Kaipara's financial mess not all its own

by Matt Long
Federated Farmers Northland provincial president
15 August 2012

Kaipara District Council's (KDC) request for independent commissioners to take care of its $80.7 million financial hole illustrates plainly why Federated Farmers is so supportive of the government's plans to reform the Local Government Act.

With mob of angry ratepayers refusing to pay, KDC has finally turned to the government to step in and take over.

I see this as the only possible solution in an impossible situation and there is some poetic justice in the government helping clean up a fiscal disaster it had a hand in creating.

The council's Mangawhai EcoCare Wastewater Treatment Scheme project plans were obviously based on the assumption of an indefinite continuation of lifestyle blocks and beach houses providing plentiful development contributions and a growing rateable base. The onset of the Global Financial Crisis (GFC) detonated that idea. It is also obvious the original pricing presented to councillors, about $20 million, was far beyond the realms of reality.

KDC has been naive and possibly mislead by dodgy staff accounting. However, the role of central government should also be kept in mind.

Over the past decade, central government has pressured councils to provide all sorts of services and benefits for communities and the environment. At the same time central government has been progressively shutting off the tap to its pool of funding, instead pointing toward councils' massive ‘infrastructure asset base' as a viable means for raising any additional cash. As a result councils all over New Zealand are borrowing huge sums to pay their way, often to meet the strongly worded requests of central government to build newer, more environmentally friendly infrastructure.

To any right thinking citizen borrowing $20 million, let alone $60 million, for a reticulated sewerage treatment system for a population of around 1000 permanent residents must seem a bit insane. However, the combination of expansionist hype and environmental barrow-pushing which has come from central government over the last decade no doubt made that figure seem reasonable to KDC's council staff and councillors. After all, everyone expected a never ending supply of fresh building developments to keep coming in.

Once started, it must have been clear to many more people than just the disgraced former chief executive officer that the bills were blowing out, but it is difficult to stop big projects once they are underway.

It is the fear of this kind of bankrupting financial burden which keeps farmers awake at night. We all want to do our best by the environment, but we also have to be able to afford any improvements. Federated Farmers is heavily involved with the Land and Water Forum and council based water quality and environmental initiatives around the country. We cannot pretend farming can simply use debt to fund top-of-the-line environmental mitigation systems any more than councils should.

New Zealand as a whole cannot afford to have its biggest export earning sector fall into these sorts of debt quagmires. Before anything is set into legislative concrete we all, rural and urban, need to have a serious discussion around what we would like and what is financially feasible, for farmers and the whole country. If the GFC had not already taught us a few lessons on the dangers of unsustainable debt, the fall-out from Kaipara should.

ENDS

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