Auditor General notes growing debts and rising costs at councils as they grapple with issues including population growth and climate change

Auditor General notes growing debts and rising costs at councils as they grapple with issues including population growth and climate change
Auditor-General John Ryan.

A report from the Auditor-General has raised serious concerns about the growing debt levels of many of the country’s councils and the rising costs they are facing due to climate change.

The report was presented to parliament on Thursday and follows a nationwide audit of long-term plans (LTPs) produced by the country’s councils’ for the 2018-2028 period.

Councils are required to produce a 10-year LTP every three years and it is the main way that they outline the services they will provide and the projects they are funding.

Auditor-General John Ryan says many of the country’s local authorities have forecast increased expenditure and debt levels.

“Councils are facing many significant and often conflicting pressures. Difficult decisions will need to be made as a result,” Ryan says.

The report says the audit showed a significant increase in capital expenditure by councils.

“This will lead to challenges regarding how to fund this extra spending, particularly for growth councils that are starting to reach the debt limits they have set. Council rates are forecast to continue to increase, and, for many communities, these increases are likely to be proportionately more than the increase in their other household costs or income.”

And because many council’s rely on borrowing to fund their capital expenditure those figures are also growing.

“As a result, the 2018-28 LTPs reflect a sharp increase in expected debt for councils overall. Some "high-growth" councils (that is, councils experiencing high population growth) are starting to come up against the debt limits that they have set, in the context of prudent financial management.”

And metropolitan councils are forecasting a 72% increase in their borrowing levels between 2018 and 2028.

Auckland Council remains the country’s largest borrower, with its debt making up 50% of the total local government sector debt. Its debt is forecast to increase by 42% from $9.2 billion to $13.1 billion between 2018/19 and 2027/28.

“Overall, Auckland Council’s capital expenditure is forecast to increase by 29% for 2018-28 compared with the forecast for 2015-25.”

And it says this is largely to meet additional growth demands in the city.

The Auditor-General’s report says because of such pressures local authorities are now looking at using other funding mechanisms to fund their costs.

“For example, some are setting up "special purpose vehicles" to provide councils with alternative funding mechanisms. We will watch these developments and ensure that they are appropriately accounted for and disclosed.”

This is in keeping with the Auckland Council’s adoption of targeted rating and a Regional Fuel Tax which is projected to raise $1.5 billion over the next 10 years.

While the growing threat of climate change is also a massive problem confronting councils around the country.

“Communities are already feeling the effects of climate change. Addressing these effects could compound the pressure of increasing capital expenditure forecasts. In many respects, councils do not know the extent of the challenges they face in responding to climate change."

The Productivity Commission has been carrying out an inquiry into the financing and funding of local government in New Zealand.

Submissions on the commission’s issues paper closed on Friday (February 15) and it is expected to release a draft report on the issue in June before presenting its final report to the Government on November 30.  

The Auditor General’s report follows a paper released this month by Local Government New Zealand (LGNZ) which said up to $14 billion of local government infrastructure was at risk from rising sea levels and climate change.

LGNZ President Dave Cull called on central government to establish a National Climate Change Adaptation Fund to deal with the costs of rising sea levels and a Local Government Risk Agency to help councils understand and factor in the risks of climate change into their planning and decision-making.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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around us people on min wage are paying $430 a week for a house. Councils will need to learn to live within the earning potential of the community and stop being a middle class employment agency.

Your comment appears to be locally focused. The HBRC is currently going postal with spending plans, financed via a huge increase in borrowing (AKA debt) and reckless sale of government assets.. The goals of HBRC are laudable, I just wish that their finance plans to achieve these goals were rational.

it's an ideology, councils believe they can guide business, be the catalyst for investment, becoming more corporate with comparative renumeration.
Unfortunately big business has a lot of influence and I don't see that doing anything but becoming more of a problem.
A lot time is of spend trying to correct past failures.

I'm shocked by the cynicism regards councils in our community, I seldom talk to anyone with a good word towards them.

"Council rates are forecast to continue to increase, and, for many communities, these increases are likely to be proportionately more than the increase in their other household costs or income.”

Funny, that sounds a lot like "Councils have no incentives to reduce costs and see ratepayers as money machines".

13
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So, is rapid population growth from immigration a good investment? Does it provide a return on investment sufficient to cover interest payments and repayment of capital plus a surplus? What is its expected payback period?

It seems that "immigration is good for us" may be more of a belief than a valid business proposition.

1) Climate change is happening but we are yet to see any major acceleration in sea level rise (3.2mm/yr). Its a long term issue at the moment, unless the Greenland or Antarctic glaciers melt. That leaves additional storm damage which will be some cost.

2) Central government should legislate to require local government to:

a) to fund essentials first (waste, water, roads etc)

b) to undertake business cases on all spending

c) put large non-essential spending to ratepayer vote

3) Central government should force amalgamation of non-economic councils. We have too many for a pop of 5m.

When you spend on $$$ on climate change studies then yes the costs increase being said studies = more reason to raise rates ( taxes )
Increase Debt .... Are the councils allowing for and increase in interest rates to fund said debt ? Wont matter... increase rates (taxes )
Almalgamation of Councils. - = increases beauracracy.
Ratepayer votes... If voting meant anything they would not let you do it.
Business cases ... what more consultants with no real world experience except real world reports for $$$ thanks very much.
Does anyone actually actually know glaciers have been melting and reforming per natural cycles since man even existed ? Because they actually have been. Fact. But hey lets use it as an excuse to tax everyone that believes natural cycles do not occur.

We've moved past that, Matt. We are big enough to be a forcing on the planet and it's systems - as the ozone hole proved. Just accept the fact. It also follows that we are overpopulated, well into overshoot. And that we will crash if we try pushing growth further - in fact, we are probably already committed to crashing. Yet away back in the peleton, are folk like you still in denial of anything which might question your way of life.

Move on.

What, move on from the Tax being forced upon people for reasons of "climate change" ?
"We are big enough to be a forcing on the planet and it's systems...."
Can you Please let us all know how then to :
Stop volcanoes spitting out CO2.
Tidal waves that wipe communities
Ice Ages
Earth Quakes.
Glaciers that melt and reform.
ooops sorry that is my fault from driving my car emmitting exhaust fumes yes ???

By your own twisted logic, I assume that you’ll be committing suicide soon in order to improve the world’s over population problem?

I knew enough to limit my progeny to replacement-only, 30 years ago. Some folk are obviously a little slower waking up.

World over population. Fair enough, you got me there. Just wondering though, Has your family decided to stop having ( or only one or 2 maximum ) children / grand children / great grand children ?
Are you happy for someone else to to tell you how much you're allowed, And TAX you if you do not comply ?
How can natural cycles be twisted logic ?
Real twisted logic is carbon taxes. TAXES. People actually believe environment TAXES go towards helping the environment. People actually believe cigarette TAXES go towards fighting lung cancer caused by smoking. Smoking does actually cause lung cancer. The TAX goes on the general spending ledger. We are all being lined up to be TAXED. In Sweden, they rewarded everyone that got in to electric cars to save the environment. BUT ooops now the tax revenue froom petrol/diesel disappeared. NO Problem. They introduced mileage TAX on all vehicles ....

Ultimately we have to self-control, or it's survival of the fittest. We are the only species with enough cognisance to be able to self-control pre-crash, but we aren't using it.

Same goes with your Swedish example. The mass need steered in the right direction (it was advertising that had steered them in the wrong one - as we see here with all the brand-new ff SUV's. All due to be stranded assets.

But if we were funding properly for, say, seven generations hence, petrol and bitumen would be seven times 'more expensive'. Our generation is living at the expense of the future - to the extent that your personal complaint about taxes/rates, is rendered irrelevant. What LG are running into now, is the running-down of that rip-shit-and-bust phase. They're not ready and their skill-sets are a long way short.

My wife is deciding to buy a car; the choice is between a gas guzzling SUV or a small economic car (maybe a Polo) - she has experience of both and knows the former will be more expensive to buy, in fuel and road tax & insurance. However it has more status, is easier to get in and out (significant at our age) and better view of the road.
The govt has the power to nudge her one way or the other - announce its long term commitment to excuraging low CO2 emissions and shift road taxes accordingly and commit to taxing petrol such that it never will get cheaper. Govt can only take this path if it convinces the public that it is in everyones long term interest and that the policy is unlikely to be undone by the next govt.

Has to be an EV or its a stranded asset.

Yes the Govn needs to start progressive taxation on CC and age of cars. Of course this hammers the poor hard while those better off can afford the extra tax if forced to.

You'll still be able to pull up to a petrol pump and refuel a car in 15years.

By then EVs will probably be a more attractive proposition than an ICE, but its laughable to think that a car bought now will be a stranded asset in its reasonable useful lifespan.

Matt the Lad. You clearly do not understand the carbon 'tax'. The tax does not go into the general spending ledger...it goes towards landowners growing trees. If operating globally, large forest lands (the lungs of the world) would not be cut, as they would generate more income for those countries by reaming standing. Educate yourself....

You have a good point there Rastus.
Do these trees get left to grow untouched ?
Is there GST on a carbon credit trade made on a piece of NZ land with trees for that purpose ?
Please educate me ..

Until around 10 years ago local government was back page news. Now it is front page. How, and why did we let these organisations that are supposed to offer a public service become such massive, wasteful, directionless behemoths?

Ask a question and receive an answer, several in fact:
- population growth pressure from immigration
- aging population with dwindling revenue bases in some regions
- aging infrastructure because recent generations couldn’t be bothered fronting up with the rates cash to maintain our status as a first world country
- more issues and pressures that the private sector either couldn’t or wouldn’t manage or purposely externalised for govt to resolve - witness water pollution and fresh water consumption

Also find the evidence that says local govt is more “massive and wasteful” than it was 10 yrs ago, noting that Auckland’s rates are still among the lowest in the country and Auckland has 89% full water reservoirs right now.

yeah, yeah, heard of economies of scale?
allowing for inflation my rates bill has jumped from around $2,200 a year to say $7,500 ($4,300 general rates, and about $3,200 Watercare) Sure we have upgraded to a larger house, but its not excessive.
My take is that we have a gold plated council, providing a substandard service. In addition they are branching out into the private domain without the necessary skills, and expertise to do so.

Regarding water reservoirs. Very easy to make that claim when we are dragging water out of the Waikato river now, which just out of interest has nitrate levels 10x (or is that 100x?) that of Hunua, or the Waitakeres. How about you ask your local councillor about the linkage between nitrate levels and bowel cancer? And why they have opted for this "cheap" and clearly risky solution for providing safe??? drinking water for Aucklanders.

You could be forgiven for thinking, all this immigration is largely to keep the banks profitable.

Local Government made the same mistake everyone else did. Chose to believe in 'money' and chose to believe in perpetual 'growth'.

If the AG is merely economics-trained (and hasn't done some original thinking re logic and systems) the he isn't going to have seen what the real problem is either. All he can see, dimly, is a growing pressure. The sooner Auditing includes resources, the better.

We need to have a goal for total New Zealand population. Two million max on these fair islands would get my vote. Quite achiveable with a hardarse anti immigration policy. Nw Zealand's 'natural' population growth is very small, and could easily get to negative. It would take a little while to get to two million, but gentle change is good.

Which solves the 'housing crisis' completely. And the Local Govt growth problem. That just leaves staged withdrawal (like South Dunedin). And it leaves the reliance on fossil-fuels, of course. So they're into triage territory anyway.

Fossil fuels will be greatly reduce because with half the population hydro will win. Still have problem with the air travel by 5m tourists and we will eed a quantum change in recycling to reduce CO2 emissions from waste.

Peak oil says quite simple even before considering CC that NZ will be off it bu 2050 at the latest and more like 2030 I suspect.

We have almost left it too late for "gentle change", I fear we will resort to the old tried and true, slaughtering each other, because we can't be arsed figuring out how to do this, and working together to do it.

My view was in 2005 and the Hirsch report we had 20 years to do an emergency operation on the scale of WW2 mobilisation, to get off oil however 14 years later almost nothing done. So its now over-run IMHO, ie too late.

I dontt think we need to go that low but certainly we need to stop growing, ie not more than 5million.

I actually did a "back of the fag packet" calculation based on no fossil fuel use in agriculture (bio fuel, yes).

Right now NZ produces food for 20milllion, so we consume $.5million and sell the rest overseas.

So the impacts are,

a) Before oil 25% of the farm's production was taken up in producing the food ie horses and labourers absorbed this. Lets say that % is allowed to stand, ie 25% of the farm's land is taken over with bio-fuel production to run the machinery.

b) CC impact, this is estimated at 10% to 25%

c) "green revolution" is the 1960s doubled or trebled farm production.

Now remove these %s from the present day output we end up with being able to feed about 4~6million.

"gentle" change I have some issues with that as we live for 3 generations more or less ie 75 years. With peak oil and CC we have about 15 years. Ergo to get to 2million within 15~25years doesnt seem a gentle process, even stablising at <5million seems painful.

PS I used to be in the Green Party however the ignorance and entrenched liberal attitudes to changing re-production and and CC were simply un-addressable. I mean to start with a co-leader with 6 kids? "oh we can all buy EVs" yeah right.

Who's grandchildren would you be targeting to not come in to existence, to get to that figure ?
Yours or someone elses ?

The ones mother nature was going to kill off anyway - as always happens in overshoot/collapse.

Arguing to avoid the unpleasant doesn't avoid fact - its a funny old thing.