<![CDATA[Condie4council]]>https://www.condie4council.nz/blogRSS for NodeThu, 13 Jun 2024 08:24:39 GMT<![CDATA[Finlayson's public release of incorrect, unsubstantiated complaint to Auditor General]]>https://www.condie4council.nz/post/finlayson-s-public-release-of-incorrect-unsubstantiated-complaint-to-auditor-general6319a3a561d116240ebfd2adThu, 08 Sep 2022 08:26:41 GMTDr Jenny CondieToday, former attorney general Chris Finlayson has publicly (paywalled) made serious allegations against the professional reputations of a number of senior council staffers. He has implied that they failed to pursue a potential $65 million cost saving on the Te Matapihi central library strengthening project. The allegations form part of a complaint Mr Finlayson made to the Auditor General. Unfortunately Mr Finlayson tired of waiting for a response, and today took details of his accusations public.

I haven’t spoken about this publicly before because I considered it more appropriate to wait for a response from the Auditor General. Since Mr Finlayson has failed to do so, I now feel it is important respond to his accusations as well as I can given the commercial confidentiality I must legally respect. (I’ve had staff check this blog post to ensure I don’t cross any lines in that regard.)

Mr Finlayson makes a number of incorrect statements in the media article on this issue. As he has not had access to the details of this decision that is not surprising, however it is another reason he should have waited for the Auditor General to respond to his complaint. He claims council officers did not present the viscous dampers options to councillors (they did) and that officers told elected members viscous dampers were not viable (they didn’t).

To understand these accusations that staff deliberately refused to investigate a potential cost saving of $65 million on the Te Matapihi project we need to go back to the decision that was made by councillors. Five options for Te Matapihi went out for public consultation. Three of these options were to strengthen the building to low, medium and high resilience, the other two were options to build new. On 28 October 2020 councillors were to decide which option to go ahead with.

Viscous dampers are an established technology for seismic resilience in buildings. They are used in some buildings around Wellington. An expert engineering panel evaluated the options. Paragraphs 68 and 69 of the paper stated:

“However, the panel felt that the design team had not sufficiently explored using viscous dampers as an alternative methodology to the ones proposed. The design team was of the view that this type of solution would be a variation of the Option B scheme [medium resilience option] and although they agreed that such an approach could achieve suitable NBS [National Building Standards] levels, it would be unlikely to achieve the levels of resilience sought under Option C [high resilience option].

“They have subsequently tested this view by undertaking a conceptual analysis on a Fluid Viscous Damper (FVD) design by substituting FVD’s in for the current frames in the Option B and Option C schemes. Their initial analysis is that they could achieve an improvement on the performance of the Option B scheme but could not achieve the performance of the Option C scheme.”

In other words they concluded that viscous dampers would deliver medium resilience and that the only technology that would deliver high resilience was base isolation.

Let’s review Chris Finlayson’s claims. First, that the viscous damper option was not presented to councillors. The above paragraphs show it was explicitly considered. Second, that officers told councillors that viscous dampers were not viable. The officer advice clearly does not state this. It says that viscous dampers could improve the performance of the medium resilience option but would not achieve the high resilience performance of base isolators. Third, that viscous dampers could save ratepayers up to $65 million. The advice received on 28 October 2020 estimated that the cost difference between the medium resilience option (which could be delivered by viscous dampers) and the high resilience option (which could only be delivered by base isolators) was between $22.3-$24.7 million. A significant cost saving, but well short of the claimed $65 million.

Public views were pretty evenly split between remediation or a new building. In a representative survey 45% preferred a new building and 52% preferred remediation. By far the most popular remediation option was the high resilience option.

Councillors had a long debate that considered the trade offs of higher cost for a high resilience building. After that debate councillors voted to proceed with the high resilience option, in a 14-1 vote with only Councillor Sparrow against. Councillors felt that the additional cost of the high resilience option was worth the benefit. It would give confidence the building would not need to be strengthened again in future, as happened to the Town Hall. It meant the building would be usable as an emergency management hub, that could be used as a base in the central city to coordinate a response and provide support to those who need it. To act as an emergency hub the building needed to be high resilience – which means that it could be reoccupied within a few hours (rather than within a few months under a medium resilience option).

After this decision, Wellington engineering company Beca approached council staff to say that they had proprietary intellectual property that would allow them to deliver a high resilience building using viscous dampers. They believed this could deliver a similar level of resilience benefit for significantly less than base isolators.

Despite this pitch coming after the formal decision for a high resilience building had been made, staff agreed to look into the possibility, but only on the condition that it could deliver a high resilience option equal to base isolation as councillors had already ruled out a cheaper medium resilience option.

First, staff needed to be able to verify Beca's claim before they could consider this alternative construction methodology. This took some time to negotiate with Beca, as they were rightfully concerned about how that process would protect their intellectual property. It was negotiated with Beca that they would provide council with a proposal that include cost estimates and resilience performance modelling and this would be independently reviewed by an engineering company in Christchurch. Staff chose this firm particularly because they have a reputation for working with new seismic resilience technology. There was confidence that they would be open to innovative technology.

This is where commercial confidentiality comes in. I can’t say anything about the content of either the Beca proposal or the independent review. I have read both reports, although councillors were not given copies, due to the seriousness with which Beca regards the protection of their intellectual property. I spoke with council staff for several hours, discussing the procurement process that was followed and the detail of the reports. I am allowed to say that I’m extremely comfortable with the process that was undertaken and the decision staff made to stick with the proven base isolation technology.

NZ Herald states: “Finlayson said... another independent review sought by the council concluded there were (sic) no advantage.” I cannot comment on whether that is what the report found without breaching commercial confidentiality. I will note that as a member of the public Mr Finlayson should not know what that report contains. I would be curious to know why he believes he knows the contents of a highly confidential report?

Mr Finlayson may hold the view that we should have chosen a medium or low resilience solution and saved the ratepayers money. He has every right to disagree with Council’s decision to choose a more expensive, high resilience option for Te Matapihi. He has the right to ask for the Auditor General to look into the matter more closely. He does not have the right to publicly accuse staff of professional negligence without any evidence to support him.

I am confident that council staff are cooperating with requests for information from the Auditor General’s office. The commercially sensitive documents have been provided to them on the same condition that the information they contain cannot be made public.

I can reassure you that our staff care about spending your rates carefully. They have proven this in the past two years by finding $17 million in savings during a very challenging time, with another $15 million savings planned for this financial year. I have confidence that the procurement process followed by staff was prudent and appropriate. I expect the Auditor General will come to the same conclusion. I hope that they are able to respond to the complaint soon, so that our staff will no longer be subject to these accusations against their professional integrity.

<![CDATA[The election is a job interview, not just a policy debate]]>https://www.condie4council.nz/post/the-election-is-a-job-interview-not-just-a-policy-debate631583c028725f4d6519a35eMon, 05 Sep 2022 05:13:13 GMTDr Jenny CondieI often think about an election campaign as a highly unusual job interview. At the end of my first term on Council it now feels more like a performance review, reflecting back on the past three years. Self-evaluations are a common part of a performance review process and I figured if you all have to do that for your jobs, I should probably do one for mine. So here goes...

Which goals did you meet?

I worked constructively with councillors and staff to make significant progress on my key campaign goals: to permit more good quality townhouses and apartments to be built in our city, and to deliver climate friendly transport options. The notified District Plan permits significantly more housing density in the central city and near key transport routes, while giving the new design guides more teeth. Good progress has been made on key transport projects including the bike network plan, Golden Mile improvements, Thorndon Quay & Hutt Road improvements, and mass rapid transit.

Name three things you have done really well. Why do you think those were successful?

1. Negotiated the recommendations of the Mayoral Taskforce on Three Waters leading to unanimous agreement, co-wrote the report and ensured the relevant recommendations were implemented. This was successful because I worked with people who held different views, listened carefully, and identified the space where everyone could live with the result. I worked with other councillors to ensure they understood and supported the recommendations.

2. Made significant changes to papers on three waters, residual waste and the District Plan by drafting complex, technical amendments - most of which passed unanimously. As above, I succeeded at this because I considered the views of people who disagreed with each other and considered the practical and legal constraints on a solution.

3. Improved the quality of advice coming to council by giving feedback to senior staff on my expectations for good quality advice and raised concerns when advice hasn’t met that standard. This has seen a steady improvement in the quality of advice we receive. This was effective because I developed good working relationships with senior staff based on mutual respect, I was clear about my expectations and the improvements I wanted to see, and gave timely, constructive feedback when advice needed to be better.

Provide an example of a tough situation you handled well

I constructively yet firmly ensured that a resolution of council was implemented after staff initially failed to do so. When councillors are trying to change the strategic direction of the Council that can be challenging for staff who have been in their roles for a long time. This happened to me regarding an amendment I got passed through committee. Nearly a year later when a related paper came back to committee it became clear the resolution had not been implemented. I raised my concerns directly with the Chief Executive’s office and worked with the responsible senior manager to find a way forward to implement the original resolution. This is always a disappointing and frustrating situation to experience as a councillor, however I found the senior leaders took this situation very seriously and once it was brought to their attention they responded quickly and well. They took the paper off the agenda, apologised to me personally, and worked over the following month to implement the resolution before the paper came back on our agenda. In the end, I was happy with the outcome.

What responsibilities have you taken on?

1. Chair of Council Controlled Organisations sub-committee – I asked each member to choose two CCOs to focus on for each meeting, which meant everyone had an overview of all the CCOs and between us we had detailed coverage of each one. I started to move WCC towards more strategic relationships with our CCOs rather than a purely accountability focus.

2. Deputy Chair of Audit and Risk sub-committee – I worked with the new independent Chair to strengthen our oversight of Council operations by developing a calendar of reporting. Brought a focus on building the capability of WCC to deliver our large work programme to the sub-committee in areas such as financial processes, health & safety, project management, and asset management. Shared the importance of this work and progress made with all councillors.

3. Deputy Chair Infrastructure – Supported the Chair in developing a work plan for the new committee. Requested a report on how council’s stormwater assets and retaining walls performed during last winter’s storms, which identified challenges in managing flooding and slips. (This work will continue as part of the Climate Adaptation work next term.)

4. Governance Reference Group member for Let’s Get Wellington Moving – Raised red flags about programme performance with senior staff and pressed for the Health Check that enabled a successful reset of the programme. This has led to significant progress in the past 18 months. Ensured effective coordination of work between LGWM and WCC in areas such as the bike network plan and the District Plan.

5. Portfolio lead for traffic resolutions – Took the lead on the new process of having minor traffic resolutions approved by the Regulatory Process Committee. Asked staff for improvements in feedback and communication with residents who submit on traffic resolutions. Kept councillors well informed of traffic resolutions in their ward and ensured any controversial traffic resolutions were referred to a committee of all councillors. This has built a culture of trust in the process which has enabled significant time saving for both councillors and staff.

What projects have you enjoyed working on the most, and why?

I really enjoyed working on the Mayoral Taskforce for Three Waters. It is a very complex area and there was so much to learn, which I enjoy. I was able to ask probing questions that led to the understanding that while funding for depreciation of water assets had been collected, it hadn’t actually been spent on replacing those assets. Members of the Taskforce had a variety of views and perspectives, it was very satisfying to understand their priorities and negotiate recommendations that everyone could agree with. It was important to me that the Taskforce report was accessible despite the complexity of the issues. I enjoyed working with technical experts to find ways to explain things in plain language. When the Taskforce report came to Council I worked with all my colleagues to write a set of amendments that everyone could support. It had all my favourite things – learning something new, asking probing questions, understanding other perspectives, finding common ground, explaining complex ideas, and all in the service of making our city better.

I’ve also enjoyed supporting other councillors get their projects over the line. Sometimes I have been able to contribute my skills at navigating Council processes, such as when helping Laurie Foon change our strategic direction on waste - which led to the proposed new sewage treatment plant at Moa Point that will mean we no longer have to bury sewage waste at the landfill, a scaled down piggy-back option for extending the Southern landfill, and a road map for waste minimisation activities such as organic kerbside collection. Other times it’s simply being a cheerleader and reliable vote such as for Rebecca Matthews on housing density in the District Plan or for Jill Day on lifting our capacity for strategic partnership with mana whenua.

Give one or two examples of how you have grown professionally over the last term. What are the things you’ve learned?

I’ve grown my knowledge about council processes like traffic resolutions or District Plan changes, as well as general governance topics such as health and safety, assurance, and project management. This helps me ask better questions and challenge staff in constructive ways that strengthen their approach or advice. I’ve had both staff and councillors comment on how much they appreciate my questions.

I’ve learned to chair meetings and public hearings, and have had consistent feedback from meeting participants that they appreciate my chairing style. As chair I try to create an atmosphere where people feel welcome to share their views. I’ve also learned that sometimes slowing down a meeting or taking an adjournment can get the best outcome.

What personal strengths help you do your job effectively?

My academic background means I’m confident reading financial reports, economic analysis, and advice on complex issues. My teaching background helps me to explain those concepts or issues to others in plain English. My experience as a budget analyst at Treasury helps me to work effectively on Council budgets. My strong sense of integrity means that I will call out behaviour that isn’t up to scratch. I also try to tackle difficult conversations rather than letting them fester.

You feel most valuable in this team when...

...working to find a way forward on challenging issues, figuring out what the legal and practical wriggle room is, and working with staff and councillors to develop amendments that most people can live with.

Failures/weaknesses/growth opportunities/feedback
What goals do you wish you had accomplished since your last evaluation but didn't?

We haven’t made as much progress on climate adaptation and resilience as I wanted to. When I was elected WCC didn’t have sufficient staff capability to deliver on our Te Atakura climate goals. It has taken time to build the team, and work on reducing emissions has taken priority so far. Now internal progress has been made on a work plan for adaptation and next term will be critical for advancing this with the community. When I arrived there were a number of Council assets for which we did not have good information or understanding of their condition and risk. Again progress has been made internally to improve our asset management planning, which should be visible to the public when our next Infrastructure Plan comes out in the lead up to the next Long Term Plan.

Which tasks do you least enjoy?

Answering residents’ queries by phone or email. These are often specific, operational matters and therefore need a staff response. It can be difficult to keep track of whether people have received a response. Processes for this have improved in the past term and that progress needs to continue so that we can be confident residents are getting good and timely answers from council.

What are some things you would have done differently looking back?

I haven’t always got it right when dealing with the media. I’ve owned my mistakes, apologised to my colleagues, and learned from the experience.

I have sprung things on my colleagues during public meetings. Any time that a group of councillors were surprised like that in public it was detrimental to trust and working relationships. I now try to let everyone know in advance of the meeting if I’m doing something unexpected.

Did you receive any feedback during the review period?

I have a habit of answering any question I know the answer to, which other councillors can find annoying as they really need an official answer from staff. I’ve been working on this and I’ve definitely improved!

I’ve also had feedback from colleagues that I spend too long during debate explaining the key points of the decision we are making, which they are already familiar with. However, when I checked with other colleagues they said that they found this helpful. I’ve tried to respond to this by reducing the time I spend ‘explaining’ and only doing so for the most critical or complex issues.

What skills do you have that you believe you could use more effectively?

I’m good at explaining complex issues in plain language and answering people’s questions. I haven’t gotten out to as many engagement events as I would have liked to, mostly due to COVID and illness. I hope to do more of that if elected next term.

What 2-3 things will you focus on in the next term to help you grow and develop?

I want to work more effectively with the administrative support staff we are provided to ensure that residents are getting helpful and timely responses to their queries.

I would like to use social media more to communicate with people about the decisions we are making and the decision making process we go through. I’ve blogged about some policy issues this term, and would like to be more consistent with that type of communication in future. This is an important contribution I can make to transparency and helping the public understand our decision making process.

I would like to get more governance training, particularly around managing financial risk, asset management, health and safety as these are each an important part of our role of councillors, but areas where I have less previous experience. I was scheduled to attend an Institute of Directors course on Audit and Risk committees, however was unable to attend due to illness. I will prioritise similar training next term if elected.

<![CDATA[ADHD is not just for kids]]>https://www.condie4council.nz/post/_adhd62f5f92932dcfeae8b2f02fbFri, 12 Aug 2022 07:04:04 GMTDr Jenny CondieI’m not usually up with the latest trends, but it turns out I’ve joined one. I’m now one of the many women who have been diagnosed with ADHD as an adult.

My diagnosis is very recent and I’m still wrapping my head around it to be honest. It feels like I have to re-read my whole life story in a new context now that this plot twist has been revealed. For example, I’ve spoken publicly about my challenges with depression and suicidal thoughts. It’s likely that my depression originally kicked off due to the struggles I was having managing my undiagnosed ADHD at university.

ADHD has historically been under-diagnosed in girls and women as they tend not to fit the stereotype of a trouble maker in class who is bouncing off the walls all day. It’s also much harder to diagnose in nerds – our intelligence and curiousity helps us succeed in school despite our symptoms.

For me, ADHD mostly affects my efforts to keep up with all the chores of daily life. (I’m lucky that my husband likes grocery shopping and cooking or we may have starved to death ages ago.)

Fortunately I find the work we do at Council fascinating – which means I tend to hyperfocus and find it hard to put down! My biggest challenge is answering emails. No one likes keeping up with emails, but I’m medically diagnosed levels of bad at it. It means I rely a lot more on the administrative support that councillors are provided than some of my colleagues.

One of the things that helped on my journey to a diagnosis was other women talking about their ADHD on social media. Hopefully I can pay that forward for other people.

We also need employers to improve their understanding of neurodiverse conditions like ADHD and autism. I’m really proud that Wellington City Council has started training our managers on how to support neurodiverse employees. Hopefully I can continue to support that mahi next term on Council.

<![CDATA[Wellington water pipes replacement value now $3.1 billion]]>https://www.condie4council.nz/post/wellington-water-pipes-replacement-value-now-3-1-billion628ffad925674b56209e1ee2Fri, 27 May 2022 09:07:07 GMTDr Jenny CondieCouncil agenda papers released today show that a revaluation of our pipes has increased the estimated replacement cost of those pipes by 80% based on the expert judgment of independent valuers. The headline here is that fully rates funding the depreciation for these water assets, as we normally do, would add another 9% on to rates - yikes! Instead, staff are recommending that we partially fund the depreciation for the next two years which will keep the rates increase at or below the 8.9% we consulted on.

Want to understand what this is all about and whether the recommendation is financially prudent? Read on!

As part of part of our planning for the Annual Report process, our auditors requested a detailed revaluation of our infrastructure assets (mostly water and transport assets). This is a reasonable request that we were expecting, as the COVID pandemic has caused rapid inflation and significant volatility of costs. While transport assets came back with a significant but manageable increase in replacement cost, the increase in replacement cost for water assets was frankly astonishing and comes on top of a 33% increase for water assets across the previous three year period. For those keeping score, across the past 5 years the cost to replace our city’s pipes has increased by roughly 10%, then another 10%, another 10%, another 40% and then another 40%.

While consumer inflation is running at around 6-7%, construction costs have been increasing much faster. For example, the price of steel has been extremely volatile and approximately doubled in the past 2 years. Supply chain issues (like shortage of materials such as GIB) affect materials needed to replace pipes as well. The housing crisis in Wellington is also making it harder to attract people to Wellington who can help us replace our pipes – which drives up wages, which drives up costs. We have also learned a lot more about our pipes after all the work we have put in replacing them in the past two years. For example, we have learned that our water pipes are generally buried much deeper in the ground than previously assumed. Digging deeper costs more.

Because of this increase in replacement cost, the depreciation on our pipes has increased by $34 million. If we follow our standard financial policies we would normally fund this through rates, which would mean increasing rates by a further 9% on top of all our other cost pressures. Clearly that kind of rates increase is not appropriate or affordable.

Instead, staff are recommending that for the next two years we only rates-fund the planned replacements for our water assets and not the full amount of depreciation based on the new valuation. This would mean collecting rates funding to pay for the $27 million worth of planned construction projects to replace our pipes next year, but not collecting rates funding for the additional depreciation costs of $61 million.

We are already investing as much as it is physically possible to deliver to improve our pipes in the next two years. With constraints on labour, material and professional services there is a limit to how many pipes we can replace in the next two years. We are already planning to spend close to (or possibly more than) what Wellington Water can deliver. Even if we throw more money at them, we don’t believe they could replace more pipes right now than they already are. Significant additional funding will be needed in future years once the capacity to deliver more pipe replacements has been increased, but for now any additional depreciation rates money we collect just goes to pay down debt.

All of that is confusing so I drew a picture below. The original LTP budget for 2022/23 (the first column on the left) was for $54 million in depreciation of which $27 million would be spent on replacing pipes and the rest used to pay down debt. After the revaluation the full depreciation amount has risen to $88 million, still with only $27 million of actual pipe replacement. The officer recommendation is that we only rates fund the $27 million of actual pipe replacement. This lowers the rates requirement compared to the LTP budget by $27 million. (It is just a confusing coincidence that the amount for pipe replacement and the reduction in depreciation funding are the same amount. Sorry, sometimes life is just like that.)

Partially funding depreciation as this proposal recommends is not normal practice at WCC, but normal practice is designed to cope with normal situations, and an 80% increase in the replacement cost of our pipes is really not normal. Fortunately, our financial policies include some exceptions to the normal process to be used if normal goes out the window. Staff are suggesting that it is appropriate and prudent in this case to use those exceptions.

In this case, the relevant reasons our financial policies allow for us to not fully fund depreciation are where the original borrowings have been repaid or where the replacement of the asset will be funded by a third party.

Through our participation in the government’s water reform process, DIA have identified how much of WCC’s total debt is related to our water assets. They have found that across $1.7 billion worth of assets (now $3.1 billion after revaluation) only about $50 million in debt remains unpaid. That’s actually not a lot. In other words, the vast majority of our original borrowings associated with water assets have been repaid. This is related to a key finding of the Mayoral Taskforce on Three Waters that WCC had been spending less on asset replacement and renewal than we were collecting as depreciation through rates – the excess was used to pay down debt.

Also because of the government’s three waters reform process, it is now likely that Wellington City Council will not be funding the replacement of these assets because the new Water Services Entity will fund those costs. (It is important to note that this option does not change the outcome of any funding that WCC might receive due to the water reforms. The only thing that would change is which bucket of government money the funding would come from. It is a complex money-go-round that I’m not going to get into here.)

Since both of these exceptions criteria have been met, our financial policy allows that it may be prudent to consider partially funding the depreciation on these water assets.

Given the complexity and uncertainty of the current environment, with COVID, substantial construction cost increases, and the water reform programme, I agree with the officer advice that partially rates funding the water depreciation for the next two years is worth considering.

This issue only further cements my view, formed as a member of the Mayoral Taskforce on Three Waters, that water reform such as that proposed by the government is absolutely essential. Wellington is at the forefront of this issue with some of the oldest pipes in the country and our extremely visible pipe failures, however I am in no doubt that other local authorities face similar ticking time bombs under their streets.

This may seem to be a last minute change but revaluations need to be completed as close to the end of the financial year as practical so they are as accurate as possible at financial year end. Generally speaking, any cost pressures that occur as a result of the revaluation can be managed through the final budget process. It is only the unprecedented 80% increase that has made this an unusual event and no one could have reasonably expected the valuation to increase by that much. The recommendations staff are proposing have been considered by the independent chair of our Audit and Risk Sub-committee and discussed with our auditor and staff managing the water reforms at DIA.

As to financial prudence, the staff recommended option will not make future generations worse off, while also balancing the affordability needs of current ratepayers. While some councillors would prefer to see council cut costs further, that should not be conflated with this issue. My own view continues to be that sudden and drastic cost cutting does more harm than good in the long run.

This council has delivered $17 million in savings over the past two years with an additional $15 million savings planned for next year. All while continuing to deliver mostly uninterrupted services to our community through a global pandemic. While there have certainly been some bumps in the road in the past two years, I personally tip my hat to the dedicated staff who have kept our city running while finding better ways of working that save ratepayers money.

<![CDATA[Wellington Water budget error to be fixed next week]]>https://www.condie4council.nz/post/wellington-water-budget-error-to-be-fixed-next-week623ade028050546a0351be8aWed, 23 Mar 2022 08:52:04 GMTDr Jenny CondieUnfortunately Porirua Mayor Anita Baker has recently made incorrect and misleading comments about a Wellington Water request made to Wellington City Council (WCC) for an additional $5M for reactive maintenance - that is fixing pipes after they break. As someone with closer knowledge of the situation I felt I needed to provide more information in response.

In March 2021 Wellington Water realised that they had underbudgeted for reactive maintenance for WCC in the 21/22 financial year. They made a request to WCC staff for $5m to be reallocated from the government stimulus funding. Given that WCC had already committed that funding to projects such as the much-needed Karori wastewater pipe renewals, staff asked for some more information before this request was brought to councillors. It has taken 11 months for Wellington Water to provide this additional information.

Once that information was received by WCC staff two weeks ago they agreed to recommend to councillors that we reprioritise some underspent capital funding to top up the (mistakenly) too low reactive maintenance budget. At the council meeting to agree this change, the Wellington Water CEO and board Chair presented an “adjusted budget” which WCC staff and councillors had never seen before. This is regrettable as it has added considerable confusion to a simple matter – a mistake was made in the budget and at the next Council meeting this error will be fixed.

My concern is not that this error happened – even high performing organisations make mistakes. My concern is that it has taken eleven months for Wellington Water to provide the information WCC staff requested.

Before the Mayoral Taskforce on Three Waters, a budget change like this would have been made behind the scenes by staff and never would have come to the council table. I support WCC staff in their efforts to provide greater information and transparency to councillors regarding Wellington Water budgets and performance.

WCC councillors know that our residents want us to sort out the pipes. Residents know it will be expensive and they have said they are prepared to pay. Councillors have no intention to “penny pinch” on this important area of investment. It is our job to ensure Wellington Water are spending ratepayers’ money wisely and we will continue to ask them questions to ensure that is happening.

<![CDATA[How much is a fair share for business ratepayers?]]>https://www.condie4council.nz/post/how-much-is-a-fair-share-for-business-ratepayers6221c8d6fb612378598e017bFri, 04 Mar 2022 08:26:33 GMTDr Jenny CondieIn an article about the Wellington City Council's proposed budget for next year, Chamber of Commerce Chief Executive Simon Arcus raised "grave concerns" about the proposal to increase the commercial rates differential. So, what's up with that?

What is the rates differential?

The rates differential tells you how many dollars of rates a commercial ratepayer will pay compared to a residential ratepayer. If the differential is 9, then commercial ratepayers pay $9 for every $1 of residential rates. Currently in Wellington it’s 3.25; WCC staff have proposed that this increase to 3.7 for next year.

That sounds pretty stink for businesses.

It would be stink if it meant that commercial rates bills were going up faster than residential rates bills, but they’re not. In the last few months, all properties in Wellington have been revalued for their RV. The residential values went up a lot more than commercial property values.

Okay... So what?

The average rates increase for next year is expected to be 8.2%. Because residential property values went up faster than commercial if we kept the differential the same, residential rates bills would go up by more than 8.2%, and commercial rates would go up by less than 8.2%. Increasing the differential means that a commercial ratepayer with a $20k rates bill this year, would get a $20k + 8.2% rates bill next year.

That makes no sense. If the differential is going up then commercial rates bills must be going up faster than residential rates bills.

You would think so, aye? But that’s math for you.

It makes more sense if you think about the proportion of total rates that are paid by the commercial sector compared to the residential sector. This year the commercial sector paid 44% of the total rates bill. (By the way, that’s the lowest share it's been in Wellington in twenty years.) If we keep the differential the same then their share would fall to 41% of total rates next year, and residential ratepayers would have to pay the other 59%. In real money, that would mean residential ratepayers paying another $8M of rates instead of commercial ratepayers. Instead, WCC staff propose that we adjust the rates differential to keep those shares the same next year, with commercial rate payers continuing to pay 44% of the total rates.

Why do commercial properties have to pay more than residential?

Because commercial ratepayers earn revenue from their businesses they have a greater ability to pay rates than residential ratepayers. Organisations like the Chamber of Commerce and Property Council generally accept that commercial ratepayers can and should pay more, but disagree about how much more. In Wellington commercial ratepayers pay 44% of total rates. In Christchurch the commercial share is 32%, in Auckland it is only 25%.

Is there a good reason why Wellington commercial rates are higher than Auckland and Christchurch?

I imagine the Chamber of Commerce might say no, but personally I think there is. Auckland and Christchurch City Councils include much more of their region’s urban areas than WCC does. Because of amalgamation, the Auckland Council now includes the whole of the Auckland region. The Canterbury region has a population of 624k, and Christchurch City Council a population of 392k. So Christchurch ratepayers makes up 62% of the wider region. The Wellington region has a population of 487k, and Wellington City Council a population of 202k. So Wellington city ratepayers make up 41% of the wider region.

This means that in Christchurch roughly 62% of the customers and employees who use these commercial businesses are also residential ratepayers for that city council. A lot of the people who work, shop, and use services in Wellington come from further out, like Hutt Valley, Porirua, Wairarapa or Kapiti. So aside from user charges (like parking or pool entry fees) they don’t help pay for the roads, or pipes, or parks that they use while they’re in the city. Charging commercial ratepayers (the businesses people come to town for) a bigger share of the city’s rates, pays for the share of the city’s services that are used by those people from out of town.

If Wellington’s councils amalgamated, like Auckland, there would an argument for reducing the share of total rates that are paid by commercial ratepayers. Until that happens, I think in comparison to Christchurch and Auckland our higher commercial rates are reasonable at current levels.