Wellington not the only council facing water cost woes

Lower Hutt's mayor says most metropolitan councils will soon face the same problem Wellington does on funding water infrastructure.

Local government Minister Simeon Brown has installed a Crown observer at Wellington City Council after it flipped on its decision to sell its airport shares, creating a big budget hole in its long-term plan.

Brown also criticised the council for paying for water infrastructure through rates, rather than debt.

Lower Hutt Mayor Campbell Barry told Morning Report on Wednesday that Wellington could not have paid for it through debt, and his council could not do that either.

"I would say for most metropolitan councils around the country, they would be in the same position because we, currently through our long-term plan a few months ago, were required to stick within headroom, stay within the balance sheet options that we had.

"And what the government put forward in the Wellington case was saying they should have done, they couldn't have, which just seems very unusual."

He wanted the minister to clarify what he meant.

"Councils like mine and many others around the country have basically been going through a really difficult time with government changes and different reforms and actually not having the tools available to us through our long-term plan process to do what Wellington City apparently was supposed to do, so that's quite a concern. And certainly some clarification would be helpful."

Barry said intervention from central government should require a "very high bar".

"This government has talked a lot about localism before it was elected, and local decision making, and they need to make sure that they allow councils to make their own decisions and to serve their own communities.

"So I do have a little bit of concern around any type of government intervention, and some of the rhetoric from government ministers I don't think has been helpful for local government generally."

Wellington City Councillor Tony Randle seconded the motion not to sell the airport shares, after originally being in favour, but welcomed the appointment of an observer.

"I think the council has struggled to make some decisions, key decisions around its financial sustainability, and I think an observer will give us that sort of outside spotlight to help us really focus on what will be some very hard decisions," he told Morning Report.

"I think the council hasn't put together a plan that's financially sustainable. We have our emergency fund in terms of borrowing capability that's being spent under the current plan, and we now have to restore it."

Brown said the council's move would "overcharge Wellington City residents by more than $700 million over 10 years". Randle said that was "news to me".

"I don't really understand quite where he's coming from, and so I'm afraid I can't help you on that judgement that's in his press release."

"We're funding water - from what I can understand - from debt, but we're not finding enough. And the issue is that water is the number one priority, yet we're still trying to get ahead with projects such as the Zero Waste Programme and the Golden Mile, and that's where these hard decisions have to be reconsidered and relooked at."

"Everything" needed to be on the table, he said, except water. Projects like the Golden Mile could be "down-rated", the cycleways perhaps scrapped. The town hall, however, he said would cost more to scrap than finish.

"Quite clearly, the minister has put us on notice. He's given us… a 'babysitter', which I think is perhaps an appropriate term. We've got to do these things right and I think we can do that because there's many decisions, many hard decisions we've already made… So we can do this, but we have to do it this time."

Councillor Nureddin Abdurahman was the driving force behind stopping the sale of the city's airport shares. He said there were mixed feelings around the council table about the appointment of an observer.

"Obviously the minister has spoken now, and for us, it's just to work together with the appointed observer constructively and the way that our city can move forward, and it is obvious there is a bit of a problem with the way this council functions, and I think now it's a bit of self-realisation for some of the councillors as well."

He said it was not even clear yet how much the council had to save exactly, and taking on more debt was still an option - though it probably would not be enough to cover the water infrastructure deficit.

"In the next 10 years, we are spending $1.8 billion on the water infrastructure. I know that is not enough, but that is how much we're spending. If we increase the debt ratio to 280 which is the maximum we can go, I think we got about $400 or $500 million, I don't think that that is a lot of money to put into the water infrastructure.

"Our funding model for the local government is broken. The central government should come up with some strategy, to be honest, to address some of the infrastructural issues that we have."

'Deeply worried'

Dean Knight, associate director of the New Zealand Centre for Public Law, said there was little justification for Brown's intervention in the council's decision-making.

"I do think it's a terrible precedent and I'm deeply worried by it, because if you start to strip it back, the problem used to justify intervention here is based around what seems to be ideological disagreement about two matters of policy," he told Morning Report.

"One's the, you know, how the cost of water infrastructure will be allocated - not the spend itself, but a belief that it should be funded more by debts than rates.

"And secondly, the shape of the investment portfolio and interest in the airport as a strategic asset, and belief in asset sales and the development of a broader investment portfolio as a particular way to self-insure against risk.

"And the key point is, this is debate stuff on which reasonable people can disagree, and those are choices open to a local authority to settle on in conjunction with the community. I've had experts telling me that Wellington's approach is rational, and you've had Campbell Barry on this morning telling me that the way that they, Wellington City, is allocated the water costs is pretty common amongst metro councils."

While Brown did have the right to intervene under the law, Knight said it was doubtful - from what he had seen - that what was happening rose to that level.

"The stuff about alleged dysfunctional decision-making is, I think, a red herring. Because, you know, democratic deliberation about contentious hot-button issues inevitably generates some sparks. That's local government, especially because these things get settled around the council table - an open committee, not behind closed cabinet doors…

"I think people shouldn't quickly clutch their pearls when you know, our local elected members are trying to work out what are some hard and thorny issues."

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