Why Wellington’s ‘financial crisis’ is being kept secret

Wellington water workers respond to a burst water main in the central city. Photo / Mark MItchell

ANALYSIS

Wellington City Council is facing a financial reality that could pour cold water on Mayor Tory Whanau’s big campaign promises and see hundreds of millions of dollars in capital spending cut.

Councillor Diane Calvert has lifted the lid on what she says is a “financial crisis”, but was only able to do so after seeking legal advice.

A behind-closed-doors briefing was held on Wednesday to inform elected members about the projected financial challenges for the council as part of its Long Term Plan (LTP) process.

The LTP is the council’s 10-year budget, and Whanau’s chance to stamp her mark on the direction of the council and get some wins over the line.

Chief strategy and governance officer Stephen McArthur said it is standard practice for briefings at the early stages of the LTP process to be held in private.

“While some of the broad financial issues are well-known, other issues involve commercially sensitive information, and it would be highly inappropriate to discuss these publicly at such an early stage of the process.”

McArthur said council staff are now tasked with producing reports that examine financial options for councillors.

These reports will be made publicly available later this year and will be an important part of community consultation on the LTP, he said.

But Calvert felt strongly that some high-level information should be released after at least three of these briefings in recent months.

She is concerned about the council being asked to allocate money for new projects while finances are “getting worse” in the background.

Wellington Mayor Tory Whanau has admitted the council is facing financial headwinds. Photo / Mark Mitchell

Calvert sought advice from the council’s general counsel about what she could say in a public setting without breaking the confidentiality of the briefings.

She ended up saying: “We are going to have to reduce our capital expenditure each year by tens of millions of dollars, if not hundreds of millions of dollars.”

Capital expenditure is money the council spends to acquire or upgrade fixed assets. For example, the biggest capital spend the council had in its recent Annual Plan was $76 million on earthquake-strengthening and improving Wellington’s central library.

The second biggest spend is $46m on earthquake-strengthening and revamping the Town Hall.

Independent councillor Nicola Young said the state of the city’s finances should be made public.

“We can’t make financial plans for the city unless we know what the financial situation is, and ratepayers need to know - it’s their money.”

She said there has been no restraint in spending since she accused the council of having an “orgy of spending” in March last year.

Labour councillor Teri O’Neill said she wanted to work for ratepayers, and the best way to do that was to follow due process and find solutions to the “financial spot” the council is in.

“Each to their own... but I wouldn’t have said the things being said because I understand this information is fiscally really sensitive at the moment.”

Whanau has admitted the council is facing financial headwinds due to inflation, high interest rates and rising insurance costs.

“We will continue to ensure we maintain our services to the community while striving for an equitable Wellington that is sustainable and resilient.”

Whanau’s reassurance that core services will be maintained is a shift in language from her proclamation that now was the time “to be bold” when the council signed off on a 12.3 per cent rates increase earlier this year.

Her mayoral campaign centred heavily around getting light rail to Island Bay and the housing opportunities the route would unlock.

She also promised to spend money on fixing the city’s water pipes, pedestrianise Cuba St, and install emergency call boxes in the central city to connect with trained community safety ambassadors.

There have already been costly additions to the council’s budget pressures within the first year of Whanau’s term.

Two more council buildings have been deemed earthquake-prone - the Michael Fowler Centre and the Opera House.

Meanwhile, the region could run out of water this summer, triggering severe restrictions.

Councils are being asked to include three recommendations in their upcoming LTPs. They are: more money for fixing leaks and replacing old infrastructure; universal water meters across the metropolitan region; and building another storage lake.

Former Wellington mayor Justin Lester said the LTP was the mayor’s vision for the city for the next 10 years and it was hers to own and deliver.

He said confidential briefings were part of the usual budget process.

“You can’t go too early out with public information because things won’t have been finalised yet. Those [briefings] will just be some of the indications around the challenges the council is facing.”

Lester said council officials often started with a worst-case scenario for a wishlist of projects, so people didn’t need to panic at this stage.

“What does worry me is that there isn’t a sufficient focus on the financial implications on households and wanting to do too much, and sometimes you’ve just got to cut things back.”

Georgina Campbell is a Wellington-based reporter who has a particular interest in local government, transport, and seismic issues. She joined the Herald in 2019 after working as a broadcast journalist.