The $700 million case for intervening in Wellington City Council

Wednesday, 23 October 2024

ANALYSIS: When the Government ramped up its rhetoric around the Wellington City Council last week it was clear that something was going to give.

And on Tuesday it did. As predicted by this column, the Government will be sending a Crown observer into the council to keep an eye on things, offer advice and counsel to the council as well as reporting back to Government.

There was one key line in Local Government Minister Simeon Brown’s press release announcing the decision that jumped out.

“The Department [of Internal Affairs] estimates that the council’s financing approach to water services as set out in the 2024-34 Long Term Plan would overcharge Wellington City residents by more than $700 million over 10 years.”

Among all the speculation last week around the last minute rejection of selling of Wellington Airport shares and the effect on Wellington’s Long Term Plan, the issue of water management, which has been the single huge issue for councils and ratepayers, was almost forgotten.

But based on the advice Brown received, the council has not been using its balance sheet appropriately and presumably has front-loaded too much of the cost of the new water infrastructure onto current ratepayers, “overcharging” and driving up rates.

There will be much more to litigate around this particular point, but given the Government’s new “local water done well policy” has yet to be implemented, exactly how water infrastructure will be funded or costed is still up in the air.

Labour worked on three waters legislation for five years, passing it only in the dying days of government. That was then unpicked by the current government. The overall result has been to leave councils around the country - including Wellington - in years of limbo.

Brown also explicitly noted that: “Recent council meetings have also seen councillors walk out, refusing to participate in votes, and confusion regarding decisions, amendments, and voting. Councillors have also made repeated public criticism of one another and council staff.”

It is highly likely that Brown - in common with every minister either based in Wellington or perceived to have any influence over the council or local government - has been heavily prevailed upon by Wellington business figures and many others to sort out a council widely viewed as dysfunctional.

The timing is not without meaning. Among the other issues, the council is in the process of selecting a new chief executive and the council committee with oversight that appointment - the chief executive performance review committee - is comprised of mostly left-leaning councillors. The term of the current and sometimes controversial CEO, Barbara McKerrow, ends on March 1, 2025.

The observer will not have any decision-making powers, but will now likely be in place when that process occurs.

The speed at which this has occurred will have been a shock to council - and met by either relief or shock by taxpayers, depending on their view of the council.

The draft terms of reference given to the council and obtained by The Post makes for bleak reading. It says that the observer will, among other things, help to ensure that “the council is able to function as a governing body”; “the mayor is able to provide leadership to other elected members and the council organisation” and that, “the council chief executive and senior management team are working effectively with the elected council members, and providing them with high-quality advice in order to make decisions.”

Quite a bit of scope there then.

And, as if Wellington ratepayers haven’t been through enough, the council will have to pay to be observed.

To borrow from Donald Trump, the Government will send an observer and make them pay!