  Council did not deliberate on any ratepayer submissions because the decision had already been made:


The need for change was identified in 2010 and the budget for a review was included in the 2010/11 Annual Plan. That review was reported to the Chief Executive’s Performance Committee in January and it agreed the review and change process should proceed.

So much for consultation

Council resolved that $200,000 would be applied to the organisational review and a further $50,000 for a Treasury Advisor who is to advise on an ad hoc basis on how Council debts are to be managed.  This follows a review into the matter by an independent expert who recommended that the Chief Executive and his staff needed expert advice.

Under Reason for the Resolution it states that "the Council has identified that the performance of the organisation is not meeting expectations".

I am sure that most ratepayers would have no problem agreeing with that.  It is also a clear acknowledgement that the Chief Executive, who is reponsible for the performance of the organisation, is the person who must accept responsibility for the poor performance.   Eighteen years in the job and Council's organisation is still not meeting expectations.  I wonder if that has been noted on his performance review?

 Leagle Eagle is rather bemused by all this.  Council employs a Chief Executive on a very high salary on the basis that he has the expertise and experience to run a very small Council.  However, at almost every step of the way Council has to dip its hand into its pocket to get experts to advise the Chief Executive about what he should be doing.  Invariably it appears that the experts recommend that consultants be employed because the Chief Executive and his staff are not qualified to cope with the matter themselves.

That is exactly what is happening with the organisational review and the management of the debts.

Why do ratepayers have to pay the Chief
Executive's salary and the costs of experts and consultants?

The minutes from the last Council meeting (25 May 2011) made it on to the Council website in ultra fast time.  It appears that the Chief Executive and his staff can get cracking when pressured by Councillors and ratepayers.

See the report in the Northern Advocate (here) and in Dargaville online (here).

Councillor Jonathan Larsen, one of the new Councillors, has shown the old hands the way forward.  He has persuaded his fellow Councillors to pass a motion requiring the Chief Executive to keep Councillors advised of all claims and actions against the Council.

In the past the Chief Executive has kept such matters to himself, and last year he paid over a large sum of money in settlement of a claim without Councillors even being aware of the claim.

The Chief Executive acknowledged that information could be slow getting to Councillors.

Congratulations Councillors!  This is a small step but an important one in taking back control of the Council from the Chief Executive.  You have been elected by the ratepayers to represent them and you must insist that you are provided with all the information that enables you to make decisions in the best interests of ratepayers.

The motion to make the Brookfields' opinion on the Proposed District Plan public was not as successful.  The Chief Executive and the Deputy Mayor advised that the information is legally privileged and could not be divulged without the writer's approval.  In other words, Brookfields has to approve the release of the information.

Councillors clearly believed this advice and voted against the motion (with Councillor Larsen voting for and Councillor Wade abstaining.)

But is the advice from the Chief Executive and the Deputy Mayor legally correct?

Legal Eagle is preparing an article on the matter.

(For the full article in the Northern Advocate click here)

The Chief Executive never ceases to amaze.  Just as Council agrees to an independent review to examine all the alleged defects in the EcoCare rates, the Chief Executive releases a proposal to replace the Uniform Targeted Rate because of the single defect acknowledged by Bell Gully, the Council's lawyers.  This is a complete waste of time and ratepayer's money given that the reviewer will be examaning all the alleged defects, not just the one that Bell Gully has singled out.  Not only that, the indications are that the replacement provisions in the Rating Act cannot be used to fix up major errors in setting rates, as is the case here.  The reviewer is looking into that as well..  So why the haste to waste ratepayers' monies?

I also need to add that the Chief Executive has drafted the new Statement of Proposal without complying with the incredibly basic requirements of the Rating Act.  In other words the proposal to replace defective rates is defective itself.  It is riddled with errors, but the major one is that he failed to state which were the relevant rating years for the rate being replaced. (For my detailed submissions on the Statement of Proposal, click here)

This fiasco follows on from his failure to fix all the defects in the previous three years funding impact statements in the draft annual plan for 2011-12. (For full details, click here)

All these botch-ups are costing ratepayers substantial sums of money and one wonders how long Councillors are going to turn a blind eye to the inadequacies of the Council's Chief Executive.

For what it is worth, submissions on this Statement of Proposal close on 7 June.  It is well hidden on the Council website. Go to Public Documents - Financial - Rates.  You will find no mention in the Latest News on the Home page.  What did you say Mayor Tiller about communicating with ratepayers?

Council has finally agreed to an independent review into all legal aspects of the EcoCare rates.  The reviewer will be selected from a list of barristers experienced in this area of law.  I will provide further details when the review gets under way..

It took the Chief Executive and his staff 6 weeks to put the minute of the Council meeting of 23 March on the Council website.  What exactly is going on in the Council offices?

The hearing of submissions commences this week.  Legal Eagle cannot help but think that the whole thing is a charade.  Most of the ideas that were floated in the draft plan, supposedly for ratepayers comments, are already set in concrete.  

The Council has already inititiated the new website.  Ratepayers' submissions are irrelevant.

The Chief Executive has already launched into the management restructuring, fired staff, and is in the process of employing new big guns. Ratepayers' sumbmissions are irrelevant.

The Proposed District Plan will continue to bleed Kaipara dry, regardless of what ratepayers think.

The 7.47% increase in rates has to happen because the Chief Executive needs the increase to pay for reorganisation of management ($250,000) and to pay more monies to consultants and lawyers for the Proposed District Plan.  (Ask your Councillor how much the plan has cost so far and what is it actually going to do for Kaipara besides lining the pockets of the consultants and being out of date before it is even finalised.)

Councillors are guaranteed to turn a blind eye to the rational, sensible submissions of ratepayers.

Relevant questions:
How long can Kaipara ratepayers afford to prop up the Tiller-Mckerchar regime?

When does the Chief Executive's contract come to an end? (Time for new blood?  A new approach?)

What will come first, a Commissioner appointed to run Council, or amalgamation with a unitary council of the North?

Note the following comment in the draft annual plan:

A call from the community to improve its website has
seen the new Council initiate a complete website
upgrade. With internet being the most popular form of
communication in the world, it is important that this
Council provides an up to date, informative and user
friendly service.

Note the comment about "an up to date service".  Then look at the Council Minutes on the website and see the sorry state they are in.  This is at 1 May 2011.

Meeting              Status of minutes

23 March               No minutes

23 February           Unconfirmed

26 January            Unconfirmed

15 December         Unconfirmed

24 November         Lost in space

? October              Lost in space

15 October (extra)  Unconfirmed

Please do not tell me that this dreadful performance is because of the lack of a $60,000 website.  The real reason is the incompetence of Council from the Chief Executive down to the Councillors.  As mentioned in the article below, it is attitude that is the important part in communicating with ratepayers.  

 Clearly the Chief Executive has no interest in whether ratepayers have up to date infomation about what Councillors decide.  If he did he would make sure the website was up to date. 

And why hasn't the Mayor (and his Councillors) jumped up and down about this appalling state of affairs?  

So what about the $60,000 new website that Council is proposing in the Draft Annual Plan?  Apparently, according to the Mayor, it is going to improve communications with ratepayers.  I have my doubts.  The desire to communicate is a state of mind.  Those who run Council need to have a fundamental desire to keep ratepayers in touch with what is going on.  I see no evidence of that from the current Tiller-McKerchar regime.  Let's look at some examples:

EcoCare rates, when they were introduced, were to be targeted against separate units - a first for Kaipara.  Did anyone tell ratepayers about it or allow them to have a say in how a separate unit was to be defined?

Council is planning to reorganise its management structure according to the Draft Annual Plan.  Wrong tense.  The Chief Executive has already done it.  It was a fait accompli before the draft plan hit the printers.  No consultation with ratepayers.  No consultation with Councillors.

Do you remember the EcoCare rates that were charged for 2008-09?  That was the year that there was no Ecocare.  The Chief Executive decided to keep the first instalment of the one-off rate even though it had been charged totally in contravention of the Rating Act.  No ratepayer consultation.  No Councillor consultation.

The last Council meeting was held on 23 March 2011.  That was four and a half weeks ago, but you will not find the Minutes on the Council website. 

Would a super-duper new website make any difference?  Most unlikely.  The Tiller-McKerchar regime is too set in its ways and it is not going to change. They are more interested in the rhetoric rather than the reality. 

Rather than spend all that money Council should get a local IT expert to give the current website a once-over.  Websites are not rocket science - Legal Eagle has proved that for himself - and a dedicated local could quickly whip it into shape.

The Kaipara Proposed District Plan which has been widely criticised, and held to be illegal by the
Environment Court, has finally got some fans.  According to the Mangawhai Focus the Council has won a Best Practice Award at the Planning Institute Awards for its creative and innovative approach to Treaty Settlement Land which is contained in the Proposed District Plan.  The Plan was prepared by the KDC along with its engineering consultants, Beca Consultants. 

Mayor Tiller is impressed: 

Council has worked very hard at producing a District Plan that we can all be proud of and along the way has done some really innovative stuff.  To have some of that innovation formally recognised is a real plus for the Kaipara District.  

But in the Kaipara District things are never quite what they seem.  

The Kaipara Lifestyler reports on the same award but adds that one of the three judges for the award was Bryce Julyan who happens to be the practice development director of (guess who ?) Beca Consultants.  The Lifestyler points out that Beca is being paid millions of dollars for its work on the Proposed District Plan. 

For those of us with a sense of fair play and an aversion to any situation that smacks of conflict of interest, this sounds like one of those "only in Kaipara happenings".   

We have already seen the Ombudsman and the Auditor General scurry for cover at the suggestion that the KDC might not have complied with the Rating Act.   

We have noted with some bemusement that the Minister of Local Government has not only endorsed, but commended, the Kaipara's Chief Executive proposal that the independent enquiry into the EcoCare rates (that the Chief Executive' had made such a hash of) was to be organised by the very same Chief Executive.  

What next?  Perhaps an award for the Most Innovative Approach to the Rating Legislation, awarded jointly by the Ombudsman and the Auditor General to the Kaipara District Council, citing the totally innovative approach to proposing, setting and assessing EcoCare rates without any compliance with legislation. 

Perhaps that is what the Mayor means by "some really innovative stuff".

See Kaipara Lifestyler

See the latest comments here.

Comment from Kaipara Konnection:

 Council staff shakeup
The ghost of former Councillor Bill Guest is definitely lurking in the halls of power in Hokianga Road. The only thing that seems wrong is that under the “Bill Guest” restructure proposal, the person who was most likely to be axed in a Council staff restructure is the one survivor it seems......(more)

The KDC Chief Executive, Jack Mckerchar, has jumped the gun and made all eight of his Council Managers redundant.  The proposal to reorganise Council was included in the Draft Annual Plan, just released, to allow ratepayers to have some input into the decision.  But it looks as though it is already done and dusted in true KDC style, with Jack leading the charge, with the elected Councillors and ratepayers well in his wake.

For the full story see Kaipara Lyfestyler and Northern Advocate

Any comments??????.

The positions of General Manager Commercial Operations and General Manager Policy and Governance were advertised in the NZ Herald on 2 April 2011. 

Mangawhai residents are encouraged to apply:

The ideal candidate may wish to locate from Auckland directly into Dargaville or commute from their beach house in Mangawhai Heads or other commutable locations. 


At least those applicants with beach houses in Mangawahi Heads would have some detailed knowledge of how EcoCare functions (or does not function).

  What do you think about Jack McKerchar's surprise reorganisation of his team?

Can anybody tell me........
What is the difference between the Kaipara District Council and the accidental millionaires, Leo Gao and Kara Hurring?

That was the couple who applied for an overdraft of $100,000 from Westpac and by mistake the bank paid $10 million into their account.  The couple moved swiftly to transfer the monies into other accounts and hot-footed it to China.  Kara Hurring has now come back to NZ to face the music.  She is being charged with theft and money-laundering offences. 

The law is quite clear.  If monies are paid to a person by mistake and that person, knowing that there is a mistake, converts that money to their own use then that person is guilty of theft. 

So how does this apply to the Kaipara District Council? 

Let me explain. 

EcoCare rates 2008-09
For the 2008-09 rating year the KDC set rates for the Mangawhai EcoCare Wastewater Scheme for the first time.  There were two targeted rates.  One was an annual rate and the other was the first of two annual instalments of a one-off rate. 

The Council advised that the EcoCare Scheme was to be operational for the last quarter of the rating year and, based on that, charged one quarter of the annual rate.  However, for some reason not explained to ratepayers, it charged the first of the two instalments of the one-off fee in full. 

As it turned out, EcoCare was not operational at all during that rating year.  This meant, effectively, that Council had charged for a wastewater service that was not operational at any time during the rating year.

Legal situation
Under Section 43 of the 2002 Rating Act a local body can only charge targeted rates if the factor of liability (e.g. connection to the sewer/availability of the sewer) is in existence immediately prior to the commencement of the rating year.  In other words, the EcoCare Scheme should have been operational on 30 June 2008 for EcoCare rates be levied for the 2008-09 rating year commencing on 1 July 2008.

 [The Chief Executive and his staff appear to be unaware, or chose to ignore, that the provision that gave local bodies the power to levy a proportion of a rate for a service that is connected part way through a rating year was repealed in 2002.  The situation is now "all or nothing".  If the service is available immediately prior to 1 July then rates are payable for the whole rating year.  If the service is available one day later then no rates are payable for that rating year.]

 The setting and the assessing of the EcoCare rates for that year was therefore illegal.  This means that the Council had no power to set such rates and any rates collected should have been refunded to ratepayers. 

The matter was put beyond any doubt by the fact that the EcoCare Scheme did not come on line at all during that rating year.  Council was therefore charging rates for a service that did not exist.  

Council's response to the situation.
Council clearly realised that it was in a tricky situation.  It therefore credited the one quarter of the annual rate that had been collected to ratepayers' accounts so that it could be set off against rates for the following year.  

That was the correct move. Council had no power to levy the rate in the first place (section 43), but with no service being available during the rating year, Council had no alternative but to refund the monies paid.  However, Council should have offered ratepayers the option of having a credit to their rating account or having a refund of the monies. 

Things were very different in respect of the one-off payment.  The Chief Executive decided to keep it.  I say the Chief Executive because I can find no record of elected Councillors making any decision on the matter or being consulted on the matter. 

A couple of ratepayers wrote to the Chief Executive and asked why the one-off rate was not being refunded when no service had been available at any time during the rating year.  The Chief Executive advised that if the monies were repaid they would only have to be recharged the following year, with a price increase for inflation, and he was therefore doing the ratepayers a favour by holding on to the monies. 

That all sounds very noble, but it is also very illegal. 

Council levied both the annual and the one-off rates contrary to the provisions of Section of Section 43 of the Rating Act. 

It refunded the proportion of the annual rate collected, not because it had levied it illegally under Section 43, but because the rate had been levied in error.  You cannot levy a targeted rate for a wastewater service if it turns out that no wastewater service was  in existence at any time during the rating year. 

That being the case why did Council not refund the first instalment of the one-off rate? 

The reason given by the Chief Executive is meaningless.  The Chief Executive has no power to make such decisions, and there is no legal right to retain monies paid in error, no matter how plausible the Chief Executive makes it sound. 

The simple truth is that the rate was paid in anticipation of an event happening.  That event did not happen.  The rate was therefore collected in error.  

There was only one course of action open to Council: to refund the monies collected to ratepayers in full.  By retaining the monies the Council was converting to its own use monies that had been received because of a mistake. 

What then is the difference between The Kaipara District Council and the Westpac couple?  Both received the monies because of a mistake.  Both knew that it was a mistake.  Both used the monies for their own purposes. 

The Westpac couple have been pursued by the police and the wife has been brought before the court.  As far as I know, no charges have been laid against the Kaipara District Council.


KDC's Chief Executive gets a third opinion from Bell Gully

Legal Eagle has just received a copy of a third opinion of KDC's lawyers Bell Gully dated 4 March 2011, concerning the EcoCare rates. 

Again, I do not know if this is the full opinion or a censored version for my benefit.  I do not know if elected Councillors will be denied access to this opinion, just as they were denied access to the others.

Like each of the opinions so far, the latest one is quite fascinating, especially in relation to the light it sheds on Bell Gully's second opinion.  This is the opinion that the Chief Executive was insisting was an independent first principles review, as recommended by the Auditor General.  In other words, Bell Gully was doing a comprehensive review of all matters relating to non-compliance.

Clearly Bell Gully did not see it that way.  In the latest opinion it states:

Bell Gully's opinion dated 16 December 2010 examined Mr Boonham's earlier allegations.  We responded to the allegations we understood Mr Boonham to be making.

 And further on:

We  ... did not advise on (another issue) as the point was not raised by Mr Boonham in the relevant letter.

In other words, Bell Gully did not see their review as comprehensive and a first principles review.  It was simply responding to the points that it believed I had raised and nothing more.

Which means, of course, that it was the Chief Executive who put his own spin on the opinion and tried to pass it off for something that it was not.

Bell Gully acknowledges another major defect in the EcoCare rating process.

Bell Gully, in its third opinion, has conceded that the rates assessment notices for EcoCare rates for the three years of Ecocare are all defective.  It acknowledges that they do not comply with the requirements of Section 45 of the Rating Act.  It is planned to amend the notice by 1 July 2011.

However, Bell Gully has not commented on Council's failure to update the rating information database for each property prior to rates being assessed - as required by Section 27 of the Rating Act.  It has also not mentioned Council's failure to assess rates according to Section 43 of the Rating Act.

 Bell Gully suggests that the defective rates assessment notice does not invalidate the rates, and that they still have to be paid.  That is not correct.  Section 44 of the Rating Act states:

 Section 44 Notice of rates assessment
 (1) A local authority must deliver a rates assessment to aratepayer  to   give notice of the ratepayer’s liability for rates on a rating unit.
(2) A ratepayer is liable for rates on a rating unit when the local authority delivers the rates assessment for that unit to the ratepayer.

So it is the delivery of the rates assessment notice to the ratepayer that creates the liability to pay rates.

However, Section 45 sets out all the information that must be included in a rates assessment notice.  It states emphatically: 

A rates assessment must clearly identify all of the following:

Clearly, if all of that that information is not included in the rates assessment notice - as happened with the KDC - then the rates assessment notice does not comply with Section 45 and there has been a failure to deliver a rates assessment notice, as described by the Act, to the ratepayer.  The ratepayer is not therefore obliged to pay the rates.

Bell Gully misses the point.  Rates may be perfectly valid but if the rates assessment notice is defective then ratepayers have no legal obligation to pay the rates.


Council made three major errors when it tried to levy EcoCare rates against separate units.

1. Failure to identify factor 7 of Schedule 3 as the basis for levying EcoCare rates.

Rating units
Under the Rating Act rates are normally levied against rating units.  A rating unit is defined as all the land in a certificate of title.  (The unit part has nothing to do with a flat or separate dwelling.) 

All land in Kaipara, except Mangawhai EcoCare, is levied per rating unit.  This means that there is one charge per title irrespective of how many separate dwellings, or flats there may be on the one title.

Separately used or inhabited parts of a rating unit
Under the Rating Act a local body can now levy universal annual general charges and targeted rates in respect of what may be termed separate units.  However, to do this, the local body must clearly state in its rating documents that the liability for the rate is to be based on factor 7 in Schedule 3 of the Rating Act.  [more] 


The Council Chief Executive, Jack McKerchar, has proposed that the second piece of legal advice obtained from the Council's solicitors, Bell Gully, should be treated as the independent first principles review recommended by the Auditor General for the EcoCare rates.

Legal Eagle explains why such legal advice does not qualify to be an independent first principles review. (here) 

New numerical system for KDC
Kaipara District Council clearly excels at innovation.  When setting EcoCare rates it ignored the provisions of the Local Government Act 2002 and the Local Government (Rating) Act 2002 - which are used by every other local body in New Zealand - and invented its own novel (but illegal) rating system so that it could try and recover the enormous costs of the EcoCare wastewater system.  It has now come up with a new numerical system.  In the Agenda for the Council Meeting of 23 March 2010, referring to the new swimming pool, it states:

   Funding of $5,4917,064 has been confirmed

(Read the figure again)

Now I am  not sure whether it is a simple misprint, or the comma is in the wrong place.  However, given the bizarre things that are emerging from the KDC's offices it could be the start of a something new.  Perhaps a new way to balance the books. 

15 March 2011
Legal Eagle has been quiet for some time.  There were Council elections towards the end of the year and I felt that the new Councillors needed a little time to settle in and learn all about the issues that were facing them.

Along with other ratepayers, I had a meeting with the Deputy Mayor and the Chief Executive on 6 January 2011 to discuss complaints about EcoCare.  We discussed a fair bit and over the next few days I will bring you up to speed.

The new Councillors are well bedded-in and interesting things are happening.

23 November 2010
I wrote three emails to the Auditor-General personally, firstly requesting the name of the auditor appointed to review the EcoCare rates and the details of the review, and then asking for a copy of the auditor's report.  The Auditor-General did not respond.

A reply was finally received from a Tony Uttley who is a Sector Manager for the Local Government Section of the Office.

In his email response Mr Uttley unwittingly included copies of emails between staff of the Auditor-General's Office.  These emails show that my emails were passed on by the Auditor-General herself to Bruce Robertson, the Assistant Auditor-General, who is in charge of the Local Government Sector.  Bruce Robertson failed to respond to my emails.

On receipt of my third email the Auditor-General emailed Bruce Robertson with the comment: "Please reply."

Bruce Robertson then passed the responsibility over to Tony Uttley with the comment:

"Thanks Tony.  You are helping me with my omission."

Presumably he is referring to his failure to respond to my emails. 

Tony Uttley's response can be viewed here

23 November 2010

 Legal Eagle has not paid his rates for this year.  He has calculated that Council owes him a rather large sum of money because it has charged illegal EcoCare rates for the previous two years.  He has told Council to deduct this year's rate (less the illegal EcoCare rates) from the amount owing and to let him have a cheque for the balance. 

Council has advised that it is taking legal advice about the EcoCare rates.  Not surprisingly, a cheque was not enclosed.

The problem with that is that Council has already taken legal advice on the matter.  When I first lodged my submissions about the illegality of the EcoCare rates with Council several months ago, Council went running to its lawyers.  The lawyers are reported to have said that what Council was doing with EcoCare was lawful.  The difficulty with that advice was that the Chief Executive omitted to ask the right questions and therefore did not get the right answers. The advice received did not respond to the submissions that I had made and the comments of the Council's lawyers were so general in nature that little could be taken from them.

The difficulty that I have with all this is that it is totally unnecesary.  Council's appoint a Chief Executive on the basis that he has a vast knowledge of local body procedures and law.  He has a life-time of experience of the ins and outs of running a council.   That is why he gets appointed and that is why he is paid such a comparatively large salary.  It is also the Chief Executive's job to ensure that staff are appointed that have the qualifications and expertise to guide Council through the minefield of governance and compliance.  Elected Councillors need to know that they have experts to guide them and offer them advice and asssistance that they can rely on absolutely.  

That is not happening with Kaipara District Council.  The EcoCare rates fiasco was completely ill-conceived from start to finish.  We are not talking about minor errors in the rating process.  We are talking about a total failure to understand the rating process.  It is absolutely clear that there is not a single person employed by the KDC who has the faintest idea how rates are set or has any knowledge of the requirements of the Rating Act and the LGA.  The Council bumbles along from error to error.  What is more, the KDC lacks an audit department, a compliance department, a risk-management department that oversees all Council's activities to ensure that they are legal and compliant.

23 November 2010

 Tomorrow 24 November 2030 is the first full Council meeting since the election.  My request under the Official Information Act for a copy of the auditor's report on the EcoCare rates was declined on the basis that the elected Council had to be advised of the situation first.

One hoped that at tomorrow's meeting there would be a full disclosure by the Chief Executive of the the auditor's report and the new legal opinion he has respect of EcoCare, followed by a full and frank - and open - discussion of the EcoCare problems and their ramifications.  Not so.  The only reference in the agenda is as follows:

9. Public Excluded Council Items 24 November 2010

That the public be excluded from the following part of the proceedings of this meeting namely,

Contract 566 Baldrock Road: Arbitration Update.

Mangawhai Community Wastewater Scheme: Complaint Regarding Rates: Boonham

The general subject matter of each matter to be considered while the public is excluded, the reasons for passing this resolution in relation to each matter and the specific grounds under Section 48 (1) of the Local Government Official Information and Meetings Act, 1987 for the passing of this resolution are as follows:

Subject matter to be considered: Ground(s) under Section 48 (1) for the passing this resolution:

Contract 566 Baldrock Road: Arbitration Update
Section 48 (1)(a),Section 7, Section 7(2)(b)(ii)

Mangawhai Community Wastewater Scheme: Complaint Regarding Rates: Boonham
Section 48 (1)(a),Section 7, Section 7(2)(b)(ii)

Reasons for passing this resolution in relation to each other
This resolution is made in reliance of Section 48 (1)(a) of the Local Authority Official Information and Meetings Act and the particular interest or interests protected by Section 7 of that Act Section 7 of the Official Information Act 1982, which would be prejudiced by the holding of the whole or the relevant part of the proceedings of the meeting in public.  

That is all very convoluted.  What it means in essence is that Council is entitled to exclude the public where it is necessary to protect information where the making available of the information would be likely unreasonably to prejudice the commercial position of the person who supplied or who is the subject of the information.  .

The Recommendation refers to a "complaint by Boonham".  As the supposed author of that complaint I have no knowledge of what Council means.  My complaints and submissions are many and varied as illustrated by this website but I do not know what this particular matter is all about.

What is not explained is what information and who provided it? 

I suspect that the Council is referring to the report provided by the auditor who reviewed the EcoCare rates.  Council wants to keep that secret on the basis that  the disclosure of the information would "prejudice the commercial position of the person who supplied or who is the subject of the information".

That means that either the auditor wants to "bury" the report because it might reflect on the auditor's "commercial position", or it is Council that is keen to ensure that the report does not see the light of day. 

There is no doubt that if the audit report is as frank as it should be it would condemn the rating process for EcoCare rates.  That would mean that Council was well and truly in the doggie-doo because it would have to refund three years of EcoCare rates and would probably become insolvent.

If that is the case then secrecy is not the way to go.  If there are serious problems, then keeping quiet about them is not going to help.  The Auditor General may have placed her head well and truly in the sand but the Minister of Local Government is keeping a watching brief to see how the elected Councillors respond to this matter.    

9 November 2010
Council has responded to my request for a copy of the report from the auditor reviewing the EcoCare rates for 2010-11.

Council advises that the audit review has been completed and that legal advice has been obtained on the matter.  Before any information can be released it needs to go to Councillors for their consideration.

One only hopes that Councilors are given sufficient information well in advance of any Council meeting so that they have ample time to consider the review and the legal advice.

Note the following points:

1. The review was flawed from the outset.  For reasons only understood by the Auditor General, the review only covered the 2010-11 rating year.  It did not cover the previous two rating years even though the rating process for setting and charging the EcoCare rates was exactly the same for those two earlier years.  So if the review finds that there are defects in the rating process for the 2010-11 year then the process for the previous years must also be defective.  Will this be ignored?

2. Rates for the 2008-09 year are clearly illegal.  The Council charged for a service that was not available at any time during that rating year.  Council has an indisputable legal obligation to refund all monies paid in EcoCare rates for that year.  The Auditor General turned a blind eye to this and did not make it part of the review.  Is Council also going to turn a blind eye to this clear breach of the law?

3. The EcoCare rates for the 2009-10 year were illegal because targeted rates can only be set for a service if that service is available the day before the commencement of the rating year.  Since 2003, under the new Rating Act, a local body can no longer charge a portion of the rates for a service connected duting the rating year.  Another blindspot for the Auditor General.  Last time the Chief Executive obtained a legal opinion on EcoCare he failed to put this rather relevant issue to Council's lawyers.  Will the matter be side-stepped or ignored again?. 

4. What is the rationale of the Auditor General for only reviewing the current year's EcoCare rates?  In her letter to Legal Eagle the Auditor General suggested that any irregularity in setting the rate could "be corrected during the current rating year". The implication is that rates that have been set and levied for previous years cannot be corrected.  So what happens to them?  Are they ignored because they are in the too hard basket?  Apparently so. 

But what of the current years rates - can they be corrected?  Clearly the Auditor General thinks that it is a simple matter.

I disagree.  Rates can only be reset or replaced under the
Rating Act in a situation like this if there is an "irregularity" in setting the rates.  The Auditor General, clearly wearing a different hat, has done a report on this matter (Resettting Rates) and expresses the view that the resetting and replacing provisions will be very rarely used because of the limitations imposed by the Rating Act.  

There is no doubt that simple errors could trigger the "irregulaity" test, but a fundamental failure to comply with every single step of the rating process would scarcely merit the description of an "irregularity". 

To impose a SUIP definition retroactively would make a mockery of the Rating Act and the Local Government Act.  The whole point of the legislation is that rates must be clearly signalled to ratepayers in advance, clear definitions must be set out throughout the rating process that comply with the law, and ratepayers must be given the opportunity to make submissions before the rates are legally set.  To leap-frog those fundamental obligations would be an offence against the rule of law, an abdication from good governance, and a total act of desperation.

We will have to wait and see what the independent review comes up with.

We will also have to see if the new legal opinion is the same as the previous legal opinion (in the unlikely event that we are allowed to see it).

It will also be interesting to see how the elected Councillors respond to the situation.

There are fascinating times ahead. 

31 October 2010
The Minister of Local Government, the Hon Rodney Hide, has responded positively to several complaints about the EcoCare rates.

In respect of the legality of the Ecocare rates the Minister states in his response to Legal Eagle: 

While I appreciate your questions about the validity of the Council’s EcoCare wastewater rates for Mangawhai, I cannot comment on their legality.  Only a court can determine whether or not any rates have been set unlawfully.  However, I am aware that the Office of the Auditor-General asked the Council to arrange an independent first principles review of the wastewater rate for 2010-11, which was concluded recently.  (more) 

27 October 2010
You will recall that some weeks ago Legal Eagle wrote to the Auditor General asking for the name of the auditor who had been appointed to review Council's EcoCare rates fiasco and the terms of reference.  The Auditor General has so far chosen not to respond.  It will be interesting to see if the Auditor General does eventually respond or would prefer the matter to be handled secretly by Council's Chief Executive without any input from ratepayers. (How bizarre that the Auditor General sees nothing wrong in the Chief Executive organising the audit and enquiry into the actions of the Chief Executive and his staff.)

We do have a crop of new Councillors about most of whom we know very little.  Let us hope that they take advantage of this forced review of EcoCare to examine the legality of the rates for the three years that it has been in existence.  It is going to be an extremely unpleasant task because a substantial sum of money that was gained illegally will be lost from Council coffers forever.

All EcoCare rates for 2008-09 and 2009-10 will have to be refunded because they were quite simply illegal. 

The EcoCare rates for 2010-11 would have been legal - because the service was available for the whole year - but the Chief Executive and his staff made a total dog's breakfast of the rating process and rendered the rates invalid.  They could be saved by validating legislation through Parliament.

All rates levied against separate units are also invalid for all three years and will have to be refunded.  The Rating Act and the LGA lay down strict requirements for such properties to be targeted.  It would be safe to say that the Chief Executive and his staff were totally ignorant of those legal requirements.  It is also needs to be recorded that after they were told of their fundamental errors they still carried on regardless.  Blind stupidity or simply an arrogant belief that they could get away with non-compliance with legislation?

(Ignore the unit of demand fantasy engineered by the Chief Executive and his staff.  It has no legal basis and will be shown to be nothing more than an extortion racket.)

We ratepayers can only hope that the new crop of Councillors show more intelligence and intestinal fortitude than their predecessors.  They need to tackle the mistakes of the past because what happened with EcoCare rates was wrong, illegal and inequitable and it must be put right.  If Council does not face up to its errors then it is inevitable that it will be involved in yet another expensive court case.

And just as the past must be put right, the new Council must ensure that its future actions comply with the law.  The draft annual plan for the 2011-12 year must include a full disclosure of the EcoCare rates and the properties that they intend to target .  Remember, the law is quite clear: if you want to target separately used units then you must say so in the plan and include a defintion of an SUIP in the plan - and the defintion must comply with the law, and ratepayers are entitled to make submissions well before the plan is adopted.  Ratepayers' rights to have their say are enshrined in law, although you would not think so under the previous Council.  We want a Council that returns to good governance and consultation and puts the dictatorial approach behind it.

27 October 2010
Captain Tiller back at the tiller
For a while it looked as if Captain Tiller was going to abandon ship. 

He had captained the Good Ship SS Kaipara for three years in which time he acted as if he was the effective Captain of his ship but in fact he and his officers had yielded control of the ship to the First Mate and the crew.  The First Mate had convinced the Captain that the normal principles and rules of navigation did not apply to the SS Kaipara and the First Mate’s novel navigational system would steer the SS Kaipara into prosperous waters.  

The reality is that the SS Kaipara is off course and drifting and heading directly for the dangerous waters of the notorious Iceberg Sea.  There have already been several collisions with smaller icebergs and navigation experts are predicting that unless there is a major change at the helm of the SS Kaipara then it is almost certain that it will collide with one, or several, of the gigantic icebergs that are lying directly on its course and that it will end up as another wreck to add to the history of Kaipara. 

Captain Tiller has had a change of heart and his commission as Captain of the SS Kaipara has now been renewed.  He also has a substantial number of new officers to support him. 

As passengers on this ship, locked below decks and terrified we are going to go down with the ship, we are all praying that Captain Tiller and his new officers learn from the mistakes previously made, that they take control of the ship, reinstate the old navigational systems, change course immediately and head for safer waters. 

We are all desperately waiting to see what happens in the next few weeks. Who will dictate the destiny of our ship and the destiny of us ratepayers?  The First Mate and the crew, or Captain Tiller and his officers?

6 October 2010

By Legal Eagle

Both the Auditor General and the Ombudsman have responded to the complaints that I lodged with them concerning the invalidity of the Mangawhai EcoCare rates set, assessed and levied by the Kaipara District Council for the 2008-09, 2009-10 and 2010-11 rating years.

Both Offices have a reputation for being ineffectual watch-dogs when it comes to dealing with transgressions by local bodies and I did not anticipate .......(more) 

6 October 2010
There are a lot of stories going around about huge sums of money being demanded by Council for EcoCare rates and development contributions.  We would like to hear from anyone who believes that they have paid too much in EcoCare rates especially where Council has deemed that a unit of demand exists.  We also hear of stories where Council deems that there is a unit of demand for rating purposes but will not allow that unit of demand to be used.  We need to have all the evidence and case-studies to put before the auditor who is conducting a review of the the EcoCare rates.  

So if you know of anyone who has a problem with EcoCare rates or levies get them to email us, or do it on their behalf.  See contact us

25 September 2010
Many prospective Councillors must be wondering how well they would fit into the KDC culture, if they are lucky enough to be elected.  To help them assess if they have the right attitudes we have put together an aptitude test for would-be Councillors.

KDC Councillor Aptitude Test
Consider each of the separate situations spelt out below and decide whether you agree with A or with B.  Then tally up how many As you have scored and how many Bs.

Rating Act 1 
A         The Rating Act only applies to areas south of Wellsford and from Whangarei north.  The Kaipara District Council is not bound by the Act and is free to set rates in any way that it wants. 

B         The Rating Act applies to all councils in New Zealand and sets out the basis on which rates must be set, assessed and charged.  

Rating Act 2 
A         Rates can be set at any time and in any manner by the KDC without any restrictions, and they can be amended or “clarified” at any time 

B          Rates can only be set pursuant to the strict provisions of the Rating Act.  They must be set by resolution in accordance with the Rating Act and before the commencement of the rating year.  Once set they cannot be changed – except for minor administrative error.  

Targeted rates 1 
A         The KDC can levy a targeted rate for a service even if that service is not available at any time during the rating year. 

B          A council cannot set a targeted rate for a service if that service is not available.  

Targeted rates 2 
A         Targeted rates can be charged for the whole year in respect of a service even if the service is available for only one day of the rating year. 

B          Targeted rates can only be charged for a service only if the service was available at the end of the preceding rating year.  In other words the service has to be available for every day of the rating year.  

Targeted rates 
A         KDC has complete freedom to decide what buildings – sheds, outbuildings, etc are to be liable for targeted rates. 

B          Targeted rates can only be set in respect of Schedule 3 factors in the Rating Act.  If separate units are to be targeted then any definition of a separate unit must be included in the draft annual plan and open to public submissions and the definition must comply with the legislation and case-law.            

Separate units 
A         A council can call a separate unit anything it likes. The more confusing the name is, the better. 

B          Under the Rating Act a separate unit must be identified in the rating documents as a “separately used or inhabited part of a rating unit”.   

Public consultation
A         It is not necessary to spell out rates in advance.  If you do ratepayers will have the chance to make submissions and waste everyone’s time.  Better to use gobbledegook to confuse them, have secret criteria to confuse them more, and, if pressured, pass an edict that is meaningless and applies retroactively.  Keep them guessing. 

B          Proposed rates must be spelt out clearly in the statement of proposal and in the annual draft plan - and must comply with the provisions of the Rating Act and the Local Government Act – as this is the only opportunity that ratepayers have to make submissions on the proposed rates. 

Rating information database
A         This is a meaningless document that places a burden on council staff. 

B          Under the Rating Act the rating information database for each property must include the categories of land to be targeted and the Schedule 3 factors that are to be used to calculate the liability for rates, and must be corrected and brought up to date at the end of each rating year so that rates can be set on the correct basis for the next rating year. 

Rates assessment
A         The aim of this document is to make the rates as confusing as possible and not to reveal the basis on which rates are charged. 

B          Under the Rating Act the rates assessment must show the categories of land to be targeted and the Schedule 3 factors that have been used to calculate liability for the rates.  If the “separately used or inhabited part of a rating unit” Schedule 3 factor is to be applied then this must be noted on the rates assessment and the number of units must be shown.  If rates are not assessed in accordance with the Rating Act they are invalid. 

A         There is absolutely no accountability for a council which does not comply with the provisions of the Rating Act and Local Government act so the legislation is irrelevant and KDC can do anything that it likes and can get away with it. 

B          As above.  Sad but true. 

For your aptitude assessment go here

11 September 2010
KDC Chief Executive,Jack McKerchar, and his staff have struggled to come to terms with the requirements of the Rating Act.  They have messed up the EcoCare targeted rates for three years in a row and now seem incapable of sorting out the ensuing shambles.  To see how clearly a council can set targeted rates go to the Kaikoura District Council's website and see how it explains clearly and precisely what targeted rates are to be levied, totally in compliance with the Rating Act.  Also see how it indicates that it will be using the separately used or inhabited parts factor to assess liability - as required by the Rating Act.  It then adds its own definition of a SUIP - as required by the Local Government Act:

A “separately used or inhabited part of a rating unit” is defined as:

Any portion of a rating unit used or inhabited by any person, other than the ratepayer or member of the ratepayers household, having a right to use or inhabit that portion by virtue of a tenancy, lease, license or other agreement.

For clarification, this means that each flat within a block of flats, or each shop within a block of shops, for example, would be rated a uniform annual general charge. The same would apply to a farm with more than one dwelling, (i.e. worker accommodation), or a residential property with a separate fully self-contained unit available for visitor accommodation.

This is a definition that is fully compliant with the law.  It is clear and was available for public consultation in the draft annual plan well ahead of the rates actually being set, assessed and levied.  The rates were set in full compliance with the Rating Act.

Compare the situation with KDC.  In setting its rates, it failed for three years to identify "separately used or inhabited parts of a rating unit" as a liability factor - as required by the Rating Act.  It failed to include a definition of a SUIP in the funding impact statement in the draft annual plans for three years, as required by the Local Government Act.  Because it failed to do these things (which are strict legal requirements) there was no opportunity for public consultation on the proposed targeting of separate units and of the proposed definition to be used.  For two years the KDC has employed a secret criteria - totally illegally - for levying rates and has now tried to cover up its illegal actions by passing a unit of demand resolution with retroactive effect that has no legal basis whatsoever. 

Compare the Kaikoura DC's definition of a SUIP with the KDC's definition of a unit of demand.  The first is set by a council that operates in compliance with the law, believes in good governance, and allows its ratepayers a say in defining how rates are to be targeted .  The second is set by a council that thumbs its nose at legislative requirements, has virtually no idea what it is doing in respect of rating matters, and believes that it has the right to set rates by Chief Executive decree (which effectively the unit of demand resolution was) without any consultation with ratepayers. 

Mayor and Councillors, you should be ashamed.

7 September 2010
I came across a new word today.  Bafflegab.  It is defined as language whose purpose is to obscure, confuse or mislead.

For an example take a look at the responses from KDC employees to the Northern Advocate's questions about the EcoCare rates being invalid.

Finance manager Mike Fleming said any rating charge was made on the projection that the service would be available - if this was not the case those affected would have credits made on their rating statements.

"This process requires a lot of work and staff are still processing eligible credit entitlements."

What exactly does he mean?  Not a lot.  He has avoided the question and said nothing.  The old art of smoke and mirrors.  And what about his boss, Jack McKerchar?

Kaipara chief executive Jack McKerchar said: "While the council is confident it has acted legally, it is having Mr Boonham's queries investigated."

Is that right?  What he doesn't say that some months ago he referred the same matter to KDC's solicitors Bell Gully but for some reason he failed to ask them about the issue of charging rates for a service that is not available at the end of the preceding rating year.  So, is he going to give it another go and ask the right questions this time?

On 24 August 2010 Jack McKerchar wtote to Legal Eagle as follows:

While we are confident Council has acted legally I am having the matter investigated for reporting to Council. This is likely to take a couple of months due to the complexity of the issues raised.

Complexity?  Not at all.  It is a very simple matter that could be resolved in a few minutes by any lawyer with some experience in local body law.  I first put the matter to the Councillors and to the Chief Executive in March this year.  There have been a few promises and plenty of words, but no definitive move to have a lawyer resolve the issue.  Sounds like bafflegab to me.

7 September 2010
Read John Dickie's response to Mayor Tiller's unit of demand letter in the Mangawhai Focus.

6 September 2010
Dargavilleonline packs a bit of punch this week.  It has a bedtime story that appears to be taken from the Arabian Nights but is based on events in modern day Hokianga Road, Dargaville (KDC's offices). 

Under Complaints continue to pour in !  it refers to the story in the Northern Advocate about Legal Eagle's questioniong of the legality of the EcoCare rates.

Scroll down for Letters to the Editor.  There is an interesting letter about a retaurant in Mangawhai operating without a liquor licence apparently with the blessing of KDC and the police.

4 September 2010
KDC has lost another court case, this time in the Environment Court.  The Court has decided that KDC was incorrect in omitting the landscape chapter from the Proposed District Plan. (Lifestyler)

Why is a small council like Kaipara embroiled in so many legal battles?  In this instance the omission of the landscape chapter was opposed by the Environmental Defence Society, the Northland Regional Council, the Centre for Resource Management Studies, and many ratepayers.  They have proved to be right.  One is drawn to question the standard of advice that Council is receiving from its consultants, and the financial cost of KDC's stubborn folly is almost unimaginable for a District with so few ratepayers.  Try and imagine the cost of consultants for preparing the plan, and then dealing  with all the submissions from those opposed.  Add the cost of consultants and lawyers in defending the case, and losing, in the Environment Court, And now, on top of that, there is the cost of writing the new landscape chapter, notifying it, and a new round of submisssions.  All for a Plan that many experts consider to be totally unnecessary.  And all to be paid out of the pockets of a very small number of ratepayers.  One has to ask:  Who is driving this bus?

4 September 2010
The Northern Advocate has printed a story about Legal Eagle's claim that the Ecocare rates are invalid.  Chief Executive Jack McKerchar is reported as saying that the Council is having the the queries investigated.  He consulted the Council lawyers Bell Gully on the matter some months ago, but few people were confident in the advice received.  Any bets on what he will do this time? 

Is it not about time that KDC faced up to the problem and got a totally independent barrister who is a specialist in the field to do a completely independent opinion on the validity of the EcoCare rates?  It would cost considerably less than some of the consultants' fees that are bleeding the Council coffers.  It would give some certainty to the rating situation and enable the newly elected Council to make plans based on a realistic assessment of the cash-flow from EcoCare rates.

4 September 2010
Dargavilleonline has some more hard-hitting commentary about KDC.  It reports on allegations of bullying by a Council employee (threats to go to the Press Council), and does a story on yet another developer who is complaining about the incompetence and intransigence of KDC.  The newsletter asks:

The question has to be asked – when is this nonsense going to stop. Do we need a commissioner brought in, rather than a new Council, to sort out the growing list of major issues that are being made public? How much longer are the ratepayers going to be expected to just shut up and pay up? What are we actually getting for the Councils wages and consultants bill?

The newsletter also sets out Councillor Guest's concerns about the Dargaville swimming pool.  Another bottomless pit?

4 September 2010
Given the ballooning cost of the Mangawhai EcoCare Scheme ratepayers might be interested in this similar scheme in Iraq.  Some wag has suggested that Jack McKerchar - who has been absent from his office recently - may have been moonlighting over there.

The $32.5-million cost of a sewage treatment facility for the war-ravaged city of Fallujah, begun in 2005 by the U.S. military, has mushroomed to $104 million, and will now reach only 4,300 homes instead of the 24,500 originally envisioned, if it ever reaches any homes at all. Although the treatment plant is almost complete, the contract did not include a pipeline to connect the plant to the town.

4 September 2010
In his response to Mayor Tiller's letter in the Mangawhai Focus, Legal Eagle made it clear that if the KDC wants to target SUIPs (separate units) then they must follow the correct procedure in next year's rating process.  To see how that should be done with full ratepayer consultation have a look at how the Whakatane District Council approached the matter.  Note the full public consultation in advance.   

26 August 2010
Mayor Tiller, do you promise to tell the truth, the whole truth, and nothing but the truth?

Mayor Tiller has had a letter published in the Mangawhai Focus complaining about misinformation, scaremongering, and grossly incorrect facts.  The complaint was in respect of an earlier letter that was critical of Council's new unit of demand definition for EcoCare rates.

Mayor Tiller goes on to set the record straight and explain the truth about the unit of demand definition. it really the truth?

See the letter from the Mayor and Legal Eagle's response here.

21 August 2010
Council sued for $1m:   Take note of the name CPG.  It is a name that ratepayers are going to hear a lot of in the next few months. 

CPG are the old Duffill Watts and are employed by KDC as engineering consultants.

Donovan Drainage and Earthmoving have filed proceedings against KDC for in excess of $1 million.  The claim is now being heard in the High Court at Whangarei.

In December last year, in a separate hearing, the Buildings Disputes Tribunal ruled that KDC had to pay Donovan’s $417.068.64.

In respect of the early hearing, the Northern Advocate reports:

The adjudicator, John Green, was highly critical of the council and CPG. More than $200,000 of the adjudicator's award was for costs.

He added that the management of the contract by the engineer had been "dysfunctional for the purposes of masking and/or avoiding additional cost and expense to KDC and it would seem that this was a prime example of a case where independent expert advice/an independent expert review of the contract design would have been a prudent step."

Mr Green went further when discussing the issue of a variation in the contract: "I am driven to the ineluctable conclusions, first, that the conduct of the engineer was inconsistent with the standard of objectivity, fairness and impartiality expected of a person entrusted with the exercise of the duties and power of engineer to the contract and, secondly, that the assertions and the evidence of KDC in relation to this matter appears to be simply fallacious."
“Fallacious” is a gentle way of saying that KDC was lying.  Not a good look for KDC.  Not a good look for one of its principal consultants.

It seems likely that all Councillors were kept in the dark about the earlier claim and outcome of that hearing and the payment of the $417.068.64. (Councillors: could you please confirm this.) But how much did Mayor Tiller know about it?  And who authorised the payment of the cheque?  In a letter in this week’s Mangawhai Focus the Mayor is quick to complain about misinformation and others misrepresenting the facts.  I am sure that all Kaipara ratepayers agree with that sentiment.  Mr Mayor, please let us have the full story on this unfortunate incident.  After all, the $417.068.64 came out of ratepayers' pockets, not yours.

It is also clear that Councillors were kept in the dark about the current High Court proceedings.(Lifestyler)

19 August 2010
I suspect that in the next few months the relationship between an elected council and the chief executive of the council is going to come under close scrutiny.  For those who wish to delve into the matter I suggest that they have a look at the report issued by the Auditor General in 2002 on the relationship between an elected council and its chief executive.

18 August 2010
Tiller back at the tiller?  After announcing last month that he would not stand for Mayor, Mayor Tiller has changed his mind and thrown his hat into the ring.  (See here)

Apparently Councillor Alspach has decided not to stand for Mayor or Councillor.

17 August 2010
What sort of fantasy world do our Councillors live in? Does someone lace the pre Council Meeting cuppa with some hallucinogen? Do Councillors nibble on hash brownies? They must be on something because they come up with some bizarre decisions.

I cannot help reflecting on the unit of demand resolution that Council recently passed. What were the Councillors up to? Between them they must have dozens of years experience as Councillors and yet they passed a resolution that is absolutely and utterly and fundamentally wrong. Not only does the resolution not make sense on the practical level, it is completely contrary to just about every principle of good governance.

This unit of demand thing was JackMack’s baby. He desperately wanted to get it passed. But how did he manage to persuade the Councillors to vote for it? Was it his velvet tongue, his wily arts of persuasion, or are the Councillors afraid of him, or indebted to him in some way? Whatever it was, they suspended their common sense, their responsibility to the ratepayers whom they are supposed to represent, and they deliberately turned a blind eye to their legal obligations.

The Councillors knew that the resolution was shonky. They are not that silly. They also knew that what they were doing was contrary to the Local Government (Rating) Act and the Local Government Act, because Legal Eagle sent them letters explaining the situation. They were referred to the exact wording of the legislation. They were referred to guide books about rates and development contributions. They were advised to consult with their peers in other councils. All this advice and yet they passed the resolution.

They may protest that JackMack assured them that he had legal advice that the resolution was sound. That is a cop out. They knew that something was fundamentally wrong with the resolution. They should also have known that any legal advice that is given depends on what is requested. If you request an opinion to support your own stance then that is what you will get.

Councillors cannot shift the blame. As the SOLGM Green Book guide to rates says in its introduction:

In the final analysis, it is the elected member who bears the ultimate accountability for funding decisions.

In the real world Councillors are obliged to comply with the principles of good governance; they are compelled to consult with ratepayers and there is an absolute requirement to comply with legislation. One wonders when the Kaipara District Councillors are going to come down from their fantasy trip and face the real world. Or are they just going to walk away and leave the mess for others to sort out?

Aptitude Assessment
If you scored all Bs then you you are a pedantic bush-lawyer with a hopeless grasp of how local bodies tick.  You need to chill out and go with the flow.

If you scored a mixture of As and Bs you are getting closer but a lot more education and guidance is needed from above.

If you scored all As then you can go to the top of the class.  You are perfect material for a KDC Councillor and will fit in well with the predominant culture.

16 August 2010
Go to the Newspapers page to read the latest blunt comments about our Council from dargavilleonline.  Some interesting comments about Mayor Tiller's stewardship, and the relevance of Councillor Alspach.  

The website of Mayoral candidate Bill Guest  is also mentioned. [More on that later]  This website also gets a mention.

14 August 2010
Thinking of standing in the election and wondering how much the Mayor and Councillors earn?  Have a look at the articles in dargavilleonline on the Newspapers page.

You can also find out how much the KDC Chief Executive gets paid and how that compares to the Chief Executives of other Councils.

10 August 2010
Some ratepayers are getting enormous bills for EcoCare.  Some have been surprised to find that, according to Council, they have a "unit of demand" in their backyard.  There are all sorts of stories going around about the dire effects of the EcoCare rates.

If you are having any problems with EcoCare then please contact us and tell us your story or send an email to the Forum.

Councillors say that everyone must be happy with the way things are because no one is complaining.  Let's make sure that our complaints are heard.

10 August 2010
Another unhappy Mangawhai ratepayer has set up a website about Mangawhai EcoCare.  Tune in and see what's going on.

10 August 2010
The residents of Jack Boyd Drive dug their toes in about being connected to EcoCare and with the help of consultant Owen McShane persuaded Council to change its mind.  (See the newspaper report here.)

10 August 2010
Several ratepayers have lodged complaints about different aspects of EcoCare with the Ombudsman and the Auditor General.  Legal Eagle has made submissions to the effect that the Eocare rates are invalid because of the Council's substantial failure to comply with the legislation in setting rates.  The Auditor General is waiting to hear from the Council's Chief Executive (several months now) before deciding whether to hold an inquiry.

10 August 2010
Did you know that if Council wants to levy rates for a service such as wastewater then the service must be available the day before the commencement of the rating year?  If the service becomes available during a rating year then Council cannot levy rates in respect of it until the following rating year.
So how come the KDC levied EcoCare rates for 2008-09 and 2009-10?

Good question, a very good question.(Read more.)

10 August 2010
Who voted for the unit of demand resolution?  It was proposed by Councillor Taylor and seconded by Councillor Guest (this was a surprise to many).  All Councillors voted for the motion except Councillors Smith and Sutherland who abstained, and Councillor Geange who voted against the motion because she felt that the definition of unit of demand was still unclear.  (See the background to the resolution and the actual wording of the resolution.)

10 August 2010
So, you are quickly learning all about units of demand.  Hold on!  Stop!  The Council got it wrong.  They used the wrong expression.  It should be SUIP that should be getting you excited.  You will be hearing a lot more about this strange creature in the next few months.  Go here to find out more about it.

10 August 2010
 If Council's non-compliance with legislation is as bad as Legal Eagle says it is, then Parliament may have to pass validating legislation to put things right.  All ratepayers and Councillors should read about the Tasman District Council.  Ring a few bells?

10 August 2010
All rates in Kaipara District are levied against each rating unit, which means all the land in a certificate of title.  Separate units are not rated because they are usually included in the same title.  But there is one exception.  Mangawhai EcoCare rates are the only rates in the District that target separate units.  Why were we so lucky?










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 We invite the Mayor and Councillors to express their views on this website.  Councillors who voted for the unit of demand resolution have come in for a lot of flack and this is their opportunity to explain their actions.

Councillor Jonathan Larsen now has his own website "The Workboot Councillor".