Mike Butler: Amalgamation risks huge debt

An analysis of the original proposal distributed by A Better Hawke's Bay two years ago, the Local Government Commission's final proposal issued last week, and what happened in the Auckland amalgamation in 2010, shows that you must be careful what you vote for.

Signatures on a tiny petition requesting a vote on a final five-council merger proposal were validated on Friday and a region-wide referendum will take place within three months.

The Local Government Commission's final proposal said some rates would increase initially and some would decrease while noting there would be a transitional period until 2021 when rates are integrated. ABHB said nothing about rates increases or decreases.

Rates in Auckland shot up by 8 per cent in the first year after amalgamation in 2010. Rates increases there do not reflect (fresh) water charges that were split from rates, metered, and charged separately by the council-controlled organisation Watercare.

ABHB predicted savings of $25 million a year while obliquely mentioning "job consolidation". The final proposal reduced savings to $260-million over 30 years, with 37 per cent of savings to come from job cuts. A sum of $8.66 million a year represents savings of 3.2 per cent of the $273.7 million total annual expenditure of Hawke's Bay's five councils.

Job reductions were predicted for Auckland being 7907 full-time equivalent staff with a total wage bill of $513 million. What they got was 8441 full-time equivalent staff with a total wage bill of $702 million. Debt is a bone of contention with the Hastings District Council external debt from $55 million to $79 million depending on whose figures you rely on, and Napier, $4 million.

ABHB proposed that debt would be ring-fenced without going into specifics. The final proposal specified that debt would be ring-fenced to 2021. All councils pay their debt through targeted rates until 2021 when the new council will decide how to pay remaining debt..

Auckland increased total debt by 43 per cent in the first year of amalgamation, from $4.4 billion to $6.3 billion.

ABHB said nothing about location of council headquarters. The final proposal puts the council headquarters in Napier with offices for consents, paying rates, booking facilities, etc in Wairoa, Napier, Hastings, and Waipawa. I'm sure Hastings retailers would not be too happy with greatly fewer council employees around at lunchtime.

ABHB and the final proposal agree that a single council would have a single information technology system, which is predicted to cost $12.6 million. But the Auckland IT system had a budget of $71 million which had blown out to $171 million by 2014, $100 million over budget.

ABHB stressed one vision for economic development, social development, sports, marketing the region, and a single long-term plan. The final proposal is also short on specifics, simply saying a single Hawke's Bay council and mayor would promote the region as a whole to central government and other national interests, produce a regional long-term economic plan, and a set of regional policies on transport, water, wastewater, provision of land for building.

Beware water meters and charges on top of rates.

The one vision thing manifested in Auckland as a call for a multibillion-dollar city rail link comprising two 3.4km-long, twin tunnels from Britomart to Eden Terrace.

A super council with combined funding increases the likelihood of such "think big" projects, which brings a big worry when councils have shown inability both to provide rational cost-benefit analyses and to run sound businesses without being propped up by rates.

ABHB merely said big-ticket projects evaluated for regional needs and the final proposal said economies of scale could be achieved, for instance roading.

ABHB touted one set of bylaws, dog licences, consents, contract awarding, rating system, all meaning greater transparency. Similarly, the final proposal pointed to consistent regulations, one set of rules for building consents, while stating the obvious that rubbish collection and recycling would continue. Again, no detail.

Some have interpreted ABHB's proposal of one representative to 10,000 residents as a cost saving, but the cost of representation is minimal, being for instance 0.5 per cent of the Hastings District Council annual expenditure.

ABHB proposed one mayor, 16 councillors elected from wards, five five-member community boards, and Maori advisory representation.

The final proposal has one mayor elected regionally, 18 councillors, five local boards with a total of 37 board members, all elected by first-past-the-post system, meaning one representative to 4000 residents in Napier, as an example.

In addition there will be a Maori board of iwi appointees, a co-governance iwi-council regional planning committee and a natural resources board.

Community board members in Auckland complained about being powerless. The Maori board with appointees voting on council committees that central government imposed on Auckland started local race-based spending, and involved iwi in building consents.

Suggestions by ABHB that a Hawke's Bay council would have greater say over use of the $800-million health, education, and welfare funds that come into HB from central government, a plan to create 5000 new jobs here over 10 years, and a proposal for the council to run parenting for every child for first five years of child's life, thankfully, have gone no further.

Mike Butler is the founder of Hastings Against Amalgamation.

Business and civic leaders, organisers, experts in their field and interest groups can contribute opinions. Views expressed here are the writer's opinion, and not the newspaper's. Email: editor@hbtoday.co.nz.