Ministers ‘divorced from reality’
A warning from ministers not to cut rates has drawn fury from councils seeking to ease burden on ratepayers. Dominic Harris reports.
Aprominent developer whose tenants have been hit hard by the coronavirus lockdown has accused ministers of being ‘‘divorced from reality’’ over a warning to councils not to cut rates.
Economic Development Minister Phil Twyford issued a blunt threat last week that any move by local authorities to reduce rates to relieve financial pain for residents and businesses could jeopardise the Government’s willingness to invest in any proposed partnerships.
Rates freezes or reductions were also ‘‘unlikely to be effective’’, Local Government Minister Nanaia Mahuta told Stuff.
But Richard Peebles, the developer behind Christchurch’s Riverside Market and Little High food venues, accused ministers of being clueless about the lockdown’s effect on small businesses and urged them to ‘‘get their heads out of the sand’’.
‘‘They must live in some sort of vacuum,’’ he said. ‘‘They don’t understand the impact of their decisions on small businesses, and I suggest they actually take time to talk to [them] – if there’s going to be any left.’’
The anti-rates relief rhetoric comes at a time when councils nationwide are already looking to tighten their belts to ease the burden on ratepayers. Some have introduced rates payment holidays, while others are considering slashing planned rates increases, cutting pay for senior staff and reexamining staffing levels.
In Christchurch, mayor Lianne Dalziel is ‘‘laser-focused’’ on eliminating rates rises next year, while council chief executive Dawn Baxendale said savings were being sought from every part of the organisation: ‘‘There are no ‘no-go’ areas’.’’
Auckland Council is also looking at reducing rates rises and laying off large numbers of temporary workers, while Wellington’s council is slashing increases and considering deferring payments.
But such moves could come at a cost – and not only for councils’ income.
Last month local authorities bid for $4 billion of Government money – $1b for Canterbury alone – being earmarked to fast-track infrastructure projects to reboot the economy.
Twyford told civic leaders they would have to do their bit financially, and that cutting rates would hamper that.
‘‘If you deliberately cut your revenue by scaling back rates increases, or going for zero rates, or cutting rates, how can I stand up with my colleagues and make the case that we should be investing alongside you?’’ he said. ‘‘I can’t do that.’’
Mahuta said rates freezes or reductions would likely be ineffective, did not target those with the greatest need and could create significant financial challenges for councils later.
‘‘What I am urging councils to do is take some time to gather information, talk to their communities and carefully consider any major financial decisions like this,’’ she said.
But Peebles, who has already seen tenants succumb to the lockdown and his business lose 70 per cent of income, said he was ‘‘speechless’’ at what he saw as a ‘‘threat’’ from central to local government.
A rates reduction would be a major boost for businesses, many now with no income, as rates were the biggest expenditure for most behind rent and wages, he said.
‘‘It’s ignoring the fact that they’re assuming all councils are running at best practice, as efficient and lean as they can be, which is obviously just not the case...
‘‘I just don’t understand – surely a minister should be advising councils to look at all costs and contracts and cut them back so they can actually reduce the burden on their ratepayers.
‘‘You don’t need to be a rocket scientist to work out that it’s going to be armageddon.
‘‘Those ministers just need to get their heads out of the sand.’’
But Dalziel said councils should listen carefully to the ministers’ messages that there are no one-sizefits-all solutions to help those in greatest need, that blanket decisions about rates could undermine the ability to invest in recovery and that the council should have to be able to pay its fair share if the Government is to fund extra investment.
‘‘It is vital that we partner with the Government on a cost-sharing basis to increase our investment capacity as a city and a region.
‘‘Neither of these messages contradicts the need for the chief executive to shape the council for the future – it’s not just about numbers, it’s about effective delivery of focused priorities . . .
‘‘We need to rise above the ‘noise’ – the rants from those who think that as long as we cut expenditure there is nothing more to be done.’’
Wellington mayor Andy Foster said the city council was ‘‘very conscious’’ of the pressure on ratepayers but that Twyford’s point around councils paying their share was ‘‘not unreasonable’’.
But former Christchurch council finance chairman Raf Manji said while councils should be looking at their books, local government ‘‘does not have the ability to magic up $50 billion of new funding’’.
‘‘Its funding options are limited and its funders, the ratepayers, are going to be under major financial pressure from the current economic shock.
‘‘If central government is so keen to see projects go ahead, they can fund them directly, and at a much lower cost than local government.
‘‘Whilst they have their chequebook open, they could also remove GST from rates, thus returning $750-800m back to ratepayers.’’
Councils have fewer financial options at their disposal than the Government to help with the economic recovery.
Non-rates revenue such as dividends, investment income, charges for facilities and development contributions, which account on average for 45 per cent
CHRIS SKELTON/STUFF of local government income, have taken the biggest hit from the lockdown, forcing councils to review costs.
The situation has left many with little choice but to look at rates increases just to ensure they can provide essential services, Local Government New Zealand president Dave Cull said.
‘‘Of course councils, as collective owners of $120 billion in infrastructure, have a potentially significant role to play in any stimulus investment.
‘‘But that will take balance sheet capacity, which is where Minister Twyford’s comments seem to be aimed.’’
‘‘We are conscious that there is a fine balance that has to be struck here, and we need to be very careful around income decisions, because there’s a lot riding on us being able to help communities get back on their feet.’’
Canterbury Employers’ Chamber of Commerce boss Leeann Watson also said councils should look at ‘‘all options’’ to deliver services and support businesses, and that the chamber had urged the Christchurch authority for years to look beyond rates for funding, such as recycling assets.
Christchurch commentator Mike Yardley has warned that reducing the rates burden ‘‘is pivotal to saving distressed businesses from the scrapheap’’.
However, he has also calculated that a zero rates increase is ‘‘a hell of an ask’’, equivalent to cutting $100m from the council’s $500m annual operational budget.
Despite the warning from Twyford, councils across the country are looking at ways to tighten their purse strings:
CHRISTCHURCH
The city council is looking for savings from ‘‘every part of the organisation’’, said Baxendale, who will have a 10 per cent salary cut next financial year.
A planned rates rise looks likely to be scrapped, while some ratepayers can receive an extra six months to pay their bills.
Spending will be reviewed, and the public will be consulted on significant changes to levels of service.
Some council-controlled organisations are reviewing costs.
Christchurch City Holdings’ board and chief executive, along with ChristchurchNZ’s board and chief executive, have taken pay cuts of 20 per cent for six months.
Christchurch Airport’s 200 fulltime staff have agreed to an 18-month pay freeze, there is a pause on recruitment and ‘‘senior remuneration, capability retention and talent strategies’’ will be reviewed.
Red Bus is carrying out a full business review, while Lyttelton Port has this week reviewed pay for senior staff.
OTAGO
Dunedin City Council chief executive Sue Bidrose has taken a pay cut of 15 per cent for six months, with other senior leaders doing similar.
Staff at Dunedin International Airport have had 80 per cent pay, reduced hours considered for staff at infrastructure agency Delta and City Forests if they cannot resume work shortly after lockdown, and Dunedin City Holdings has asked its companies to freeze wage and salary reviews.
Some consultants at Otago Regional Council have taken a 10 per cent pay cut, while Queenstown Lakes District Council (QLDC) has cut hours for consultants and is aiming to cut rates.
Queenstown Airport, owned largely by QLDC, stopped all capital works other than critical ones under the level four alert and is reducing costs and reviewing all expenditure, while staff have taken pay cuts of between 5 and 20 per cent.
Destination Queenstown, which is not a public organisation or CCO but an incorporated society member, is reviewing its budget.
AUCKLAND
The council is cutting many of up to 1100 temporary or contract staff and consultants, with 450 having already gone.
Executives across the council and its agencies, along with mayor Phil Goff, have agreed six-month pay cuts of 20 per cent for chief executives and 10 per cent for the second tier.
The chairs of the CCO boards and directors will take 20 and 10 per cent cuts respectively.
Four of the five CCOs have frozen recruitment and are reviewing spending.
A budget rethink asks residents to choose between a previously proposed 3.5 per cent annual rate rise, and a lower 2.5 per cent option.
WELLINGTON
Wellington City Council has proposed cutting its previously approved 7.1 per cent rates increase for this year to 5.07 per cent rates, and offered a deferral of rates payments for commercial property owners.
A forecast $48 million in lost revenue, partly due to reduced use of community facilities and a $14m loss in its airport dividend, will be funded through debt, if approved.
This draft annual plan will be open for public feedback from May 8 until June 8.
A separate pandemic response plan has also been drafted.
Greater Wellington Regional Council is also reviewing ‘‘all activities and budgets’’, while Porirua City Council has identified savings around contractors and consultants.
SOUTHLAND
Invercargill City Council staff who cannot work under the level three alert will receive 50 per cent of their pay, while Gore District Council is making 17 part-time staff redundant.
Additional reporting by Todd Niall, Debbie Jamieson and Mandy Te.