Law curbs Government over-reach in council kerfuffle

Tuesday, 15 October 2024

Government intervention in local body issues must clear a high legislative bar, says Anne Tolley, a former Tauranga City Council commissioner and Cabinet minister.

Tolley has seen Government intervention both as Tauranga commission chair from 2021 to August, and in Cabinet in 2012, when four commissioners replaced elected councillors at Kaipara District Council.

Prime Minister Christopher Luxon, Finance Minister Nicola Willis and Local Government Minister Simeon Brown all talked this week of intervening in Wellington.

Under the Local Government Act, central government can do that only if a council has a significant governance problem, or an issue likely to endanger public health or safety.

Tolley told The Post “it's a very high bar to have an intervention like Tauranga”. As well it was time consuming, and could be seen as overruling the wishes of voters.

“The legislation is pretty tough. To override democracy is extremely unusual and unique, and the law requires a really high test. The legislation protects the democratic process,” Tolley said.

Wellington council last week voted to stop the sale of its 34% share in the airport, which Luxon said on Tuesday had weakened its long-term plan and ability to lower rates.

If the Government had to make an intervention at the council, ‘’we will’’, he said.

Unlike Tauranga, Wellington City Council is still able to make decisions, and is not insolvent, as Kaipara was deemed to be.

Wellington-based economics and policy adviser Michael Reddell said the council was very unlikely to run out of money in the short-term, provided it was not hit by a really severe natural disaster.

'Councils can always raise rates and, like it or not, residents don't have any choice but to pay,” he said.

Not selling the airport shares to put the money into a diversified investment fund. should not “in principle” impact on how much capital expenditure the council can do now.

“But it would have provided a readily accessible back-up fund in the event of an emergency, such as a severe earthquake or tsunami,” Reddell said.

'The basic idea made a lot of sense in that Wellington is incredibly exposed to those natural disaster risks, so the last thing it would want would be further exposure to those risks through part-ownership of the airport, which is located directly in the path of any tsunami.'

Tolley had been out of the country for several months, so did not wish to discuss Wellington’s situation, but did say disagreements around council tables were not unusual.

“There's plenty of examples around the country … it doesn't necessarily mean that the government can step in, or the minister can step in, and override democratic process.”

Both Kaipara and Tauranga had benefited from central government involvement, she said.

“(Kaipara) got their books back in order after a massive overspend … it's been returned to democracy for three or four terms now,” she said.

“Obviously, I would say Tauranga was successful. Apart from anything else, the rating system needed to be restructured, and the commission did that and invested in some of the infrastructure that needed to be done.

“The ultimate aim is to return to democracy and have it be effective.”

While KPMG advice to Wellington City Council was to sell airport shares to increase its financial resilience, not doing so did not land it in financial strife – provided no disaster struck.

Accountancy giant KPMG in March advocated money from the airport share sale being placed in a Perpetual Investment Fund to cover future risk.

“WCC’s asset base is exposed to great risk due to Wellington’s geographic and seismic profile. Assets and projects currently underway face unsatisfactory insurance coverage,” KPMG said in March.

Councillors have been told the council was underinsured by an estimated $2.6 billion, and that amount was growing.