Draft Annual Plan 2013/14
Rates calculator for 2013/14 year
It is a shame they do not know the devastation, worry, financial ruin and probably health problems they have caused to the elderly and people on medical benefits etc in Mangawhai, like my parents who are in their eighties but lucky in one way that they are just out of the eco care system connection range, but a lot of their friends are not.
Mangawhai will always be home to me and my family, not nice seeing your family home ripped apart. Know my grandparents and great grandparents would be devastated.
I am a rural ratepayer (Paparoa) and my rates with the current coming up increase of 18% (instead of the quotes 9% by the council) will have increased with a total of 78.5% over the last 2 yrs. When and where is it going to be enough????
AUDITOR'S SIDE-STEP 06.07.13
Deloitte, the new auditor for the KDC, has done a nice little side-step in auditing the final version of the amendments to the 2012/22 LTP, which have just been adopted by the Council.
Remember that the audit report on the draft amendments to the LTP (statement of proposal) contained some dire warnings:
• The District Council is relying on significant development contributions to help repay debt associated with the Mangawhai Community Waste Water Scheme. If the forecast level of development contributions is not achieved, it could affect debt levels, finance costs and rates.
• The District Council continues to assume that legal issues associated with past targeted rates of $17m will be able to be addressed without the need to refund the rates collected to date. The Council notes that there is uncertainty about this assumption.
• The District Council intends to review its levels of service and asset management plans in the next 12 months. These reviews could lead to significant changes to service intentions and the incidence of rating, and may require further amendments to the LTP.
If the above forecasting assumptions are proven to be materially incorrect, the District Council would need to consider reducing levels of service, increasing rates further and/or increasing debt.
That last warning sums it all up. If the shonky assumptions never materialise then it will be higher rates again for ratepayers. The Ponzi scheme continues.
There is another warning in the original report:
In our audit report on the Statement of Proposal, we also noted our view that the proposed amendment, and any consequential amendments to the LTP that would be required if it is amended in the manner proposed, would not address the three matters we drew attention to.
In other words, no matter how much the Commissioners move the deck chairs around, the figures are not going to stack up and ratepayers are in for more massive rate increases.
Legal Eagle made submissions to the auditor and to the OAG about the fantasy-land assumptions and how the auditor's indifference to them in the past has contributed immensely to the financial problems of the KDC.
I also pointed out the "elephant in the room", referring to the fact that Council has acknowledged that it has no valid LTP, so how can the auditor even consider auditing something that is outside the law.
The Auditor-General advised me, basically, to mind my own business. This is what she had to say:
I do not propose to comment on legality issues that are the subject of the current court proceedings and the Bill before Parliament.
It is not appropriate for me to debate the details of on-going work with members of the public. While we work in the public sector, we still have the normal professional obligations of confidentiality that auditors owe to those they are auditing.
That dismissive response suggested that the final audit report would be very much in the same vein as previous ones. But I was still fascinated to see how the OAG and the auditor were going to deal with something as fundamental as the LTP being invalid. Would they acknowledge the elephant?
A crafty side-step avoided the issue. In a bizarre move, almost certainly agreed to by the OAG, the auditor states in the final audit report that because the amendments to the LTP have not been formally included in a new amended LTP then he is not required under the LGA to give an audit report on the amendments. He is saying that he cannot be required to audit the amendments on their own, but only if they are actually incorporated in a new LTP.
Ratepayers will struggle to see the how this splitting of hairs legal argument complies with the whole spirit and intent of auditing, but what it does mean is that the auditor can run for cover, quote some legal technicality for not getting involved, and the commissioners can proceed unhindered with their farcical projections and their invalid plan, and the ratepayers can be screwed yet again.
COMMISSIONERS IN FINANCIAL LA-LA LAND 27.05.13
The financial assumptions in the DAP have been universally panned as another venture into la-la land by the commissioners. The previous regime sucked in ratepayers with financial projections for the future that were totally baseless and brought about the financial ruin of Kaipara, and now the commissioners are heading down the same track.
They have not learned a single lesson from the past. And there is no need to. As commissioners of a local authority they are not democratically elected, they have no responsibility to ratepayers, no obligation to act competently or prudently, and they will not be held responsible for any action no matter how grossly incompetent.
That is not quite true. There are obligations of prudence and due care, and there are sanctions in law, but the commissioners know that they can be safely ignored because, on the basis of accepted local government practice, the regulatory authorities including the auditor, the Auditor-General and the Minister of Local Government will ignore any breach of their legal or common law obligations.
Whilst company directors commit a criminal offence and can be imprisoned if they mislead investors, commissioners and councillors of a local authority have carte blanche to lead ratepayers up the garden path with half-baked ideas and baseless projections without incurring any sanction of any sort.
The general condemnation of the commissioners' financial projections and the allegations of shonky figures are highlighted in the blogs of Joel Cayford's (here) and Legal Eagle (scroll down to ANOTHER CON).
The commissioners, clearly stung by the widespread criticism, mount their defence in a report entitled Issues and Options: Development contributions which can be found in the Council Agenda for 21 May at page 90. (The file is so big that you will need to download it immediately rather than trying to read it online.).
The report is the work of Chief Executive Steve Ruru and smacks very much of an attempt to rearrange the deck chairs on the SS Kaipara before she slips below the waves.
It is a great exercise in council-speak, where you start with where you want to finish and then mask the lack of sense and logic in your considerations with spin, smoke and mirrors and every device that you can muster to cloak the real facts..
The end result is that Council does what it wants to, whilst artfully ignoring all the indicators that show overwhelmingly that its projections are utterly without any foundation and that they are completely doomed from the outset.
The commissioners then try and paint their decision with a veneer of respectability by making a personal statement about the integrity of the decision.
The report talks of 450 properties that will be connected to EcoCare in the next ten years which will bring in the income stream from development contributions, and thus enable the debt to be repaid.
The commissioners are desperate to get new properties to connect - to create the development contribution cash-flow - and it look as if they will require the subdivisions that already have their own private systems to connect to EcoCare. Jack Boyd drive is mentioned.
If that is the case then the commissioners are in for a heck of a fight. The Jack Boyd residents have already fought one legal battle against the Council, and won, and if the commissioners pursue their plans then their will be a widespread rebellion in Mangawhai.
The report also mentions that no further connections can be undertaken without further capital investment in the scheme. In other words, before new subdivisions can be connected, the reticulation system, including pipes, pumps etc, will have to be extended and paid for.
We were led to believe that the price we paid of over $70 million (remember that the debt is at present nearly $60 million and we have already paid over $10 million in reduction of that amount) would give us a scheme that could cope with 4,500 connections (less than 2,000 at present).
That is patently untrue. We do not know the capacity of the plant itself because the commissioners refuse to follow the suggestion of Greg Gent's Review Team and have a full engineering assessment done. But we do know that no further connections can be made without further capital expenditure on the reticulation system.
It appears that the sum of $600,000 has been allocated over the next ten years for capital development. The Ruru report fails to mention that much of that will be used in extending the disposal system at the Lees farm which has now reached capacity.
The commissioners acknowledges that the allocated $600,000 would only allow up to 200 properties to be connected, but that projection ignored the fact that most of that money will be taken up with the Lees farm extensions. That means that additional capital will be required far sooner than anticipated.
The commissioners projections fail to take this need for more capital investment into account. Instead of having this massive inflow of development contributions to fund the debt reduction programme, most of the monies will be spent on the capital costs of providing the reticulation system. There will be little left over for debt reduction.
In some cases the figures simply do not stack up at all. In one subdivision (Green View Heights) the Council concedes that the development contributions will not be sufficient to meet the capital cost of reticulation.
So not only will there be no surplus to be paid in reduction of the debt but Council will have to incur further debt to connect the properties.
The understatement of capital costs is a major flaw in the financial projections but there are others.
The income from development contributions is grossly overstated and is without any foundation in fact.
In the report the commissioners acknowledge that the proposed income from development contributions is a bit pie in the sky and reluctantly concede that current income is way below what was budgeted (Surprise, surprise!).
The facts speak for themselves. According to the DAP the projections are that development contributions for the five years starting with 2012-13 will amount to $600,000 each year, all of which can be used to retire debt. That is $3 million for the first five years. For the next five years the figure is $1 million a year.
Over 10 years that means a reduction of debt of $8 million.
But that figure ignores the capital expenditure that will be required to connect those additional properties.
It also ignores the glaring obvious inaccuracy of the assumptions. In the first year of those projections (the current rating year) less than $100,000 was received in development contributions. The budgeted amount was $600,000.
And that is not a one-off aberration. In the previous year $54,000 was collected.
Pretty convincing indications of the REAL figures for development contributions, but, as we shall see, figures that the commissioners choose to totally ignore.
And that is not all. In those two years mentioned not one penny of the monies received from development contributions was actually applied to paying off the debt. Every penny was spent on paying other liabiities to stop Council from going under financially.
In short, if Council does receive any development contributions then a large part iwill be consumed by the capital costs of making the new connections, and what is left will most probably be used to try and meet outgoings. The chances of any surplus being available to repay debt is minimal. And the fantasy of repaying $8 million in 10 years is just that, a fantasy.
But there is more.
Quite amazingly, but not surprisingly, the commissioners have decided to completely ignore the government review of development contributions that is underway at present. The government is deciding whether to reduce or discontinue development contributions altogether because of the effect that they have on housing affordabiity. Such a decison would obviously have a dramatic effect on the commissioners' financial assumptions.
If you want a good laugh have a read of 4. Options on page 92 onwards and see the ridiculous processes that this Council goes through to justify what it plans to do anyway.
Having considered all the shortcomings of their assumptions, in concluding the report the commissioners decide to ignore all the evidence that shows that their assumptions are WRONG, RISKY and could be made TOTALLY BASESLESS by a government decision in the near future. They simply bury reality behind a veneer of vacuous statements about the integrity of the figures that they have provided.
In respect of the anticipated income that will come from development contributions to repay debt, the Recommendation (which later becomes the Resolution) states:
That it believes the projected income from Development Contributions included with the DAP etc are reasonable.
The Reason for the recommendation recites the same sort of nonsense:
With regard to the quantum of Development contributions contained in the Annual Plan, Council has based its revenue assumptions on a programmes of works for additional connections which is realistic and achievable.
In respect of the government's plans to change the whole structure of development contributions in the near future, the commissioners are not to be deterred. They decide to bury their heads in the sand and totally ignore the obvious. They then justify that with the following rationale:
Whilst there is a review process underway in respect of Development Contributions by the government, no changes to the current regime have been confirmed and therefore it is not appropriate for Council to change its approach in anticipation of changes that might or might not happen.
Those statements by the commissioners are an absolute disgrace. They know that the figures and facts do not support those assumptions in any way, but, under the local government system that we have, they know they can make any fanciful predictions, ignore all the realities, and get away with it.
The auditor and the Auditor-General will totally ignore the fact that the projections cannot be substantiated in any way, will simply apply the rubber-stamp and allow the people of Kaipara to be ripped off again.
And when the whole caboodle comes crashing down again, which it will, the commissioners will simply shrug their shoulders and walk away knowing that no one will give a damn that they recklessly led the people of Kaipara further up the path to financial ruin.
MISLEADING RATEPAYERS SHOULD BE A CRIME 23.05.13
What is it about local government? Whilst in the real world company directors are being sent to jail for making untrue statements in offer documents and misleading investors, their counterparts in local authorities - the councillors - are free to make any fanciful promises that they wish, be as dishonest as they like, and yet the regulatory authorities simply turn a blind eye to them, and they get off scot free.
The Kaipara Council is a prime example. For years the Councillors have led the ratepayers up a financial garden path by incurring massive illegal loans in secret, covering them up, and then, on the verge of financial ruin, they have the gall to present to ratepayers the bill for all those years of illegal and incompetent behaviour.
Ratepayers hoped that when commissioners were appointed to replace the inept Councillors that there would a totally new approach, with an inquiry into the past, with those responsible being held to account, and a new regime of openness, honesty and transparency.
Not so. The commissioners have shown a total indifference to the chaos of the past, and their lack of openness and transparency in their dealings with ratepayers has only been matched by their predecessors.
Not only that, they give the impression that their sole aim is to salvage the interests of the banks by transferring the financial bankruptcy of the Council on to the ratepayers of the district.
The cause of all Kaipara's problems was the secret, illegal debt that Council justified on the basis of financial projections that were totally off the planet. The sort of projections with absolutely no basis that would have seen all the Councilors in jail, if they had been company directors.
And those problems are now being perpetuated by the commissioners who are making the same sort to of promises as to projected income that cannot be substantiated in any way.
And. as before, the regulatory authority - the Auditor-General - has one eye closed.
And. as before, the auditor for the Council - the Auditor-General - has the other eye closed.
It is nothing sort of shameful that those who hold these positions of trust in local government should be free of any restraint, liability and sanction and are able to resolve all the financial problems that they create through their own incompetence by simply sending the bill to the ratepayers, and doing so with the blessing of the government.
ANOTHER CON 23.05.13
In a recent blog Joel Cayford highlighted the absolute absurdity of the financial projections that the commissioners have included in the draft annual plan (DAP).
Ratepayers in Kaipara should have learnt the lesson by now that financial projections put together by so-called experts are utterly meaningless. Those who wield the power start with the outcome that they want, then get the pundits to hobble together some statistics that superficially appear to justify the outcome.
The projected income-flow that the experts said supported the massive secret expansion of the EcoCare scheme was based on sheer fantasy. A bunch of primary kids could have done better.
As we know it was an abysmal failure. The projected development in Mangawhai, and therefore the development contributions, never materialised. As a result of the massive illegal spending and the baseless projections Kaipara is facing financial ruin.
In a desperate last ditch, face-saving exercise the commissioners are trying to suck in the hapless Kaipara ratepayers for the second time, again by promises of massive amounts of development contributions coming to the rescue.
As before, the whole thing is an utter fantasy with absolutely no basis in reality.
Let's look at the figures given by Joel Cayford.
Council's plans for the future, as set out in the DAP, are based on 34 new properties each year from 2012-13 to 2015-16 paying a development contribution levy of $17,590 each. That is a total of $600,000 that can be paid off the principal of the EcoCare debt each year.
And then from 2016-17 to 2021-22 the projection is 59 new properties a year making a total, on today's price, of over $1 million a year.
That is an $8 million reduction in principal over the ten years.
It looks pretty impressive and many ratepayers are being sucked in by the figures and the "trust us, we know what we doing" spin of the commissioners.
The only problem with that is that the figures do not stack up.
There is nothing like some hard cold evidence to give the lie to hyped-up statistics.
Take the first year in the projections: 2012-13. The anticipated income from development contributions according to the commissioners should be $600,000.
The year is not over yet but according to Steve Ruru, the Chief Executive, the income for the year so far (It expires on 30 June) from development contributions is $83,837.
With a bit of luck, and if we are to be generous, it might reach $100,000 for the full year. But it is not going to come with cooey of the $600,000 projected.
Perhaps the figure for the current year goes against the trend.
Not so. The total income from development contributions for the 2011-12 year was $54.114.
A pause whilst the figures sink in. And then I put the question.: Do the commissioners' projections of income from development contributions have any linkage to reality?
But that is not all. The other fantasy is that the monies from development contributions will actually be used to repay the principal of the debt.
And pigs might fly.
Steve Ruru would explain that local authorities are allowed to operate on a very casual financial system where monies are not separately compartmentalised. We would call it the piggy bank situation (Its that pig again). The monies coming in are dumped in one big pot and all the urgent payments go out first.
Because the KDC is insolvent, it is frantically borrowing from Peter to pay Paul and hoping it can keep its creditors at bay. It has already filched all the monies that it holds on trust for ratepayers - the reserves funds and the Mangawhai Endowment fund - to pay its bills. As we have seen with the Mangawhai Activity Zone, there is no money left in the kitty.
It is now digging into the monies paid to repay the principal of the EcoCare debt to pay other debts.
Ask Steve Ruru how much of the monies received for development contributions in the last two years was applied to reduce the principal of the debt.
The answer is:
And the reason given? "None has been applied as yet, we are picking it up as we finalise the proposed amendment to the Long Term Plan 2012/2022."
In simple language that means that they have not paid anything off the principal and that they have no intention of doing so.
It also means that they are unable to do so. The rate strike is having a massive effect on income and, of course, the ridiculous wastage of money on the validation bill and the defence of the judicial review proceedings is going to soak up massive amounts of money.
The reality is that the income from development contributions is being used to prop up the commissioners' crumbling empire.
And none of this takes into account the amazingly relevant consideration that the government is at present examining the whole role of development contributions and the effect they have on the affordability of housing. The results of its discussion paper on the issue will be out soon and will either modify developments contributions, possibly by capping them, or abolish them all together.
In the audit report that accompanies the DAP, the auditor points out that the projections for development contributions could be wrong, and if that is the case then Council will have to borrow more money - it can't - or increase rates. That comment was made prior to the Discussion Paper being released.
So, when this house of cards comes tumbling down, as it inevitably will, it will be the ratepayers yet again who will have to fund the shortfall with another capital payment and again pay for the sheer incompetence of their Council.
By then the commissioners will be long gone enjoying some new cosy placement with nary a backward look or a twinge of conscience.
ROOM FOR AGREEMENT? 08.04.13
For some time now the KDC has taunted ratepayers with a conundrum that underlies the unfairness of local government in New Zealand.
The Council readily acknowledged that rates set by it in the past were non-compliant with the law and therefore invalid, and that $17.3 million dollars was illegally collected from ratepayers. A reasonable person would take from that that the illegally collected monies should be repaid immediately. That is what happens in real life.
Not quite as simple as that. In a strange twist of logic the KDC maintains that although technically illegal the rates are not actually illegal until declared to be illegal by a court.
So, until a court so rules, the illegal rates are deemed to be legal. Which means, following this logic, that ratepayers are obliged to pay them even though they are illegal.
Ratepayers are bamboozled and find it hard to understand why they should have to pay rates that the Council acknowledges are illegal and that according to Council's lawyer, an acknowledged expert in this field, would be declared illegal by the court.
Faced with this contradictory and intransigent view of the commisioners, and given their refusal to consult with ratepayers on the matter (as required by their terms of reference), and their unilateral application for a validation bill that is so extreme it will test the patience and good will of parliament, ratepayers were left with little alternative.
They filed proceedings to clarify the matter and decide once and for all which rates were legal and which were not.
Any external observer would applaud ratepayers for having the courage to pursue the only sensible avenue that was available to them.
Let's face it, having the court decide with some finality (and within a few months) an issue that has dogged this Council for over four years - and will continue to dog it for many more, if unresolved - is a step that should be welcomed by both ratepayers and commissioners.
Ratepayers will finally get an independent ruling on the liability for the debt, something that they have battled hard for.
The commissioners may feel peeved that they have not been able to bulldoze ratepayers into submission, but must now acknowledge that, with the court becoming involved, it has become a totally different ball-game. The commissioners are now obliged to do things in accordance with the law, and fairly, and in consultation with ratepayers.
What a great opportunity for the two sides to reassess the situation and the approaches they have taken, and consider whether there is not some common path forward.
Ratepayers requirements are very simple. They argue that they are not legally responsible for the illegal debts of Council, and those that are responsible should be held responsible.
It is a very arguable point that has legal merit and must be resolved one way or the other if the Kaipara problem is going to be resolved.
If both parties acknowledge that and agree to have the issue resolved by agreement by the court, or by agreement between legal counsel, then that would be a massive stepping stone.
The other major hurdle is the ratepayers' insistence that there must be a fully independent scrutiny of Council's finances, past and present.
Ratepayers believe that there have been serious cover ups in the past especially in relation to EcoCare, and they also believe that the Council's finances at present are in a dreadful state and are being hugely misrepresented in the DAP.
Independent scrutiny and assessment of the financial situation is necessary before there can be any "buy-in" from ratepayers, and before any plans for the future can be agreed.
If these two issues - legal and financial - can be agreed upon then the way is open for a joint approach to the future of Kaipara.
It is going to take a lot to resolve the complex legal and financial issues of Kaipara and ratepayers acknowledge that interim measures and a validation bill of some sort will be required. Provided that a consensus is reached ratepayers would have no difficulty agreeing to such measures.
The illegalities of the rates and the LTP etc are something of a sideshow. Everyone knows they are illegal and it is pointless arguing about them. If Council adopted a cooperative approach then ratepayers would agree to reasonable remedies being put in place either as interim or permanent measures that would enable Council to function appropriately.
The objection to the current validation bill is that it has been undertaken without any consultation, it includes items for validating that are completely unacceptable, and it its timing is completely wrong. A validation bill will be appropriate when ALL the issues have been identified and a plan for the future agreed upon. An ad hoc, badly conceived bill at this stage will only create ill feeling and opposition in the community.
Time for the ratepayers and the commissioners and Minister to think carefully about the next steps..
INVALIDITY OF DAP 06.14.13
On this page there are several comments on the DAP, criticisms of its content, and snapshots from some ratepayers on the overall effect that massive rate hikes are having on them.
However there is the underlying question that needs to be asked:
Is the DAP itself valid?
With the commissioners seeking validation of many of the decisions made by Council in the last few years one has to ask whether the DAP (which will become the annual plan for 2013/14 incorporating amendments to the 2012/22 LTP) is also non-compliant with the law.
This hinges on section 93(1) LGA:
93 Long-term plan
(1) A local authority must, at all times, have a long-term plan under this section
Section 95(6) LGA also makes it clear that the annual plan must refer to and be based on the previous LTP. Which suggests that that the annual plan is also invalid if it has no supporting valid LTP.
Ratepayers are arguing that an invalid LTP is not an LTP that complies with the LGA.
They also say that the LTP for 2012/22 is invalid for several reasons. It was clearly adopted outside the time-frame set down in the Act, but there were also several other matters of non-compliance which rendered it invalid.
The commissioners originally stated that they had a legal opinion to the effect that the LTP was valid, but they refused to make it public because it was "privileged information".
That stance immediately raised the suspicion that they did not have a legal opinion, or the opinion was not as clear cut as they were saying.
That appears to have been proved to be correct, for the commissioners have now included the LTP in the validation bill and have cited some of the defects or irregularities highlighted by ratepayers.
However, in the draft validation bill the validation of the LTP has been included under section 11 which is "for the avoidance of doubt". This expression is not explained anywhere in the bill. One can only guess that the commissioners are trying to have a bob each way. "We think its legal but in case it's not then we want it validated".
To me that seems like a total abuse of the validation proceedings. Retroactive validation by parliament is only used as a last resort where there is clear illegality that can only be remedied by validation. It is not to be used by local authorities as a Chinese laundry to wash all sorts of soiled clothes to make them look bright and white and brand-spanking new.
The LGA is quite clear that the failure to meet the time-frame in adopting the LTP is sufficient to render the plan invalid. Section 261(b) grants the power to the Governor-General, by Order in Council, to:
validate an action, step, or procedure taken after the time required under or by this Act:
That provision presupposes that the failure to meet the time requirement invalidates the plan.
The Governor-General also has the power under section 261(c) to:
validate an irregularity of form in an action, step, or procedure required by or under this Act:
It is interesting that the commissioners have decided not to use these provision to remedy the agreed defects in the plan. Perhaps they consider the irregularities do not come within the scope of section 261 and prefer the broad-brush, all-encompassing approach of validation by parliament.
In spite of that it seems quite clear that the LTP is invalid until it has been validated in some way, and the MRRA is seeking a declaration from the court to that effect in the judicial review proceedings.
If that is the case then the amendments to the LTP in the DAP and the annual plan itself also fail because there is no underlying valid LTP.
This means that the Council is operating outside the law and does not have any of the powers granted to it under the LGA or the LGRA. It has no power to set, assess or collect rates.
No doubt it has also breached its covenants under its loans with the banks, which could trigger a demand for repayment of the loans.
The whole thing is a very complicated legal shambles which leaves ratepayers in a dreadful situation.
The simplest way for the matter to be resolved is for both the Council and ratepayers agree on the court resolving all outstanding legal issues, and then a joint plan can be agreed on for the future based on a solid legal basis.
Whilst the commissioners maintain their confrontational approach then ratepayers would be advised to submit that the DAP is invalid, and withhold all payments to the Council until the questions of validity are resolved one way or another.
That is unless the commissioners decide to take a different approach.
They, and those who drive them, have to realise that the Kaipara problem will not be resolved until the financial mess and the legal mess are scrutinised by external experts. That gives the solid base for progress.
If the commissioners were prepared to accept an independent assessment (court or otherwise) on the invalidity issues, and they were agreeable to an independent scrutiny of the financial situation of Council, then they might be able to reach an accord with ratepayers on how to resolve these problems cooperatively.
"CONNECTABLE" AGAIN 05.04.13
Doug Bone has alerted me to section 459 of the Local Government Act 1974 which empowers a local authority to require an owner of a property to lay a drain to connect to the a public drain or sewer.
However restrictions on this power are set out in subsection (7):
Section 459 (7) No owner shall be required—
(a) to construct any private drain, other than a common drain, to connect with any public drain or the sea at a point more than 30 metres from his land; or
(b) to construct any private drain for the drainage of a building if the nearest part of the building is situated more than 60 metres from the public drain, or watercourse, or sea to which it is required to be connected
Note that the first part ties in with the definition of "connectable" property being within 30 metres of the sewer.
However sub clause (b) states that the actual building being serviced must be within 60 metres of the drain.
So it may well be that your boundary may be within 30 metres of the sewer but your house may be more than 60 metres from the sewer.
Council cannot force you to connect because of subclause (b) but will the Council still regard you as "connectable" for the purposes of charging rates?
The definition for rating purposes is ambiguous:
Properties capable of connection are defined as being within 30 metres of a public sewerage drain to which it is capable of being effectively connected, either directly, or through a private drain.
The meaning all turns on the definition of "property". Does it mean land or does it mean building?
Council should amend the definition in the DAP to tie in with the provision in the LGA
Any comments welcome.
I will also seek a response from Steve Ruru.
MORE "CONNECTABLE" ISSUES 05.04.13
John Dickie comments on the post below.
Regarding "connectable" properties
I 100% concur with all the sentiments expressed by Clive in his posting, and do this with many decades of professional experience and perhaps only about 8 years of trying to find out the situation at Mangawhai.
When the sewerage scheme was first being developed and the now discredited initial user charges were being imposed, I argued with KDC for months. Captain Jack repeatedly said I was "connectable" even though the Ecocare contractors were saying quite categorically to me that they were not able to physically connect my property because they had not done all works in the roadside sewers and manholes.
KDC and its consultants very clearly in their "public consultation" noted that the overall scheme was designed AND costed, with grinder pumps as necessary to enable shallow laying of the main sewers. A grinder pump connection (and in fact even the electricity charges to run the grinder pumps) was to be part of the overall cost paid by Ecocare. So this is another case of incremental but overall retraction of what was being promised as part of the Ecocare package.
But the most important part of the Clive's posting is the discussion on just what we have "in and above the ground". This is the real crux of overarching problem for Mangawhai, KDC and the government. As Clive has pointed out, there are some indirect references to capacity and current ability to connect more properties.
For years, I have asked very detailed questions of Council regarding this and also made very detailed technical submissions to the (in)famous OAG Ecocare inquiry, but there has been a wall of silence. I do acknowledge that many months ago Steve Ruru requested my participation in a "community suppport / advisory group" that would address the very question of where it would be appropriate to extend the system, but there has been no further communication from Council.
Two more little snippets:
My professional assessment of a report prepared (at KDC ratepayer's expense) under instruction from "Council" as to the value of the scheme was that the findings were "questionable" (to be kind) as the report, by its own admission relied to a large degree on costings as provided by the Contractor.
When can we get straight answers? Continued spin might make me dizzy, but it does focus the resolve to eventually get at the truth.
"CONNECTABLE" ISSUES 05.04.13
I have some serious concerns about the fairness of the "connectable" charges for those who have properties within the catchment area of a wastewater system but are not actually connected.
It is probably fair that they pay any capital charge as the sewerage system is there for the benefit of all properties in the area whether they use it or not.
However, when it comes to paying the annual "user" charges I feel that the Council has gone over the top.
The definition of "connectable" can be found on pages 81 and 82 of the DAP:
Properties capable of connection are defined as being within 30 metres of a public sewerage drain to which it is capable of being effectively connected, either directly, or through a private drain.
That is a standard definition that was in the old legislation and is now adopted by most local authorities.
One of my concerns is that the annual charge for connectable properties has risen from the old 50 per cent of the connected charge and is now:
The fixed amount for units that are not connected to the relevant wastewater network as at 30 June 2013 but are capable of being connected is equivalent to 75 per cent of the corresponding fixed amount applied to properties connected to the wastewater network.
So a vacant section that is within 30 metres of the sewer line now has to pay 75 per cent of the total annual user charge even though it does not, and cannot, use the sewer at all.
That strikes me as being totally over the top.
The other problem that I have with it is the actual meaning of "connectable" in real terms. The definition says that if you are within 30 metres of the sewer and are"capable of being effectively connected" then you are connectable. But are you?
Council is having serious problems with connecting additional properties to the system because of capacity and other issues. It is very coy about the whole issue but it appears that considerable capital investment will be required before many more properties can be connected to the system.
This is the cagey comment in the DAP at page 151:
There is some ability to increase the number of users connected by extending the reticulation network within the existing Scheme area or “drainage district”. Council will continue to look for economically sensible options for extending the current reticulation system so that additional households can be connected.
A footnote then adds:
The Long Term Plan 2012/2022 and this proposed amended Long Term Plan incorporate growth projections for additional connections and the capital expenditure that Council will need to incur in order to connect them.
All of this is rather vague but it seems clear from information filtering through that substantial capital expenditure is required for both reticulation to properties and for the final disposal of the wastewater before many more connections can actually be made.
The footnote then introduces another problem:
In addition, the lot owner, if a grinder pump is required where there is no gravity, may incur up to $10,000 to connect to the system. Council needs to review the feasibility or timing of connecting in these circumstances.
My concern is that Council may be charging you as a "connectable' property because you come within 30 metre limit, and presume that you are capable of being connected when the reality might be that you cannot be connected because of shortcomings of the system.
If you need to have a grinder pump then you are especially at risk.
Council needs to come out in the open and tell ratepayers exactly what the problems are with the system and the feasibility of making new connections.
Obscure comments and footnotes are not the way to communicate with ratepayers in a plan.
In my view the charge for "connectable" properties should revert to 50 per cent of the full charge.
The definition should be changed so that Council is obliged to certify that a property is actually capable of being connected to the network. If it is not then it is not "connectable" and no charge can be made.
It would also be interesting to know why we paid over $70 million (the actual cost not the current debt) for a wastewater scheme for 4,500 connections (confirmed in the DAP) which can only service less than half of that and cannot take any more connections without further substantial capital expenditure.
Was the scheme that we paid for fit for purpose?
What happened to the requirement in the terms of reference, referred to on the first page of the DAP, that the commissioners would:
Identify the capacity and quality of the Mangawhai community Wastewater Scheme.
What happened to the Bicker's report that Greg Gent's Review Team commissioned?
Eight years of lying and covering up. Time now for honesty.
I am sending this post to the Chief Executive for his comments.
IS THE PLAN A SUCCESS? 04.04.13
In the DAP the commissioners bravely announced six new overarching policy criteria that are intended to guide and help balance the addressing of the issues of the past while meeting the needs of the future.
Those criteria can be seen at page vii at the beginning of the DAP.
I have set them out below with my own comments in blue:
1 Simplicity - Council’s plans and policies should be clear and easy to understand. Overly complex plans and policies detract from this and have an unnecessary cost.
This is just not true. The rates in the validation bill were unintelligible. That is why they are being validated. The validation bill itself is unintelligible. Council plans are unintelligible to the average ratepayer. The big con is to say that you have made it simple and then ratepayers feel rather silly if they don't understand it.
As for unnecessary cost, take a good look at golden handshakes to retiring chief executives, the cost of having FOUR commissioners when one good one would be enough, and paying hundreds of thousands of dollars (without any consultation) to validate all the errors and illegalities of the previous Council.
2 Community support - the revised plans and policies should be acceptable to the community.
Why would paying a massive debt incurred deviously and illegally ever be acceptable to the community especially when the commissioners refuse to allow an independent scrutiny of the affairs and the accounts of Council and present a totally misleading plan for the future?
3 Equity - Plans and policies should be fair and treat like with like both now and in the future. Further, those who contribute to the need for the activity should pay more.
You have missed the fundamental point that ratepayers are not responsible for the illegal debt. If you believe in user pays, as you suggest, then you should also apply "abuser pays". Those who were responsible for abusing the system should pay.
4 Stability/durability - The plans and policies should be stable and have longevity and so give some certainty to people over time.
The financial projections are as Mickey Mouse as they were in the past. You grossly understate the true debt, ignore massive contingent liabilities, ignore the huge problems and risks Council is facing, deliberately misrepresent the income to be derived from development contributions in the future, and present an utterly deceitful financial scenario that is doomed to failure.
You also seem to forget that you have acknowledged that the LTP in invalid. That means that you are operating outside the law until you can get parliament to rubber stamp you.
You have also breached your banking covenants and are hanging by a thread.
Can you see stability and durability in any of that ?
5 Affordability - The levels of services and costs of the activities need to produce rates, fees and charges that are affordable for people.
Refer to my comments in posts on this page.
6 Fair distribution - Use the Uniform Annual General Charge (UAGC) to ensure a fair distribution of costs across all ratepayers given the marked differences in land values across the District.
Fair distribution of costs? The major cost to Council is the interest on the illegal debt. Ask any ratepayer in Kaipara how they feel about paying the interest on the illegal debt for the Mangawhai sewerage scheme and all the irregularities that went with it.
WATER RATE INCREASES 04.04.13
Council has changed the whole basis of charging for water rates so that there is now a substantial standing charge that is payable regardless of how much water is used. Accordingly, water rates have risen dramatically.
Council was clever enough to introduce this increase a few months ago to get some degree of separation from the increases in the property rates in the DAP.
Water rates are rates and should be included in with property rates when calculating the affordability of rates.
It would be worthwhile to see the sort of water rate increase that people are having to pay.
Examples please. Before and after. Then add the water rates to the proposed property rates and see if you still come with the 5% affordability threshold.
A CAPITAL OFFENCE? 04.04.13
It is interesting that the new capital charge for the Mangawhai wastewater scheme is charged on rating units. (See page 83 DAP.) That means there is a single charge per property for those who have not paid a capital charge already or have only paid part.
This is a change in policy. In the mad grab for money by Jack McKerchar with his unit of demand nonsense, those deemed to have separate units were obliged to pay the original one-off charge on each unit on a property.
There should be fairness and equity between contributors. Does Council intend to fix this irregularity and refund the original overpayment?
Comment: That seems unlikely Those one-off levies on units of demand were totally illegal but that does not stop the commissioners trying to validate them by sneaking them surreptitiously into the validation bill. They probably hope that parliament will not notice the chicanery, and that ratepayers will have forgotten that they originally paid per unit.
AFFORDABLE RATES? 04.04.13
Putting together any plan for a local authority becomes an exercise in manipulating statistics. The information in plans is totally unintelligible to most ratepayers but if you throw in a few meaningless statistics the it will add a veneer of credibility to the equation.
We have already seen how the KDC promotes the concept of average rate increases which have nothing to do with the reality of individual rate rises. It also fudges the figures by missing out vital elements.
Ratepayers who are suffering absolutely massive increases and are literally struggling to survive will be astonished to know that Council deems the rate increases over the last two years to be "affordable". This is what it says in the DAP at page 147:
Council’s desire to contribute needs to be balanced with the need to keep rates at an affordable level and for the organisation to operate in a financially prudent manner. We recognise that there are limits to the level of rating that the community can afford to pay. In this regard Council has compared its proposed levels of rating with the threshold for an affordable level of rating against the median household income as suggested by the Rate Inquiry 10.
10 The Local Government Rates Inquiry report indicated that rates are affordable if they equate to 5% of gross household income.
So without knowing a thing about your personal financial circumstances the Council has ruled that your individual rate increase is affordable.
If you want to use the formula supplied to check for yourself then take your household income, add a zero and then double it. Here is a table to help:
GROSS INCOME NEEDED FOR RATES TO BE "AFFORDABLE"
|ANNUAL RATES||GROSS HOUSEHOLD INCOME|
Make sure that you let Council know how you feel about this and send your comments to us as well.
MANGAWHAI WASTEWATER (ECOCARE) CAPITAL CHARGE 01.04.13
The reintroduction of this charge in the DAP is part of a fascinating game of smoke and mirrors.
Ratepayers in Mangawhai who are connected to the scheme will be well aware of the one-off capital charge that was levied back in 2009 on the basis set out in the statement of proposal of 2006 which was based on the initial EcoCare contract for $35.6 million.
There were differing amounts payable depending on when the title to the property was first created and on whether the government's sanitary subsidy applied, but generally the charge was based on a figure per property of around $7,000. Some ratepayers were given 25 years to pay.
In last year's 2012/22LTP the Council planned to introduce a completely new charge that gave a lie to the "one-off" name of the previous capital charge. With the massive secret debt having finally come to light, each property was to be charged a second capital charge of just under $20,000. This is how Council described it:
Existing users will be required to pay $19,720 (including GST) over a ten year period per SUIP, or $1,972 per SUIP each year – less any targeted rates they have paid already, and less any government grants. In practice, this means an average of around $1,344 per SUIP each year for ten years, as most existing users have already made some contribution.
This was preposterous and a total breach of faith by Council which had cunningly concealed the true cost of the EcoCare scheme. There was a massive hue and cry, Council backed down, and the capital charges were excluded from the plan for the first year of 2012/13, with the intention that they would be revisited for the 2013/14 year.
They have indeed been revisited in the DAP. The new capital charge introduced in the 2012/22 LTP is not even mentioned. The plan just states that the "one-off" capital charges levied in the past are being validated in the validation bill and those ratepayers that have paid the full amount already will have nothing further to pay.
Those who have paid some of the instalments on the 25 year plan will have to continue paying the instalments.
Those who are to be connected or are capable of connection will pay a new charge of approximately $8,379 (inclusive of GST)
There are six different rates depending on the circumstances applying and they can be seen here at page 83.
There is also an option of paying of the amount in a lump sum.
The fascinating thing about this rate is the reluctance of the commissioners to state clearly that the massive second bite of the capital charge cherry envisaged in the LTP has been abandoned.
And yet they were not so reluctant in the local newspapers. The Kaipara Lifestyler reported the following comments from the commissioners:
Capital charges for the Mangawhai Community Wastewater Scheme are to be reinstated at the core cost of the scheme — $35.6 million.
“What they signed off on is what they will pay for,” Commissioner Peter Winder said. The portion of the MCWS debt applied across the district would¬ remain.
So what the commissioners are saying in the newspapers, but not in the DAP, is that they have listened to the ratepayers and are only going to bill the Mangawhai ratepayers for the part of the debt that is considered to be legal - $35.6 million. That is quite a startling about-turn and something that one would have expected to be widely broadcast.
But, sadly, like most things that come from the commissioners, it is not quite what it appears to be.
Certainly the liability of the Mangawhai ratepayers appears to be limited so that they will only pay part of the debt, perhaps the legal part. But the illegal part of the debt is still being paid by current and future ratepayers in Mangawhai and across the district in the following ways:
• Along with all other ratepayers in the district, Mangawhai ratepayers will be contributing to a further large part of the capital of the EcoCare scheme but this will be hidden away in an increase in the universal annual general charge which rises to the maximum level allowed by law.
• Nearly 50% of the Ecocare debt (legal and illegal) is being allocated to future development and to be funded by development contributions. Sounds good, but there is a catch. Council is planning to pay 50% of the interest on this amount ($26.2 million) each year, which is an increase from 10% at the moment. In addition it is going to start repaying interest that has already been capitalised. And who pays for this? The development contributions? This is how it s explained in the plan:
The current District ratepayers will be funding the interest and the additional principle repayments as part of the general rate.
So the ratepayers across the district, including Mangawhai, will be paying the interest charges on the future development part of the debt.
So in the final wash-up Mangawhai ratepayers together with all the other ratepayers in the district will be paying far more that the $35.6 million that Peter Winder suggests.
But even worse is to come. The share allocated to future development and to be paid by development contributions is nothing more than a sham. The income from development contributions is down to a dribble and with minimum development on the horizon the situation looks grim. Not only that, the government is currently assessing the future of development contributions as it considers that they add significantly to the cost of building.
So what happens when development contributions don't materialise? Council either borrows more (unlikely), or levies a new capital charge from existing ratepayers.
The whole thing is a complete con job. Such comments as Peter Winder's in the newspaper may have some superficial appeal and convince many ratepayers, but sooner rather than later the whole fantasy will be revealed for what it is and ratepayers will be socked again and again for new capital charges to pay the illegal part of the debt.
The blow is softened this year, to lure ratepayers into the trap, to get the LTP in place and get the validation through parliament, but inevitably in the next few years the trap will be sprung and the full force of the debt, legal and illegal, will be dumped on the shoulders of ratepayers.
Anyone who has any doubt should ask the commissioners for an absolute assurance that the minimal rate increases for subsequent years will be adhered to, and see what their answer is.
Remember this a Ponzi scheme and it has got a long way to go before the debt is paid. If the commissioners and the government have their way Kaipara ratepayers are the only ones who are going to contribute to the scheme, and they will be cajoled, persuaded or forced to keep up the payments until the whole debt has been repaid.
It is good to see that the KDC finally understands what a SUIP is all about. The McKerchar/Tiller/Geange regime had no understanding of the Rating Act and operated completely outside the law when it came to rating separate units.
To sum up very briefly, a local authority can set rates in respect of a rating unit which effectively means all the property contained in a certificate of title, irrespective of what is on the land.
It also has the option of charging for each SUIP or separate unit within a rating unit which is described in the Act as a separately used or inhabited part of a rating unit.
Rates in Kaipara have always been charged against rating units. With the commencement of EcoCare targeted rates Council introduced somewhat belatedly the illegal unit of demand regime which was a clumsy, incompetent and illegal attempt to charge rates against separate units.
Council has now got some decent legal advice and in the 2012/22 LTP has introduced a SUIP regime.
However, rates are only being charged against SUIPs in respect of wastewater targeted rates throughout the district for residential properties only. (Other properties have a pan charge)
You should therefore check your proposed rates calculator for next year. (See Links Box at top of page. Make sure you go to the next page for 2013/14 rates)
Have a look at wastewater charge (connected or connectable) and you will see that the Factor is SUIP. Then check the Rate. If it is 1.00 then you are being charged one rate for the whole property. If the figure is 2.00 or more then you are being charged for SUIPs. Here is an example:
Mangawhai Wastewater connected SUIP 1.00 1230.00 1,230.00
If you are being charged for 2 or more SUIPs then you need to check that you are being assessed properly.
The definition of a SUIP is in the DAP (here) at page 77. Read it carefully.
The definition of a SUIP is completely different to the definition adopted for the illegal unit of demand. However if your property was previously assessed as having a unit of demand (jn Mangawhai only) then Council will continue to rate it as a SUIP even though it does not satisfy the SUIP definition.
You therefore need to challenge Council's assessment prior to 1 July 2013 when the new rates take effect.
The whole essence of a SUIP is that it is occupied by a separate household on a permanent basis and there is a tenancy, lease, licence or other agreement.
The fact that the separate building has a bathroom or even a kitchen is irrelevant. The test is whether it is used separately by a separate household.
So if you believe you are being wrongly assessed lodge an objection immediately and insist on the matter being resolved prior to 1 July.
If you have any problems then please contact us and let us know.
LIES, DAMNED LIES AND STATISTICS 31.03.13
The Kaipara Council has yet again confirmed the truth of the above adage in the manipulation of statitics in the DAP to mislead rateapayers. The Council always likes to quote "average" rate rises across the whole district, because that gives a favourable figure that they can put in their press releases.
They calculate the average rate increase figure by comparing the total amount of rates being collected in the current year with the total amount of rates for the previous year and then calculate the difference as a percentage increase.
As ratepayers found last year the average increase had nothing to do with the increases in their own rating invoices. Areas such as Mangawhai that are rated heavily do not come within a bull's roar of any average figure that Council has used in its propaganda.
Ask those people whose rates increased by several hundred per cent last year what they think of Council's average rate rise.
Council also uses totally dishonest tricks to concoct an average that looks acceptable. Last year the Mangawhai wastewater capital charges were not included when calcultating the rates average because they were capital charges and not rates. A clever trick. The only problem is that there is no such thing as a capital charge. The so-called capital charge is simply a targeted rate like all the others and should have been included in the average just like the other rates.
Council has done the same sort of thing this year. It quotes an average rate increase and in a footnote says that it is slightly higher if the Mangawhai capital charge is included. However, what it does is spread the capital charge over the whole district to make it look infintessimally small. That is misleading and dishonest because the rate is not paid across the district. it is added to the rates of a few hundred people in Mangawhai whose rates are going to increase dramatically as a result.
A comment from a rural ratepayer:
We have a rural property, and our Rates will go gone up 16% from 2012/13 to 2013/14, after a 50% increase last year. If 9.3 was the average for this increase, then who has less than that, or is that another lie?
Any other examples?
REGISTER OF SUBMISSIONS 31.03.13
Council is keeping a register of submissions and this can be viewed here. To access the submissions click on the Annual Plan, and on the next page click on Submissions along the top of the page. To view each submission click the PDF symbol at the extreme right. To enlarge each submission. hover the cursor towards the bottom of the page and click on the + sign.
COMMENTS ON THE DAP SUMMARY 31.03.13
Ratepayer John Cregten's comments on the Summary can be seen here. Just hover over the yellow bubbles to see his comments.
SUBMISSIONS TO THE DAP 31.03.13
Submissions on the DAP are due by 19 April.
Ratepayers should be careful if they are using the submission form attached to the Annual Plan Summary headed the "Big Picture". It is full of leading questions that are designed to limit the responses that you can give.
For instance, the options on debt reduction presuppose that the debt is valid. You should strike the options out and state that the EcoCare debt is invalid and not the responsibility of ratepayers, if that is what you believe.
The part on living within our means includes all sorts of draconian policies and yet the options at the end relate solely to the question: Is it important that Council’s rates are less complex and easier to understand?
By ticking any of the boxes you will be deemed to have approved all the policies.
You need to scrutinise every section carefully and ensure that you are not misled into endorsing policies that you do not agree with.
YOU NEED TO BE BOLD AND DELETE ANYTHING THAT DOES NOT APPLY AND STATE YOUR OWN CONCERNS VERY CLEARLY.
PULL NO PUNCHES.
RATES FOR 2013/14 30.03.13
You can see the proposed new rates for your property here. Just type in your address and then click on the appropriate valuation reference on the left if there are several options. The screen will automatically show the rates for the current 2012/13 year. To see the proposed rates for next year click (Next year - 2013/14)
WHAT PLAN? 29.03.13
Ratepayers might be struggling to find out what all the fuss is about in the draft annual plan (DAP) which has been out now for 10 days.
The problem is that it is nigh impossible to access the plan. The Council website lists it in Documents A-Z under Annual Plan, but the document is very difficult to view.
Normally such a large document is broken down into parts which can be viewed separately but this time it is one massive document of nearly 25MB which pushes the PDF system and most computers to the limit. My computer stutters and stops, starts, stutters and then completely freezes.
Rumour has it that the trick is to download it to your hard drive but that has to be done when you first view the document otherwise it doesn't work. I obviously missed that opportunity.
But at least I have managed to view snippets of the plan, which is more that all those ratepayers in the district who do not have computers will ever see.
We could of course get a hard copy from the Council. Sorry, it is out of print and we are waiting for a new run to arrive. A sterling testament to the efficiency and the planning of the KDC.
Sections 93 and 95 of the LGA set out the importance of the annual plan and the LTP in the consultation and accountability processes, but such provisions become totally irrelevant if the average ratepayer has no access to the documents.
It is a very denial of all the principles that supposedly underlie local government in New Zealand.
You could have course gone along to one of the three information meetings that the commissioners held to tell ratepayers about the new plan.
You didn't know about them? Well, not until after they had happened.
It appears that the meetings took place on the 25 and 26 March. However the press release of 14 March advising of the meetings was not sent out until 27 March. An apology was subsequently sent out:
A number of emails were released this morning that should have been released as they occurred. We apologise as this is not the service we are looking to achieve with our new system. One of the press releases contained information on public meetings which took place on Monday 25 and Tuesday 26 March 2013. It is important to note that these meetings were not your only opportunity to engage.
No access to the plan, meetings not advertised. Deliberate of just the usual KDC shambles?
A conspiracy theorist might think that the commissioners may want access to the DAP limited solely to the propaganda supplement published by the Kaipara Lifestyler. The supplement can be seen here and the press release here.
This supplement is a perfect example of the how local politicians can doctor the truth and make a sow's ear look like a veritable silk purse.
The worst performing council with a track record of illegalities and incompetence unlike anything seen before in local government in New Zealand is presented as - in the "Big Picture" - ""a high performing organisation with strong community and man whenua support".
The commissioners are committed to "Making Kaipara and Excellent Place to Live" and talk of "a bright future" which is ironic given that they are in fact pillaging the people of the district and bringing financial ruin to the whole area.
This all sticks in the craw of those who see beyond the smoke the mirrors, and the bullshit of the commissioners' glib dissemblance, and grasp the reality of what the commissioners are doing to Kaipara. They are using our money to pay for such propaganda sheets that disguise the whole thrust of the plan whilst at the same time they deny us access to the plan itself.
NOTE: Following this post Legal Eagle has been given a hard copy of the DAP by the MRRA and a ratepayer has provided a faster download version of the DAP. (Better to download the DAP onto your own computer.) See the Links Box at the top of the page.
TREATMENT OF THE ECOCARE DEBT 20.03.13
These details are taken from pages 152/3 of the Draft Annual Plan (DAP) (here).
The EcoCare debt is acknowledged in Draft Annual Plan (DAP) to be $58 million as at June 2012.
In the DAP the debt is going to be "attributed" (which simply means "allocated") to the various parties who will be responsible for paying that part of the debt allocated to them. The parties are:
1. Mangawhai ratepayers,
2. Ratepayers in general across the whole district, and
3. Future ratepayers who buy development properties in the future. The last category is funded by development contributions levied on future developments in the Mangawhai catchment area.
This is how liability the debt is allocated in the DAP:
% of debt
This is what Council has to say about the matter in the DAP:
The funding allocations outlined above reflect a move to match the costs of the component parts of the Scheme between existing and future users and to reflect the wider community interests. Prior to the adoption of the Long Term Plan 2012/2022 last year, the wider community benefits and obligations were not recognised in the funding model and a disproportionate share of the cost of building the Scheme for existing users was either allocated to growth or deferred for payment by future generations. This approach is simply not sustainable in today’s environment and it is critical that Council implements the new funding model.
Kaipara ratepayers in general
The new "refinements" to the financial model, as Council calls them, place a much greater burden on the ratepayers throughout the district. They are going to be responsible for 31.72% of the EcoCare debt which will be funded by an increase in the general rate across the district.
Council considers that previous allocation of the debt did not taken into account the "benefits and obligations" that the whole district derives from the Mangawhai scheme. Those benefits and obligations are not indentified in the DAP, so ratepayers will have to make their own assessments of what they are.
No doubt those in the west will have some concerns, to say the least, about being compelled to pay for what many consider to be Mangawhai's folly.
Mangawhai ratepayers who are connected or connectable to the scheme will pay in three ways. First, they will pay 23.1% of the debt through a special capital contribution rate that is so complicated (six types of targeted rates) that it is beyond my comprehension. I will be seeking further explanation from the commissioners.
Mangawhai ratepayers will also be paying the annual service charge of $1,020.91. Those serviced by other sewerage systems around the district will be paying a similar charge.
Third, Mangawhai ratepayers, along with all other ratepayers district-wide, will be paying the general rates component referred to above that goes toward the Mangawhai scheme.
Just a note here about the unfortunate people who are deemed to be "connectable". This description applies to properties within 30 metres of the piping for the scheme but which are not actually connected to the scheme.
These folk cop the lot. As they are deemed to be "connectable" they will pay the capital contribution rate in full.
They will also pay the general rate, like every one else, that includes the EcoCare component.
They also have to pay 75% of the full connected annual user charge even though they are not using the scheme. This was increased in last year's LTP from 50%.
This, I suspect, is going to cause a few problems. The plan boasts of a scheme that can service 4,300 properties and states that about 2,140 are connected or connectable at the moment.
Of that figure about 1,300 are actually connected. This is a complete guess because Council has no record of the properties that were actually connected by contractors.
However, the DAP is eerily silent on the fact that the scheme cannot take any more connections without further capital expenditure. This was revealed in a recent Chief Executive's report but is apparently being kept very low key in the DAP.
The revelation of the neceessity to incur further debt to bring the EcocCare scheme up to operational level would have a negative effect on the balance sheet, and presumably would not therefore be appropriate,
Likewise the revelation that those properties that need grinder pumps will have a long wait and will have a hefty connection fee to pay.
These two very relevant matters are hidden away in a foot note on page 151:
16 The Long Term Plan 2012/2022 and this proposed amended Long Term Plan incorporate growth projections for additional connections and the capital expenditure that Council will need to incur in order to connect them. In addition, the lot owner, if a grinder pump is required where there is no gravity, may incur up to $10,000 to connect to the system. Council needs to review the feasibility or timing of connecting in these circumstances.
Nevertheless, if you are within 30 metres of the scheme, you will be deemed to be "connectable" and be obliged to pay the rates even though Council either refuses to or is unable to connect you to the scheme.
This is where we enter fantasy land. Council has some very fundamental initiatives in the DAP that sound great (like all the financial models that they used in the past, that came from experts and cost a fortune, but were absolute and utter rubbish) but are as insubstantial as the smoke the Council wafts about to disguise its true intentions.
We were all astounded to learn at the Mangawhai meeting with the commissioners that in the past the amount of EcoCare debt allocated to future development contributions - over 40% - was growing like Topsy each year. Only 10% of all the interest was actually paid and the balance was simply added to the debt. That's like paying ten per cent of your mortgage interest every year and adding the balance to the principal.
The latest "cunning plan" is that in each year 50% of the interest will now be actually paid and the other 50% capitalised. Better than the10 per cent idea, but the debt will continue to grow at a massive rate and there will have to be substantial development contributions charged some time in the future to pay the interest bill and pay off the ever increasing principal.
But let's look at the figures. The interest on the amount of the debt allocated to future development ($26.2 million, as per the chart above) at 6% amounts to around $1.5 million per annum in interest payments. If half of that is to be paid then the Council has to find $750,000 from development contributions each year to meet the interest bill.
Therein lies the problem. The income from development contributions in the 2013/14 year is anticipated to be, wait for it................................ $17,599. That's seventeen thousand five hundred and ninety nine dollars, in case you think there is a typo or a few noughts missed off.
That means that there is a massive shortfall of over $730,000 if Council is to meet the target of paying 50% of the interest.
The commissioners are also planning, commencing from next year, to start paying off some of the capitalised interest on the development contribution part of the Mangawhai debt.
How, you may sensibly ask, can the commissioners pay $750,000 in interest payments AND additional capitalised interest, when there is only a paltry income of a few thousand dollars?
The commissioners are on to that. Note the following provisions which are sneaked into the DAP:
In addition, debt repayments equivalent to a further 37.5 per cent of the capitalised interest will be phased in over three years, from 2014/2015 to 2016/2017, to increase the speed of the District-wide debt repayments. The benefits are to the District ratepayers and to Council as debt is reduced earlier than otherwise would be the case and debt capacity is preserved should it be needed in the future. The current District ratepayers will be funding the interest and the additional principle repayments as part of the general rate.
So, although a large part of the debt (45.17%) is allocated to future development contributions, which sounds great from the point of view of "intergenerational equity" and other such flimflam that gets bandied around, the cold hard reality, carefully disguised as usual, is that the ratepayers will be paying the interest on the future development part of the debt AND from next year the ratepayers will, in addition, start paying off the interest that has already been capitalised.
But worse is to come. The figures are based on development contributions coming to the rescue - like the Seventh Cavalry - 'sometime' in the future. But sadly that is not going to happen. This is going to be like the Battle of the Little Big Horn where General Custer's "reinforcement models" proved to be awry. The Seventh Cavalry never arrived, and General Custer and his men succumbed to overwhelming odds.
Such an outcome is glaringly on the cards now for the ratepayers of Kaipara. Development in Kaipara is at an all time low. Developers have been scared off by the cowboy antics of Jack McKerchar and his Council and the sheer high cost of building in the district. The fact that the total income from development contributions for one year is projected to be $17,599, a miserly sum, speaks volumes and shows the extent to which this Council has destroyed development in the District.
But looming even larger is the threat that development contributions will disappear altogether.
In February this year the Minister of Local Government released (here and here) the Development Contributions Review Discussion Paper which considers the future of development contributions in local government. Submissions closed on 15 March.
Whatever the outcome of the Discussion Paper it is likely that development contributions will be restricted in some way and the financial models used in the financial strategy in the DAP will be blown apart.
So what happens if development contributions disappear or are severely curtailed?
Exactly the same as has happened in the last two years. The "financial models" of the past will be deemed to have been inappropriate,Tthe plan will be abandoned and a complete new set of proposals will be introduced whereby ratepayers will be billed for another round of capital payments (the third) to meet "the totally unforeseen circumstances".
Remember that this is a Ponzi scheme where the same investors - the ratepayers - are forced by the government to pour money, time and time again, down the Mangawhai dunny.
The Council will not give a fat's rat. It will not even apologise. It will simply remind you of your obligation to pay rates and threaten you with a penalty if you don't pay.
Nowhere in the Western world would you get away with such dishonest practices and lack of accountability. And yet, in Godzone, this disgraceful rort is being perpetrated by a local authority with the blessing of its auditor, with the blessing of the watchdogs, and is actually being enforced by the government.
Note the warnings of the auditor in the DAP:
If the above forecasting assumptions are proven to be materially incorrect, the District Council would need to consider reducing levels of service, increasing rates further and/or increasing debt.
There is a limit to how much services can be reduced. Debt is up to the maximum and cannot be increased. So the only alternative would be to increase rates.
So, as it stands, ratepayers will have to meet the interest payments on the future development allocation of the debt, but it also looks likely that, sooner or later, ratepayers will be asked yet again to dig deep and pay the principal on that allocation.
This Ponzi scheme has still a long way to go.
A LIE IN THE FIRST FEW WORDS 17.03.13
The KDC annual plan for 20013/14 (AP) incorporating amendments to the 2012/22 LTP, is finally available on the KDC website here with a summary here.
At 358 pages it is a big read and will be largely incomprehensible to most ratepayers. That, of course, is one of the main aims of the document.
I have yet to delve into the smoke and mirrors that I expect to find, but a quick squiz at the first few lines show that this is definitely the work of the commissioners.
Remember that transparency and consultation are the pillars on which local government in New Zealand is supposedly built - according to the Local Government Act - and compare with that the total disdain for those principles that the commissioners have shown in the last six months.
Remember how they reneged on the commitment to consult with ratepayers and form a focus group to consider the options for resolving the illegal rates problem?
They shunned that commitment and the views of ratepayers and proceeded with the draconian validation bill without any consultation.
At the same time they breached the clear terms of reference set by the Minister of Local Government requiring them to consult with ratepayers.
Or did they?
In the Foreword to the AP (on the first page) the commissioners set out the tasks they were required to perform under the Ministerial terms of reference. One of them is:
Address the problems created by invalidly set rates and other legal compliance issues
Most people would accept that statement at its face value. However it is totally incorrect. It is a lie.
As in many other cases the commissioners have misrepresented the situation by telling only half truths and missing out vital information.
The exact wording of the Terms of Reference (here) is:
Work with the Kaipara community and ratepayers and the Department of Internal Affairs to identify options for dealing with invalidly set rates and other legal compliance matters;
Note how the obligation to work with the community (highlighted in yellow) has been unilaterally removed from the terms of reference by the commissioners. which means that the commissioners can bury and ignore their blatant failure to comply with the Minister's clear requirements.
That is fundamental dishonesty.
A big lie in the first few lines does not bode well for the rest of the 358 pages.