ARC ignored own report ; hijacked by staff

Media statement Thursday, January 12th, 2006

ARC ignored own report ; hijacked by staff

A report commissioned by the ARC from Auckland Professor Basil Sharp was hijacked by council staff last May, resulting in its conclusions being misrepresented and the council agreeing to increase its business rates differential.

But the ARC then gave no opportunity for the report or the staff interpretation of it to be rebutted.

The Sharp Report delivered to the ARC on May 25th last year found that in no way could a business differential be justified. A further report commissioned by Auckland business from economist Greg Dwyer agreed.

But in a memorandum to the council two ARC staff grossly misinterpreted the Sharp report’s findings to draw the opposite conclusion of its author.

The Employers & Manufacturers Association today released documents containing this information. (see below)

“Auckland business has vigorously opposed the introduction of a business differential on the grounds that businesses do not receive benefits from the ARC more than those received by other property owners,” said Alasdair Thompson, EMA’s chief executive.

“ARC’s rates are based on a property’s capital value which means far more in rates are generally paid by business than for other types of property.

“Nevertheless in 2004 the ARC introduced a business differential level of rate 50 per cent higher again than for other property owners.

“After strenuous objections the ARC eventually agreed to seek an independent report that would analyse the benefits received by business ratepayers from the ARC in return for rates paid.

“The purpose of the report was to assess whether it was fair to charge businesses more in rates than other properties, or not.

“Basil Sharp from Auckland University’s Department of Economics was ultimately engaged and eventually delivered his report to the ARC on May 25th, 2005.

“Sharp pointed out that 76 per cent of the activities of the ARC provide what he calls ‘general’ benefits (para 12).

“He said most benefits (79 per cent) were assessed as having a low likelihood of providing any benefits to business.

“In Paragraph 13 Professor Sharp says: ‘It would be most misleading to attempt quantification, even, for example, attempting to allocate a percentage cost as a benefit to business.’

“Despite that, council staff in a memorandum misrepresented Professor Sharp’s advice, and told the ARC councillors that they had extrapolated from Sharp’s report direct and general benefits to business from ARC services.

“The ARC then went on to increase the differential to 60 per cent and without making the Sharp report or its findings public until after submissions on the ARC’s Annual Plan had closed for the 2005/06 year.

“Incensed by the misrepresentation of the Sharp report to councillors, Auckland business commissioned their own review of Professor Sharp’s work from economist Greg Dwyer along with the staff memo that misrepresented it.

“Dwyer is highly critical of the ARC staff memorandum. He concluded: ‘The quality of public policy analysis reflected in the ARC’s claimed expansion of the Sharp report is woeful. The ARC memorandum detracts from an informed understanding of the Sharp report (refer p 36 of the main report - The executive summary of the Dwyer report is attached)

“Dwyer sought information from council staff and was supplied a large number of papers on rating policy but he found ‘none contained an analysis that would justify a business differential on the capital value rating basis.’

“He concluded: ‘The onus (remains) on the ARC to demonstrate that its rating policy is derived from a principled analysis and reflects a genuine commitment to act in the best interests of all ratepayers and residents rather than an arbitrary policy essentially aimed at appeasing residential ratepayers The ARC has not yet discharged that responsibility.’ (see p vii).

ENDS

See... Rating Business, October 2005 (Dwyer Report Executive Summary)

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