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Is it sensible for councils to use public money to bail out public entities?

The Local Government Business Forum's 2018 report shows Hamilton topping the nation with 35 per cent of operating expenditure on the nice-to-haves of Culture, Sport, Economic and Community Development.

OPINION: Historically, councils grew out of road and water boards, but these days, it seems like they exist to bail out bad public spending programmes. Auckland Council has committed $63 million to save the Eden Park Trust.

This comprises a $10m grant (it does not need to be repaid) and taking over $53m in loans. The banks don't trust the Trust to repay these, so the council can't expect it either.

Is this sensible? It caused a lot of debate and even Mayor Phil Goff voted against the grant. Is it fair? Actually, yes it is.

Eden Park Trust borrowed the money for various improvements that would allow it to earn more from hosting events – which is the purpose of the park. 

They got a resource consent from Auckland Council to host six concerts per year at a profit of $1m per concert – enough to repay the loans comfortably.

Unfortunately, despite the resource consent, promoters still had to get so many approvals for each concert (surely the same traffic management plan can be re-used?) that it took over a year to get permission for each one.

Not to mention the cost. The risk created by Auckland Council's process was too great.

Imagine selling 50,000 tickets only to get some pointless delay and having to reschedule. So promoters go elsewhere, which in the case of concerts, is more likely to be Melbourne than Mount Smart or other local venues.

If Auckland Council screwed a viable business model, then it is fair they need to step in and save the Trust. But it is not fair on ratepayers, and it is not fair on renters when the rates get passed on.

In an ideal world, the council would not be involved with the Trust. Eden Park should be able to operate on its own, and the role of councils should be focused on core services. This is the opinion of the Local Government Business Forum, a national group made up of institutions from the Chamber of Commerce to Federated Farmers, all of whom are increasingly concerned about the growing spending culture of councils. Since 1994, local government spending has gone up at nearly four times the rate of inflation.

At the same time, the Office of the Auditor General regularly notes that councils are underspending on infrastructure. I think we need a closer look at what is going on and give councils a reminder.

The role of councils is stated in the Local Government Act section 10. "To meet the current and future needs of communities for good-quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost-effective for households and businesses."

Section 11 identifies the core services: network infrastructure; public transport; solid waste collection; avoidance of natural hazards (e.g. flood control); libraries; museums; reserves; and other recreational and community facilities.

That's a pretty comprehensive list of what we want. It may not be exciting and glamorous like shares in a hotel or hosting V8s, but it is the stuff that is important to a functioning city.

Yet between 2009 and 2016, non-core spending across all councils shot up 170 per cent. That's a shocking trend away from the real role of councils.

So how does Hamilton compare to other cities in spending?

The Local Government Business Forum's 2018 report shows Hamilton topping the nation with 35 per cent of operating expenditure on the nice-to-haves of Culture, Sport, Economic and Community Development. Wellington spent 25 per cent, the average was just 17 per cent and Rangitikei only 4 per cent. This is before the commitment to give the new regional theatre $25m.

I wouldn't mind if we got value for money, but nearly a third of spending went on staff costs – significantly higher than the average for the region's ten councils.

Only 54 per cent of total spending went on infrastructure. Perhaps we should only pay 54 per cent of the staff. If Auckland did that, I suspect it would have solved the problem with Eden Park Trust – fewer bureaucrats would have made the approval process easier!

Working through the annual accounts shows too many examples of questionable value. Why did Hamilton City Council need to spend $1,273,927 on advertising in 2017? That's more than Wellington and Christchurch, and three times the per capita spend of Auckland.

Let's get our priorities back on track. Do the basics well and stop creating problems.

*Andrew Bydder is a Hamilton architect.



 

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