Ratepayers have only just discovered the massive cover up by Council relating to the secret and illegal contract to extend the EcoCare scheme.
This is what Council failed to tell ratepayers.
This is what really happened:
+ Council consulted with ratepayers in February 2006 for a scheme that was to cost $35.6 million (overruns paid by contractor) to service 3,300 sections.
+ The Local Government Act states that no changes could be made to the scheme without further consultation with ratepayers.
+ In 2006-07 Council secretly entered into a new contact that substantially extended the scheme (almost doubled) with corresponding cost increases, but did not consult with ratepayers.
+ During the next few years ratepayers were not consulted or even advised. It was kept completely secret.
+ The total cost of the scheme is stated by Council to be $62 million. However it is believed that the real figure is closer to $80 million.
+ The secret contract was only revealed when Council made available all the public excluded documents in November 2011, after the former Chief Executive, Jack McKerchar left the Council.
+ The current number of connections is about 1300. The original contract was to cater for 3,300 sections, and the secret contract for 4,500. At the meeting with Council on 12 May 2012 Deputy Mayor Geange advised that no futher connections could be made unless there was further capital expenditure.
+ Council purchased the completed scheme in 2009. As mentioned, the total cost was about $80 million. In 2010 it obtained two valuations for replacement value. These were considered to be on the high side because they did not take into account the inferior plant and pipes. One came out at $35.6 million and the other at $37.3 million. The Lees farm, which was part of the total cost was valued at $1.8 million, thus making a total value of just over $40 million.
+ The Lees farm was purchasd for $4.28 million. Its later valuation was $1.8 million.
+ the Auditor-General is holding an inquiry into the legality of the EcoCare scheme and the debt and into all aspect of the EcoCare scheme.
+ Council is uncertain which properties are connected to the scheme because the contractors did not keep proper records. Some properties were not connected because it was too difficult and some were too expensive to connect.
+ The property owned by Councillor Sutherland in Insley Road is not connected even though it is situated right on the harbour. Likewise the school which is also in the same street on and also on the harbour is not connected.
+ The scheme was based on financial models and projections that were kept secret from Councillors. Bruce Rogan, when he was a Councillor, was denied access to them. It was the same with Jonathan Larsen. The projections were fantasy-land stuff and based on the Ponzi scheme greed of consultatnts and contractors.
+ The scheme was supposed to be self-supporting with outgoings being matched by income from targeted rates and development contributions. The Chief Executive revealed on Saturday to ratepayers that the annual outgoings on the scheme are $3.7 million but the annual income is only $1.3 million. You don't have to be a mathematical whizz to work out the extent of the problem. And of course all the rates for the first four years have been declared to be invalid and will have to be refunded, and the development contributions are probably the same.
+ The purpose of the sewerage scheme was to save the harbour from pollution. Supposedly. It is understood that the scheme has not made any difference to the situation. The purpose of saving the harbour was a complete red-herring. The true reason was the enrichment of contractors and consultants.
This is the presentation made by Legal Eagle at the meeting with Council on 12 May 2012:
ECOCARE - THE TRUTH
The story of EcoCare goes back to the 1990s. There were all sorts of proposals but In 2005 the scope of the scheme was finally agreed by Council and Earth Tech the contractor.
A wastewater project of this size cannot be approved by Council without consulting with the community. In February 2006 Council issued a statement of proposal setting out the terms of the contract with Earth Tech and explaining to ratepayers what the scheme meant to them and how the scheme would be funded.
That statement of proposal was adopted as part of the Long Term Plan for 2006/16.
• The project cost was $35.6 million.
• The contractor was to be responsible for all cost overruns.
• Because of concerns about substantial growth the scheme was to cater for 3,300 connections.
• This was for a complete scheme.
It included provision for:
• Reticulation of the current urban areas.
• Connection of established households.
• Establishment of the sewer transfer network between Mangawhai Heads,
• Establishment of Treatment Plant in
• Disposal and or reuse of treated wastewater and biosolids.
The only thing that had not been finalised was the final disposal site for the effluent.
• This document encapsulates the agreement between the Council and ratepayers.
• It is "contract" based on trust.
• It is the founding document of EcoCare.
• It was set in concrete and could not be changed unilaterally .
I say that because the EcoCare scheme is deemed to be a "strategic asset" and any decision relating to it is a "significant decision". Under the Local Government Act (LGA) this requires decision-making and consultation at the highest level.
Not only that, under section 97 of the LGA a decision to alter significantly the intended level of service provision for any significant activity MUST NOT be taken without the decision being included in a Long Term Plan and in a statement of proposal.
This meant that Council could not make any significant changes to what was in the original statement of proposal without a formal consultation process and issuing a new statement of proposal.
We did not like the EcoCare scheme.
We felt that we were bulldozed into it.
We felt that there were better and cheaper alternatives for protecting the harbour.
But we finally accepted it.
We performed our part of the bargain
We paid our capital rates - even though they were illegal.
We paid our annual charges - even though they were illegal.
Developers paid their development contributions - even though they were illegal
We even paid the unit of demand levies - even though they were illegal and ultra vires. (Council had no power or right to levy them.)
For four years we have performed our obligations to the letter.
Now leap forward 6 years to where we are now.
Council is telling us that the contract that we had is meaningless.
That all the figures were wrong.
Council tells us that the EcoCare debt is $58 million and that the total costs was $62,268,855. There are suggestions that the true cost is as high as $80 million.
We thought we had a sewerage scheme at a fixed price of $35.6 million and we thought that we had already paid for it.
Council is now telling us that even though we have already paid for the scheme we now have to pay for it again.
So what happened?
Clearly there were massive changes to the scheme.
That is fine. All schemes need fine tuning. But these were changes on a large scale with a corresponding increase in costs.
Council was obliged to comply with the LGA and consult with ratepayers.
Council was obliged to issue a new statement of proposal.
Council did nothing. Council kept everything secret.
All resolutions were passed in public excluded sessions.
None of the subsequent plans, annual or long term, mentioned the amendments to the scheme or the increase in costs.
For all those years Council kept the matter secret from ratepayers.
What Council did was a fundamental breach of the law.
Councils only have the power to act if they comply with the requirements of the Local Government Act.
Council failed to do that.
Council was therefore acting ultra vires (outside its powers).
Council had no power to enter into any new contract or incur an increased debt.
But more than that, Council misled the ratepayers of this district.
Council completely misrepresented what the EcoCare scheme was going to cost.
That is why we have absolutely no trust in the Councillors, and why they should all resign immediately.
And that is why the Auditor-General is holding the inquiry.
Ratepayers would not have known the true story, but in November last year Glennis Christie at Council opened up one of Jack McKerchar's secret drawers and released on the Council website all the public excluded resolutions and reports relating to EcoCare.
Those documents show how Council hid the true facts and the true costs of EcoCare from the ratepayers.
In May 2006, before the statement of proposal and the LTP had been adopted, Council was already secretly changing the scheme. On 24 May 2006 it resolved to buy the Lees property as an effluent disposal site for $4.75 million plus GST. The deal was confirmed by resolution on 23 August but the price had gone up to $5.113 million. (Council omitted to include a price in the option to purchase!)
The resolutions were both made in public excluded session.
On 26 October 2006 Council, in public excluded session, considered a report from Beca on the sizing and growth presumptions of the EcoCare project. The Chief Executive summarised the report and stated that:
• There had been substantial growth in population,
• The current model of 3,300 connections appeared conservative.
• Capacity was to be increased to 4,500 connections.
• The plant was to be upgraded.
• That the reticulation area was going to be extended to capture more properties.
• That Council would apply for a Plan change to get denser housing in the reticulation area.
• That the Lees farm was to be used for effluent disposal with an 11km pipeline to connect it to the plant.
The Chief Executive commented that the changes: Basically doubled the original scope.
An amended Project Deed was prepared and a motion to sign this was passed by Council on 28 November 2007. The motion was moved by Councillors Sutherland and Smith and approved by all Councillors, including current Councillors Tiller and Geange.
In other words the original proposals were scrapped and replaced by new proposals that substantially altered the scope of the scheme and increased the cost. The new contract price was almost $43 million but that did not include the cost of the Lees farm.
All done without any consultation and without any statement of proposal.
Ratepayers were kept completely in the dark
It was completely illegal.
The price has blown out to $62 million or $70 million or $80 million. Nobody knows the true figure.
So where has all the extra money gone? I don't know. The Councillors don't know. The only person who knows is Jack McKerchar.
Statement of Proposal
For those who want to read the original statement of proposal for the first contract, it can be viewed on the Council's website here.