The Annual Plan – Full Council meetings (30 May, 5 June, and 30 June)

A full council meeting was held on 30 May 2014 and subsequently carried over to 5 June 2014. There were no apologies for the 30 May meeting. However, apologies from Cr Canton were received for the 5 June meeting.  The annual plan was then finalised by full council at the 30 June 2014 meeting.

The 30 May full council meeting was the official meeting to discuss the final cut of the 2014-15 annual plan and any expenditure that would be undertaken (or not) during that year. And an opportunity to take on board feedback on the draft annual plan circulated earlier in the year to the community. The agenda was to consider the following big items: Motueka library, Golden Bay service centres, Golden Bay recreation centre, Tourism funding, and Cycle trail extension – as separate resolutions, with a single resolution for all the other items.

However, before this meeting, several workshops had already been held in the preceding weeks to consider submissions, debate the issues, reconsider positions, and provide the opportunity for like minded councillors (or blocks of councilors) to strike any deals. Therefore, this meeting was to a large extent a formality, but for some councilors like myself, it was also the last opportunity to convince others around the table to change their minds.

Day One – the debt grenade

The full council meeting on Friday (30 May) was to be the big day when we would confirm council’s expenditure program for the forthcoming financial year. Things began, as outlined in the meeting agenda, with the Motueka library proposal leading the discussion.

Motueka library

All councillors were in support of removing the $1 million refurbishment of the Motueka library from the draft annual plan. Why it was ever included in the draft annual plan remains a mystery to me – given the lack of support it had around the council table before the draft annual plan was released. Yet the majority of councilors still voted for it to be included in the draft annual plan. Yet here we were, listening to the same arguments and now agreeing to remove it. Was it’s inclusion in the draft annual plan (and eventual removal in the final plan) just a straw-man for something else?

I for one, thought it should have been removed form the draft annual plan (and deferred for consideration in the long term plan), in the same manner the Golden Bay recreation centre was. This would provide the community a transparent and clear direction from council about what projects were to be deferred, and importantly, why.

Generally, the argument around the table during pre-draft annual plan workshops was that a redeveloped hub in Motueka (that included a service centre, library, and other council services) in one location on Decks reserve, was the way to go. I certainly agree with that direction, as it consolidates overhead costs for a number of council services. But the archilles heel for the hub project was its cost. It was just too expensive, at a time when council needed to be taking stock of its debt position. In my mind, the time was not right to undertake such a project and the prudent step was to consider this project (and others, like the Golden Bay recreation facility) as part of a longer term strategy.

The alternative to the hub concept was to invest $1 million in a refurbishment of the existing Motueka library – that included minor expansion of space and earthquake strengthening. This was the proposal that eventually made its way into the draft annual plan. However, on the day, councilors agreed that this work was also not a good idea. It was felt that the earthquake work would not be required given the governments announcements that it was reducing the earthquake strengthening standard from 66% to 34%. Furthermore, some councilors around the table felt that investing any more funds into a building that was on leased land, was not desirable.

Rather it was better to invest any funds in a hub concept on land owned by council. Finally, it had been noted in earlier reports to council that book useage at the Motueka library was in decline and the use of web based services (eg ebooks) was trending upwards. In light of this trend it was unclear whether the pressure on space within the library was also in decline – and perhaps more time was required to see how this trend would impact on future spacial needs. Accordingly, it was decided to reduce funding from $1 million to $76,000 to allow for any earthquake strengthening work required.

In my opinion the inclusion of the $1 million refurbishment of the Motueka library in the draft annual plan (and its eventual removal in the final annual plan) was a $1 million straw-man for other items to be kept or included in the final annual plan (eg the Golden Bay recreation centre). This is because some around the council table considered that the removal of the library (and deferment of the service centre) gave them room to do other projects within the existing budgeted program of expenditure. And as observed above, the inclusion in the draft annual plan of a refurbished Motueka library had little support during earlier workshops.

If I had been forced to chose between a $3 million Motueka hub concept and $3.5 million Golden Bay recreation centre, I probably would have chosen the hub concept. Why? Because the Golden Bay recreation centre still had a number of years of good service left within it. If we could sweat our roads (eg, defer maintenance of roads in the annual plan), we could easily sweat a recreation centre for a few more years. Furthermore, during an inspection of the recreation centre we were told that the main concerns with the centre were access to showers from the visitor changing sheds (which currently involved a toweled walk to the showers) and the closure of the grandstand (on the roof of the centre) due to earthquake risk. Both minor inconveniences and costs. Finally, some in the Golden Bay community also did not support another recreation facility if it added more debt. In contrast, the Motueka hub concept provided service improvements and potential operational cost savings.

A debt grenade

After consideration of the Motueka library refurbishment, the finance manager was invited to make a presentation on our financial (and debt) position in light of council’s intended expenditure program. This was to be a later item in the agenda.

During this presentation, the finance manager informed council that due to the 2014-15 annual plan being the last year of the previous long term plan, all outstanding capital projects (eg work that had yet to start or had not been completed) would have to be recognised in the 2014-15 financial accounts. This would also provide a clear financial position when considering the next long term plan.

Basically, council had committed to $20 million of capital expenditure in earlier years that would be catching up with the council’s balance sheet in the 2014-15 year. In effect, around $9 million dollars of debt funded capital works that had yet to completed would be added to the 2014-15 financial accounts.

Some councillors were quite shell shocked by this apparent increase in the council’s debt position. Although others recognised that this was actually debt funded expenditure that council had already undertaken to spend in earlier years. At this point the mayor asked that the meeting be suspended until the financial implications of the debt could be analysed. Subsequently, the revised (and very real) debt position was reported in the media (see Waimea Weekly. see “Shock as $18M blow-out found” (4 June 2014) http://issuu.com/waimea-weekly/docs/040614/1?e=1913941/8122090).

The reality was that the council’s closing debt position, based on forecasted opening debt (of $167 million) would be higher than forecast in the draft annual plan. However, due to the forecast of $167 million being higher than actual debt of $148 million, the increase in recognised debt meant that the forecasted closing debt position would remain close to what was forecasted (around $173 million).

The reality was that our debt was still going up. It’s just the forecasted increase from $167 million to $173 million (a $6 million increase) would instead go up from $148 million to $171 million (a $23 million increase).

In both scenarios, new debt increases by approximately $6 million. That’s the real figure to watch. As is the closing debt position – which will translate into increasing interest payments.

A figure we cannot afford. At a time when we should be trying to minimise debt funding so we can begin to turn the debt funding of council activities around. We already spend $8 million a year in interest payments. Thats three community recreation centres a year!! Thats why I could not at this time support any debt funding of assets that are not critical.

Sorry Golden Bay, but getting our debt under control has to come first, and saving $3.5 million is an easy first win that would have made a sizeable dent in a very large debt ship that we have to begin turning around. Adding $3.5 million of fuel to an “interest repayment” fire just makes no sense to me especially when we not under any real pressure to replace the recreation centre. Finally, in my opinion, more pressing issues (like storm water) required council funds before we could spend money on recreational facilities.

If anyone tells you we do not have a debt problem they are deluded. We have got to stop spending on the nice to have items to ensure we have the head room to turn around our dependence on debt funding, preserve our credit rating, and ensure we spend our money on the more pressing priorities (like storm water). That should have started now. Alas, its been kicked for touch till next year.

Day two – a fait compli

Council reconevened on Tuesday (5 June 2014) to move through the remaining items on the agenda. Apologies were received from Cr Inglis and Cr Canton. All other councillors were present. By this time, the shock of the debt had lulled and many councillors felt that it was just funds moving around on paper. But as I alluded to above, the reality is that council debt was increasing by a further $6 million.

Golden Bay service centre

The draft annual plan proposed adding just under $1 million dollars to the 2013-14 annual plan for a rebuild of the council service centre.

This building was a council services building used by council staff and for the public to make enquiries, pay rates, and obtain resource consent information. The building is located on crown granted land. If the land is not used for council purposes, it will revert back to the crown. Staff were removed from the building when it was identified as earthquake prone (eg, below the approved 66% earthquake compliance requirement). Accordingly, staff were shifted to a temporary building, opposite the back of the Motueka public library.

This left the council with several options: (1) refurbish the service centre so its 66% earthquake compliant costing $380k, (2) rebuild a new centre for no more than $1 million, or (3) relocate the service centre to another location – either the library or information centre. Added to the decision mix were several additional considerations. First, the council could receive additional insurance funds if it included a commercial space in any rebuild. Second, any relocation would require additional expenditure of expensive fibre for sending data to the service centre. This effectively ruled out relocation.

In terms of a rebuild it was argued that there was little financial difference in cost for a new build and any refurbishment that met the 66% earthquake standard. Especially if the new build would enable a commercial space to be added that would be partially funded by the additional insurance and future rental income.

However, there was a larger financial difference if the refurbishment was only required to meet a 34% earthquake standard. The expected cost would probably be something less than $380k. Given the government had announced a forthcoming change in the earthquake standard (from 66% to 34%), it was felt that the financial argument for a rebuild did not stack up, and earthquake strengthening to a 34% standard was the more cost effective option. Accordingly, the project was deferred to the long term plan for further consideration and no budget for a rebuild was required in the 2014-15 annual plan.

I think this was a very sensible financial decision. And one that perhaps preserves the heritage value of the building. And due credit also to the Golden Bay councilors (Cr Sangster and Cr Bouillir) moving the change to the draft annual plan. Although I also appreciate this was a tactical concession to get the Golden Bay recreation centre across the line.

Yes, it would mean that staff would have to continue to operate from a very small temporary space – but only for another year or two. In my opinion, there is also still scope for some functions (not all) to be moved to the library, so that only planning functions operate from the temporary building. This might alleviate in the short term some of the spacial pressure. However, that is for a future discussion.

Moving forward, the council will be investigating how much refurbishment work is required to meet a 34% compliance requirement so staff can return quickly to their former building.

Golden Bay community centre (or recreation centre)

This proposal sought the replacement (and upgrade) of the existing rugby clubrooms and squash courts. The upgrade also proposed the addition of net ball courts. The co ncept and plans can be viewed on the councils website (see http://www.tasman.govt.nz/policy/public-consultation/recently-closed-consultations/feedback-form-golden-bay-community-recreation-facility-concept-plan/).

I attribute its demise in the draft plan on the finance manager’s presentation to councilors on our debt position just before it was considered. And Cr Higgins vigerous support of that message. That presentation emphasised the cost of adding any more debt funded programs to the council books.

We also heard that there was no legal obligation on council to provide a recreation centre in Golden Bay. In effect, the inclusion of a new recreation centre was a luxury that we did not have to commit to in the next financial year. We could take a “tea break” and consolidate our financial position. Rather than rush in, we could take the time to improve our financial position before embarking on any more projects.

Shifting the recreation centre to the long term plan would also give the Golden Bay community more time to raise the necessary finance while signaling the project had not been forgotten. We just needed time to sort out the councils finances first. All very rational and prudent.

However, in my opinion, the reality was that the inclusion of the Golden Bay recreation centre (together with other items) in substitution of the Motueka library was a missed opportunity to reduce debt at a time when interest rates are going up. The time to spend on nice to have items (like recreation centres), is when interest rates are low or trending downward. Not when they are trending up or when the demand (and price) for builders and contractors will be high as the Christchurch rebuild gathers stream.

While I appreciate that the councils commitment was changed from $3.5 million to $3.2 million (a $300k reduction). It still commits council to debt that in my opinion was unnecessary to commit to, when were are also starring down the barrel of a Dam proposal, as well as a strain on our storm water infrastructure, as rainfalls are projected to increase due to climate change.

At this point I note a recent article in the Nelson mail on stormwater (see http://www.stuff.co.nz/national/10236222/Flooding-battle-to-cost-millions). In that article it was stated that storm water and flood protection would mean more borrowing and more debt. In my opinion, this misrepresents the debate. The tension is not between addressing storm water issues and debt, it is between addressing storm water issues and spending money on other nice to have projects. Its a question of prioritising spending. Surely protecting peoples homes, comes before building recreation facilities?

As a community we band together to protect one another during a crisis. Mitigating the potential cost to the community of a major flood (not to mention the risk of potential insurance fee hikes or non-insurance, as well as litigation risk for council) surely warrants the investment. Not to mention removing the unnecessary worry ratepayers have whenever there is a major rainfall event. This is a political decision and the community need to speak up.

If Champion Rd can have Q100 storm water solution why can’t the other three or four hotspots in Richmond. For example, the Hart Rd\Bateup Rd intersection which receives rainfall from the higher Richmond south developments and was under water during the last three heavy rainfall events since 2011. Or the cemetery dam overflow (at the back of the Richmond cemetery), that nearly overflowed were it not for the valiant mid-night efforts or nearby residents removing flood debris from storm water grills – averting what could have been a major disaster for homes below the cemertery.

Finally, while the Golden Bay recreation centre will only add another $1 million of debt to the 2014-15 plan, the proposal is funded across two years. This means that council has already committed to the remaining $2 million of debt in the 2016-17 year. This places another road block in prioritising available funds on storm water in future years. And the overall increase in debt remains the same $3.2 million.

For the record, Cr Murfin and I opposed this expenditure. Cr Norris also voted against the amended resolution, although he voted against it on the basis it should have remained at $3.5 million.

Tourism

This issue has generated a lot of confusion – and it has not been helped by poor communication of what council (or at least some councilors) set out to do – which was to review the return on investment from tourism funding. I’ve discussed this issue in earlier posts so I will not revisit the debate. However, the outcome of the annual plan puts in place funding for destination tourism for the 2014-15 year, with some incentive for the relevant stakeholders to resolve future funding before the end of this year.

Great Taste Trail (or cycle trail extension)

This proposal sought to build the next planned segment of the trail beyond Wakefield. During workshops leading up to the draft annual plan being finalised, many councillors were opposed to this proposal on the basis of the ongoing operational costs council would be exposed too against the limited financial return it might offer Wakefield businesses. However, the Mayor suggested that if he could secure 50% government funding would councilors support the cycle trail being added to the draft annual plan. On that basis it got support during the workshops. However, between the workshop and the proposed resolution, the funding source got widened to include other third parties (potentially including institutions that might received council grants).

To reinforce councils commitment that funding the cycle trail extension was only on the basis of government funding, and not from another entity that might be indirectly funded by council grants, I moved that the last three words of the resolution be removed – namely “or another third party”. Unfortunately, I received no support for this amendment and it was defeated.

Everything else (including the Mapua development)

Surprisingly (or perhaps not), the $1.2 million Mapua development was lumped into the fill-a-buster resolution – together with 70 other items for consideration.

As it was part of a single resolution, you had to either support the resolution or not. This meant that disagreement with one of the 70+ items meant you had to vote the whole resolution down, or note your dissent on any of the 70+ items being considered. For example, the $1.2 million Mapua development proposal.

I had thought given a number of residents raised concerns about this item, the level of general public interest, the size of the investment, and the fact the cycle trail (involving only $300k) had received a separate resolution, that the Mpaua development proposal would also have been separated out from the rest of the items, that were less controversial. However, the Mayor (who is responsible for setting the agenda) preferred to leave it in amongst the rest. However, as concession the Mayor allowed councillors to note their disapproval of any single item – which I chose to do – rather than seek to separate the item from the main resolution.

By way of a brief background, the Mapua development initiative proposes to build on the former acquarium site. Two build options were outlined by a WHK report. The first was a container option (similar to the one used in Christchurch) for around $100k. The second was a standard build for $1.2 million. This would be partially debt funded. A third option was to just lease the land and let a developer build and lease any new building.

In my opinion, its not for council to seek more equity from ratepayers in order to embark on new commercial activities. If ratepayers want to invest their money in new commercial activities they should not be compelled to do it through increases in rates. And lets be frank, thats what is being proposed.

I also do not believe it is for council to attempt to control what businesses operate in the Mapua precinct other than by regulations. That is for the market to decide. If there are undesirable businesses, they can be controlled through regulations, not buying up all the buildings so the council becomes the sole lease holder of the entire precinct. However, if councilors want to employ a strategy of ownership, then they should be doing it for the least cost.

In my mind the container option would achieve the desired outcomes in a more cost effective manner, as well as bringing back a buzz to the Mapua precinct, in the same way it has happened in Christchurch (see http://www.thefifthestate.com.au/archives/49798/ and http://www.china.org.cn/photos/2011-12/04/content_24070673_3.htm). The added benefit of a container development is that it would reduce the lease costs for tenants while providing a very efficient space to operate their businesses from.

Arguments have been made around small space a container would offer, but the type of family businesses some councillors seek to retain in the precinct could easily operate from smaller spaces – as is the case in Wellington. Although I should add containers can be made into larger spaces (as the pictures of the ChCh precinct show). A container development would also allow more space for public seating which is at a premium in this area. After staff costs, lease costs are a major hurdle for start-up businesses, especially craft businesses. A container development would provide opportunities for new businesses to establish themselves. Surely this is a good thing.

An argument was advanced by staff that the $1.2 million should remain in the budget so that full council could at least consider whether the proposal had merit. If it was removed, council could not consider whether the proposal had any merit. In my mind, council should have nipped the project in the bud then rather than waste any further effort by staff. However, that argument found favour and the majority of councillors (but not all).

In my mind, expenditure of $1.2 million (or for that matter anything above $200k) that would require more debt funding, did not have any merit. Accordingly, I voted against it and noted my dissent on the item.

 Agenda and minutes

The agenda and minutes for the annual plan are found at: http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2014/2014-05-30 and http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2014/2014-06-30.

Newspapers

http://www.tasman.govt.nz/council/media-centre/news/minimising-the-impact-on-ratepayers-remains-a-major-focus/

http://www.stuff.co.nz/nelson-mail/news/10227950/Final-decision-on-rates-plan

http://nelsonweekly.co.nz/funding-cut-to-cycle-trail/

http://www.stuff.co.nz/nelson-mail/news/10018498/Tasman-to-tackle-debt-crisis

“Shock as $18M blow-out found” (4 June 2014) http://issuu.com/waimea-weekly/docs/040614/1?e=1913941/8122090

http://www.stuff.co.nz/nelson-mail/news/9828399/Tasman-rates-to-rise-up-to-3-5pc

http://www.stuff.co.nz/national/10236222/Flooding-battle-to-cost-millions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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