Transfer of assets a debacle

Rick Thorpe

Opinion

THE council’s consultation process on the transfer of assets debacle continues to be a mockery. We can now add a series of additional breaches to the council’s claims of proper process and transparency. The original breach, back in August 2015, related to the council decision to double the Gisborne Holdings Limited (GHL) directors’ fees and then a little later to transfer across the council asset management staff to GHL. This all occurred before the public hearing in October and clearly pre-empted the final decision by council to proceed.

Several official information requests made by Manu Caddie on behalf of Tairawhiti Residents Association, to understand the calculations determining the new municipal building rental and current internal charges, have been stymied with obfuscation and what appears to be misinformation. What is clear from the information provided is that there is a matrix of internal transfers between assets and activities that are not accounted for in annual financial reports. Information now released shows that what was initially claimed as current internal charges for the Fitzherbert St buildings, were not in fact for Fitzherbert St — meaning the changed ownership will result in significant operating cost increases.

The council recently determined that the proposed transfer of the Waikanae Beach Holiday Park and Vehicle Testing Station is of low significance and of little interest to the public. With only two weeks of consultation planned during May, and no opportunity for public hearings on submissions, it again appears the council is making a mockery of the process. It is now clear that GHL staff have already taken over the management of these assets.

We still do not know the terms and conditions for how GHL will manage the transferred assets as the Statement of Intent (SOI) has yet to be finalised. This would never happen in the private sector. Would you hand over management of your property without a signed agreement?

The distributions policy, that determines the dividend paid back to GDC, and the threshold at which GHL can buy and sell assets without council approval, are major issues that have still not been agreed.

Weren’t the municipal buildings transferred over four months ago? The transfer of these assets is fundamental to the council’s investment strategy, directive #4 in the Long Term Plan, to generate non-rate revenue for the council from new commercial activities. This was to be achieved by removing these assets from the political interference of councillors, and having them managed at arms length by a commercial structure.

The claim that these assets would generate more revenue under this new arrangement is without evidence. A review last week by PwC supports our contention that there will be no financial benefit to the council. If you also factor in the lost benefit of GDC stranded overheads, taxation implications and the duplication cost of GHL management, we estimate there is in fact a significant revenue deficit of at least $500,000.

This whole proposal has been ill-conceived from the start and the lack of any respectful public consultation only supports concerns that major council decisions are being manoeuvred from the chamber to the board room.

The decision to transfer the burden of the municipal rebuild on to GHL, to disguise the obvious cost and increased debt for ratepayers, has fooled no one. I hope those councillors who are responsible for pushing through this proposal can explain why the public continues to be excluded from the process and why they pursue this proposal when there is no financial benefit to ratepayers.

GDC responds: No breaches of processThere have been no breaches of process. The decision to transfer the municipal buildings to GHL was not made until a resolution passed at the November 19 council meeting. Prior to that meeting a formal period of consultation with the public was undertaken in which Mr Thorpe participated. This was all in accordance with the requirements of the Local Government Act.

At the November 19 meeting (not August) the council decided to increase the pool available to directors to $200,000 p.a. This was because fees had not been increased in about 10 years and there had been an increase in workload due to the due diligence required on the commercial assets transfer. The increased pool also provided for a further fifth director if required.

The statement that the council determined the transfer is of low significance and of little interest to the public is wrong. On the contrary, it is precisely because the council decided that the transfer was of public interest to the public that it decided to seek feedback from the public over a two-week period in May/June.

The GVT and Holiday Park are not significant assets (defined in the Local Government Act and the council’s Significance and Engagement Policy, copy available on the web). Highly significant assets are core-function assets such as water, wastewater and other key infrastructure.

GHL staff are undertaking day-to-day management of the commercial assets, at the request of the council. As part of the transfer of municipal buildings to GHL, effective Dec 1, council staff previously engaged in managing the commercial interests of the council were also transferred to GHL to facilitate the rebuild. Instead of the council employing additional staff to manage the remaining commercial assets, the council engaged GHL — the same staff as before — to undertake management of the commercial assets on behalf of the council. The Statement of Intent forms no part of this arrangement.

There is an SOI currently in place with GHL. The SOI that is being discussed by the council is for the SOI for the year beginning July 1, 2016 and needs to be agreed before that date.

Gisborne District Council Management