The dark art of eco­nom­ics

The Northland Age - - Local Life / Opinion -

The Far North Dis­trict Coun­cil has some de­ci­sions to make over the next few months, de­ci­sions that will de­ter­mine whether or not all FNDC ratepay­ers find them­selves pay­ing to sub­sidise the costs of a very prof­itable busi­ness that wants to set up shop in Kerik­eri.

First, a quick les­son in the dark art of eco­nom­ics. Economists talk about ‘ex­ter­nal­i­ties,’ which are gen­er­ally seen to be a bad thing. An ex­ter­nal­ity oc­curs when some­one un­der­takes an ac­tiv­ity that gen­er­ates a profit, but is able to off­load, or ‘ex­ter­nalise,’ some of the costs of that ac­tiv­ity on to other peo­ple who get no share of the profit.

We could well see this sit­u­a­tion oc­cur­ring lo­cally, if FNDC grants the ini­tial re­source con­sent ap­pli­ca­tion from Arvida Group, who want to es­tab­lish a re­tire­ment vil­lage in

Hall Rd, Kerik­eri, with 200 houses and a 90-bed care fa­cil­ity. Only a hand­ful of house­holds are be­ing al­lowed to com­ment un­der a lim­ited no­ti­fi­ca­tion process, de­spite the fact that the project could im­pose costs on all FNDC ratepay­ers.

Ex­ter­nal­ity #1 — since the ap­pli­ca­tion sur­faced, res­i­dents have been sur­prised to dis­cover that there is a plan to in­stall a wa­ter main along Hall Rd. To fa­cil­i­tate the Arvida de­vel­op­ment, that project would be pri­ori­tised, and the size of the main in­creased. That will mean higher costs, and de­lays for work in other parts of the dis­trict.

Ex­ter­nal­ity #2 — the sewage treat­ment plant due for com­ple­tion in De­cem­ber will cre­ate ca­pac­ity for about 350 new con­nec­tions. The Arvida project would eas­ily ac­count for at least 250 of those; add in 100-plus new prop­er­ties in res­i­den­tial de­vel­op­ments al­ready con­sented, and the sup­posed 10-year ca­pac­ity will be gone in 10 months. Re­mem­ber­ing that Arvida re­ported a $59 mil­lion profit last fi­nan­cial year, and has 18ha avail­able, would it be un­rea­son­able to re­quire them to in­stall an on­site treat­ment plant rather than im­pose more costs on ratepay­ers for yet an­other ex­pan­sion?

Ex­ter­nal­ity #3 — the ini­tial earth­works for Arvida’s project re­quires 8000 tonnes of ag­gre­gate to be brought on to the site. Hall Rd is scarcely 5m wide, is poorly con­structed, and lacks foot­paths. It is ad­e­quate (barely) for cur­rent use, but coun­cil’s own in­fra­struc­ture staff have ex­pressed se­ri­ous con­cerns that the vol­ume of heavy ve­hi­cle use will cause ‘ter­mi­nal dam­age’ to the road. Against this possibilit­y, it is pro­posed, Arvida will be obliged to lodge a $100,000 bond.

That amount would go nowhere near the real cost of restor­ing the road to a rea­son­able stan­dard, and guess who will pick up the tab for the bal­ance, while other more ur­gent road­ing work around North­land re­mains un­done?

This project could im­pose costs on all ratepay­ers, so the cur­rent ap­pli­ca­tion must be denied and a fully no­ti­fied process put in place to give ev­ery­one a chance to be heard. You’ll be pay­ing for it, af­ter all.

Maybe ask your lo­cal coun­cil­lor what they think about ex­ter­nal­i­ties. They shouldn’t be hard to find. It’s elec­tion year.

"This [Arvida] project could im­pose costs on all ratepay­ers, so the cur­rent ap­pli­ca­tion must be denied and a fully no­ti­fied process put in place to give ev­ery­one a chance to be heard."

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