Hutt says supercity is high risk, high cost

Press Release – Hutt City Council

Hutt says supercity is high risk, high cost
Hutt City Council has told the Local Government Commission that its proposal for a supercity is a “high cost, high risk” option. It recommends the Commission drop the plan and leaves the region’s cities to work out their own efficient arrangements.

In a strongly worded official submission on the supercity proposal, the Council dresses down the Commission for errors, selective use of data, and the failure of its recommended fifth-best option to pass the tests required of it by legislation.

Lower Hutt Mayor Ray Wallace says the Commission’s interference in the region’s governance had not been justified.

“The Commission has made no case for change, and it’s wasting our time with a ‘think big’ grandiose idea.

“The Commission wants us to spend at least $210m to maybe save $58m in ten years’ time. Our analysis is that it could actually end up losing money. There’s every chance that a blowout in IT costs and salaries will put the whole region in a worse position. That risk, and the damage to local democracy, is not worth it.

“In contrast, this region’s councils have been working on better, smarter ways to achieve change. We want to be left to get on with it. The smarter options include integrating the region’s public transport and roading functions. Water functions are already merged,” Mr Wallace said.

The Hutt City Council submission includes a new analysis of the Commission’s financial data. It finds that the long pay-back time of the hoped-for savings mean the value is best viewed in “discounted” terms (i.e. not the current value of the dollar, but the value when the savings are finally made). That means payback of the costs of amalgamation won’t be realised for 14 years. The analysis says that if the Auckland experience is replicated, where salaries have increased, not decreased, a supercity will end up losing money.

The Hutt City submission picks out the Commission’s assessment of “communities and issues” as the most poorly argued and articulated sections of the report. The Commission essentially argues that since communities in the region interact, they should be amalgamated. It ignores the unique character and interests of each community, and mixes up local issues with regional issues.

“That’s like saying since New Zealanders visit Aussie regularly, we should merge countries,” Mr Wallace says.

Hutt City Council‘s submission lambasts the failure of the Commission to show that its proposal passes the legally required three-part test for assessing local government reorganisation. It is highly critical of the Commission’s invention of six different criteria designed to make a supercity look the best option.

• The Commission is required to find a solution which is efficient and effective, but its own financial analysis ranks the supercity model with local boards fifth of the eight options the LGC assesses.[1]

• The Commission is required to find a solution that improves local democratic decision making, but the Commission had to re-write the rules to exclude reference to ‘local’[2] because the local boards that replace councils have limited budgets and are subservient to the council.

• The Commission is required to find a solution that improves economic performance in the region, but its report is unable to show how a supercity would do this.

The submission is critical of the “selective” evidence used by the Commission.

One example is an attempt to demonstrate that the Wellington economy is performing poorly. The Commission quotes a BERL report that says the “Wellington Region performed worse than the national economy on all indicators except employment growth and business unit growth.”[3] But it is only in the detail of the LGC’s report that it acknowledges that “the difference is marginal”.[4]

The Commission ignores evidence that the performance has been largely due to cyclical reasons and ignores official Statistics NZ regional GDP data which show that Wellington’s GDP per capita ($58,000) is higher than the national average ($48,000) and higher than Auckland’s ($49,000); Wellington’s total GDP has grown only slightly slower than Auckland’s over the last seven year (3.3% p.a. vs 3.5% p.a.); while GDP per capita has grown faster in Wellington than in Auckland (2.5% p.a. vs $1.9% p.a.).

Another example is its claim that the region has an unfunded bow wave of aged water reticulation, storm water and sewage infrastructure. To fake a shortfall, it claims that replacement will cost $1789m over the next 30 years, and contrasts it with the current 10 year budget of $587m. The Commission does not explain how an amalgamated council could any better afford the costs of replacement if there was an aged infrastructure problem.

Mr Wallace says selectively picking data has no place in an official, impartial and expert report. “This is not the work of respected experts, it’s the work of enthusiasts with an agenda, and that has no place in Government.”

Hutt City Council’s submission says that the only change that is worth considering is a structure that allows network, capital-intensive functions to be managed and operated at a regional level. This means establishing regional structures for public transport and roading. This could be a stand-alone Council Controlled Organisation or some other form of specialised entity for land transport for the Wellington and Wairarapa regions.


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