New documents show Southland businesses have serious concerns about the Invercargill City Council being fit to govern.
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The Department of Internal Affairs requested information from the council in August following rising tensions between elected members, and at times, with staff.
The documents were released by the council under the Local Government Official Information and Meetings Act.
Last month, Southland Chamber of Commerce president Neil McAra sent two letters, saying the Chamber believed the council was facing challenges that were beyond councillor's ability to resolve.
It followed feedback from many of the 450 businesses the chamber represents and concerns also raised by the Department that several high profile capital projects - including the multi-million dollar city block development - were testing the capacity of the council to provide strong, unified leadership.
The Chamber believed there was a vacuum in leadership around the council table and many councillors didn't understand their governance role, he said.
"The ongoing and very public conflicts, noted in the DIA letter, have been very embarrassing, and have led to a significant loss of confidence in the Council from within the Southland business community.
"It is frustrating that aspects of the Southland Regional Development Strategy, developed in 2015, have failed to progress. We are concerned a perception has grown that Invercargill is a hard place to do business.
"We do not believe the Council itself can fix what is broken, and strongly support further investigation and consultation with the business and wider community of the issues outlined as part of your evaluation process."
However, the Chamber did express confidence in the council's independent governance expert and were encouraged to hear the council was taking the matter seriously.
Businesses have called for further investigation and said they were disappointed that the council has no plan to consult them as it was an opportunity to start rebuilding the confidence that had been lost.
Invercargill Mayor Sir Tim Shadbolt sent a response the following week, thanking McAra for the letters on 3 and 16 September, saying the focus to date has been to supply the information available and commissioning an evaluation as requested.
"Once the evaluation has been completed, council anticipates there will be a number of actions recommended to be undertaken. External engagement with organisations such as the Chamber may well be part of those actions," he said.
"Council has discussed your letter, and all councillors have confirmed their willingness to engage with the Chamber outside of this process."
The documents also detailed discussions between councillors and staff about the Department of Internal Affairs' request and how to handle it publicly.
In an email dated 13 October, council chief executive Clare Hadley wrote down some of the conversations she had with the Department "in the interests of transparency" and in the spirit of the Local Government Official Information and Meetings Act.
The conversations started back in January when the Department called for a reference check and later sought a 'lay of the land'.
That was followed up in late February or early March when Hadley visited Wellington with interest raised about Sir Tim Shadbolt's litigation against his own council.
By mid July, Richard Hardie from the Department emailed for an update on a range of council matters before discussing the controversy over the regional recycling tender process.
Hadley mentioned emailing Hardie on 11 August, saying it was around the time councillors were discussing the council's performance and councillor Ian Pottinger asked about support options for the council and crown observers.
Seven days later, on the afternoon of 18 August, the mayor and chief executive received the Department's letter that raised concerns about the council's performance.
The letter was then sent by Hadley to the council's leadership group - that involves less than half of the councillors.
"At this stage - and subject to your further advice - I have only sent it to the group that met today."
In response, deputy mayor Toni Biddle - who has since announced she was standing down from council last week - said the content of the letter had nothing that wasn't expected.
In a private email, councillor Nobby Clark told Biddle a meeting invite was the only information he'd received.
Days later on 21 August, he sent an email to Biddle, Hadley and the Mayor, saying he'd prefer to raise his concerns in a public excluded meeting with other councillors as the independent governance advisor would be free to advise how they can best respond to their governance issues.
Clark followed up with a further email on 24 August, raising concerns that Hadley had been in contact with senior department staff given her employee status.
His concerns included who she had been communicating with, who initiated the calls, what was the nature of the calls and why, as her employer, councillors were not formally advised.
He also questioned two Code of Conduct complaints, one against Biddle for her 'tone' during an open meeting debate - which he said he found outrageous - and another against himself for a similar issue by a councillor.
"If the words I used were inappropriate, why did the [chief executive] not ledge my complaint - given my alleged inappropriate comment was regarding her?"
It wasn't until nearly a week after the Department's letter was received that a media release was sent.
In an all staff email, people were told it would be business as usual for staff: "Council won't be commenting further on this matter while the process is underway."
Councillors were sent an approved communications plan: "If I may please draw your attention to the "Key Messages" and "Spokespeople/who to contact for more information" sections of this Plan, as they will assist you should you be contacted by media... The plan will be updated as the process evolves".
The fourth version of the plan was released along with the other correspondence to guide staff and councillors until the Department's 28 August deadline.
"It is acknowledged that in recent times, elected members have been somewhat divided on some issues around the Council table. There has been a disconnect between governance and operations, and some elected members have chosen to speak publicly ... outside of a formal Council mandate, which has highlighted the division."
Part of the plan included keeping key businesses and community leaders up to date "as a matter of courtesy, respect, and to show we value their support and collaboration".
The plan specified that clear, concise messaging was needed to ensure there was no information gap and that other stakeholders didn't feel obligated to give a response to a perceived lack of information.
Then on 4 September - just over two weeks since the council first received the letter - the public got their first opportunity to hear from councillors about how they plan to restore trust and confidence in their ability to govern.
An interim briefing on the current governance standard is expected later this month.