484 Pukehangi Road

Pomare 3025

Rotorua

Draft, due 17 June 2020

Annual Plan Consultation Team

Rotorua Lakes Council.

By email to info@rotorualc.nz; Council, Senior Officials, media.

Residents and Ratepayers’ Submission to Rotorua Lakes Council re draft Annual Plan 2020-21

Tena koutou katoa.

INTRODUCTION

Please accept and record this feedback to the Annual Plan consultation document[1] (‘the draft Annual Plan 2020-21’) as representing the views of the Rotorua District Residents and Ratepayers Inc. (‘Residents and Ratepayers’). This incorporated society was launched on 25 September 2015, replacing it’s predecessor, the Rotorua Pro-Democracy Society, with a wider mandate. It has campaigned since for the restoration of democracy, the rule of law, financial responsibility and policy making power to elected representatives.

This submission was based on the views of the 13 members of the Residents and Ratepayers’ Committee consulted on 27 April, 24 May, 6 June and 8 June, and four rounds of consultations of the 379 members active on email on 25 May, 29 May, 1 June and 6 June. All of their contributions are much appreciated and have been integrated into this submission.

There is also a warm recognition of the challenges faced by the Council officials who developed and presented the draft Annual Plan 2020-21 in the unique and difficult circumstances created by Covid-19. All involved are thanked most sincerely. We would be pleased to answer any questions they or elected representatives may have.

APPROACH

Residents and Ratepayer’s submission comprises an Executive Summary and feedback that follows the structure of draft Annual Plan 2020-21. It uses verbatim quotes from respondents, lightly edited, to illustrate the general views of respondents. To illustrate, four respondents spoke for many when they said:

That was a mission – just getting through the reading! I did attempt to read the various Council plans (long and short term) a week or so ago but found myself getting bogged down. The language used is often inaccessible to your average ratepayer – myself included – or overly general and lacking detail.

I am sure the members of RDRR appreciate the amount of work you are putting into this submission, hopefully it will be taken notice of. I also feel that only elected members of Council should have voting rights. It is OK that the so called “partners” be allowed input into decisions but not voting rights. Thanks.

I just wish to acknowledge the hours of work that have been put into this document.

One can only hope and trust that once this finalised documentation is submitted that every elected councillor will read, reread and inwardly digest ALL the content to ensure prudence prevails in every aspect of their decision making.

EXECUTIVE SUMMARY

Residents and Ratepayers’ feedback can be expressed as 13 recommendations:

With Vision 2030 being rendered obsolete by Covid-19, that it be replaced by a vision that retains social, environmental, and cultural well-being aims and commits Council to helping people, families and businesses to survive and prosper with essential services and appropriate infrastructure.

That a more equitable balance be restored between the recognition of the cultural rights of mana whenua and the human rights of all citizens in Council’s investment and resource management decision making, most especially in its governance and commercial partnerships.

That greater priority be given to essential infrastructure related to the three waters, less to Sports and Recreation, less to legal advice, more to revenue from fees and charges, more to corporate research into productivity, and less to functions that are a central government responsibility, such as housing.

That the proposed capex budget of $117M for 2020-21 be substantially revised to downscale and delay the Lakefront Redevelopment and the Long Mile Road/ Forest Hub 2 Project, and to refine and accelerate the restoration of the Museum and SHMPAC.

That the proposed one-off $1M Community Support programme be replaced by an additional $0.5M being allocated to the Community Development Grants scheme.

That the proposed Economic Recovery Fund of $9M in 2020-21 and $20M in 2021-22 be cut to avoid any duplication of central government packages or competition with entrepreneurialism and innovation in the private sector.

That three of the ‘Shovel-Ready’ projects (Urban Land Development, Wastewater Treatment Plant Upgrade, Kaingaroa Village Plan) be implemented if fully funded by CIPs.

That, if not fully funded by CIPS, then

the Rotoehu Sewage Connection proposal needs to attract strong local support before any further planning occurs,

the Aquatic Centre proposal needs to be significantly downscaled to reflect domestic demand,

the Airport CCO needs a newly authorised strategic development and investment plan to reflect post-Covid market realities,

the Whaka Forest Hub 2 project requires a new strategic and business plan that does not assume any further public investment, and

the Lakefront Redevelopment project should be downscaled and rescheduled to significantly reduce the degree of ongoing public investment.

That the expected reductions in revenue (currently estimated as being between 3.8% and 6.65%) be applied as a benchmark for cost compression to expenditure on asset renewals and improved levels of service and to other opex, including through redundancies.

That ‘buying local’ be regarded as a relatively short- or medium-term measure.

That Council accept that it has limited capacity to cushion the blow of Covid-19 and that its proposed Annual Plan 2020-21 is provisional and vulnerable due to its dependency on central government grants yet to be announced.

That a more prudent approach to rating be adopted by freezing General and Targeted rates at 2019-20 levels to reflect (a) the estimated decrease in the affordability of rates to ratepayers (currently between 7.8% and 9.2%) and (b) Council’s capacity to sustain value for services being reduced due to the estimated reduction in revenues (currently between 3.8% and 6.65%).

That a more prudent approach to debt management be adopted to raise debt headroom to safer levels, stop using debt for opex, stop borrowing to fund job creation and public relations initiatives, and to only use debt for long-term community capacity-building, especially in essential infrastructure, to deliver all four ‘well-beings’.

THE MAYOR’S MESSAGE

All respondents assumed that the Mayor’s Message (‘The Message’) provided the justification for the Rotorua Lakes Council’s (RLC’s) practical and financial plans for 2020-21. They also assumed that their feedback would be honoured by elected representatives and officials because it is intended to help improve the draft Annual Plan 2020-21.

This critique of The Message therefore reflects how respondents see the proposed Annual Plan affecting their lives, businesses and community, and clarifies the basis for the corrections they recommend.

Almost without exception, respondents indicated that The Message:

misunderstands the nature and probable length and depth of the economic impact of Covid-19,[2] and
is implausible because Council’s financial strategy since 2013 has run up debt to record levels while consistently failing to achieve its target of GDP growth exceeding national standards.[3]

A central concern, as gently expressed by a pensioner couple, is the need for greater financial prudence:

Considering we have lived prudently and have never had debts (even built our home out

of income) and have lived without handouts you can realise that the Council borrowing

and subsequent interest payments give us cause for query.

Another central concern is managing the impact of Covid-19. Most respondents pointed to the consequences over years, not months, of the end of demand for international tourism and a significant reduction in domestic tourism demand.

Other major concerns highlighted by many respondents are the corrosion to our sense of community being caused by a once-in-a- 160-year depression, how the disruption to supply chains around the globe has undermined decades spent building international trading relationships, and a naïve belief that a Council public relations campaign will “build back our economy and the community’s confidence.” (p.1)

The Message’s aim (p.4) of building “more resilience into our economy and community,” essentially by redirecting businesses and individuals to central government’s relief packages, offering supplementary subsidies, and while borrowing another $30M in 2020-21 to fund locally partnered projects, was described by one respondent as “silly, deceptive nonsense.” The greatest flaw in The Message was identified in a typical response:

The world around us has changed — NOT … [the Council’s] thinking /approach and doings – and … using well-meaning words! [Their intention is] … to build more resilience into our economy and community by charging more/ borrowing more and increasing spending on more non-beneficial projects for most ratepayers. [It is claimed that] “This approach will strengthen us for unexpected challenges and emergencies “! How stupid and irresponsible.

Some respondents highly experienced in public sector administration noted that the draft Annual Plan does not distinguish between Council’s proposed initiatives and central Government’s relief schemes. It shrouds Council’s modest capacity to encourage economic recovery and development. The claim that the Council can play a “major role to play in standing our district up again” (p. 4) is regarded as boastful and implausible overreach intended to justify borrowing another $30M in 2020-21.

The same respondents pointed out that most investment capacity for recovery is with the central government or with the private sector, not with indebted councils like the RLC. Local economic growth is in the hands of those whose transactions constitute the economy: consumers (such as residents and ratepayers), service providers, investors, entrepreneurs, manufacturers, and others in the business sector.

Most Residents and Ratepayers believe that Council has, for far too long, invested ratepayers’ funds wastefully and disproportionately into private Māori enterprises, even to the point of maintaining new tourism assets and infrastructure on tribal and reserve lands in perpetuity, without any prospect of public returns. They see such practices as nepotistic and as creating dependencies that destroy long-term capacity building towards competitive advantage.

The Message’s active denial of any need for belt-tightening in local government is offensive to many. This denial is taken personally because many families and businesses are struggling to survive through self-imposed austerity. Many respondents pointed to the recent and aggressive refusal by the Mayor and a senior official to accept pay cuts or donations that would express solidarity with those most affected by Covid, the purchase of new cars and the $1.7M refurbishment of their offices. A typical response was:

I have been appalled at the total insensitivity of the Mayor in her refusal – even in principle – to take a cut in her salary; no reference to the spending on cars for staff, or work on council staff offices. To me, this shows an appalling lack of leadership when I have taken the time to listen and compare her views with statements of Mayors from other districts; from Taupo and Hamilton in particular. I imagined myself as a resident and felt, “Yes! Here is a person who cares about me and my family! I think we can work together.”

In the broader context of Council’s initiatives, many long regarded by Residents and Ratepayers as vanity, legacy and payback projects that favour co-governance and commercial ‘partners’, The Message’s claim (p. 4) of “ongoing prudence in our decision-making” was flatly rejected as “laughable”. Another noted that although The Message:

upholds “ongoing prudence in decision making,” I would say the emphasis should be on FINANCIAL PRUDENCE. Little evidence of that aspiration is clearly defined/ expressed.

Another respondent pointed out that the terms ‘productivity’, ‘efficiency’ and ‘effectiveness’ were absent from the Annual Plan.

Several respondents bluntly questioned The Message’s claim (p. 4) that “We will continue what has been a successful approach to date to partner with Government and its agencies, with local providers, business and iwi to look at ways to fund and deliver Rotorua’s recovery. They tell us we are on the right track.”

One respondent said “Well, they would say that wouldn’t they.” Others pointed out that the allegedly ‘successful’ economic growth in the year before Covid was only 1.9 per cent, that is, well below national GDP growth figures which Council has long set as their minimum target. Rotorua’s growth in GDP from March 2019 to March 2020 has since contracted to 1.5% compared to national growth of 1.7%.[4] As noted above, Rotorua’s GDP growth has been lower than national growth since 2013. It is therefore reasonable to assume that if RLC’s co-governance and commercial partnerships have not delivered the growth promised in the past, then they are unlikely to do so in the future.

Respondents also noted that RLC’s much-touted funding and delivery partnerships with central Government, local providers, business and iwi have excluded the interest group that provides the greatest source of Council’s revenue, ratepayers. This long-standing, disrespectful and arrogant marginalisation is resented by Residents and Ratepayers.

The Message’s promise (p. 5) that pre-Covid priorities and “existing projects” will be sustained and ‘recovered’ was also questioned by many. It is taken as a clear signal that planning assumptions rendered largely obsolete by Covid will remain unchallenged. It suggests that the emerging and long-lasting economic, cultural, social and environmental impacts of Covid-19 have not been as foundational to the development of the Annual Plan 2020-21 as the predetermined commitments given expression in Vision 2030. If so, then the unchanged approach proposed will be a triumph of fixed ideology over flexible pragmatism in turbulent times.

Most respondents doubted The Message’s promise (p. 5) that ‘recovery’ in the coming financial year will follow the economic stimulus of “new capital projects that will provide work for businesses and will provide ongoing and new employment opportunities” such as the “housing strategy and associated work”. The example is unfortunate because it signals tokenism. The RLC’s housing strategy is projected to get only $300K in the 2020-21 budget. A respondent also pointed out some of the subtleties involved that cast doubt on the general strategy:

The dominant group being made unemployed will be women and recent school leavers without training. Many will not have been working full time. The projects being promoted will involve contractors who are likely to bring in some of their labour. New housing for the low-income sector is a high priority. This means low cost subdivisions (apart from this I would prefer no growth in population).

While several of the so-called ‘shovel-ready’ capital projects are still regarded by Residents and Ratepayers as timely and justified in a Covid context, none are new and others are regarded as outdated. Some are artefacts of past planning that have been awaiting capex and have been recently rehashed to attract taxpayers’ funds by meeting criteria that are unlikely to promote long-term economic development.

To illustrate, the key criteria being used to evaluate Council’s $210m bids to the Crown Infrastructure Partners (CIP) programme are their capacity to ‘make work’ for the unemployed, their speed of implementation and their political dividend in an election year. Many respondents have noted that these criteria could result in decisions that will come at cost to social development, community coherence, the environment, to innovation in our local economy and to productivity gains in current businesses. A more detailed critique of the CIP bids is provided below. In the interim, one respondent spoke for many against The Message’s general strategy when he argued that:

I am concerned about Council continuing to borrow to fund its grandiose plans. In the proposed Annual Plan they intend to borrow $30M to keep developments going and say that it will help with job creation. The only way that the $30M can be repaid in the long term is by rates. The principal sum will incur interest and be a greater long-term burden on Ratepayers. There seems to be no assessment of how many jobs will be created. It is just a nebulous unquantified statement. Too many of the “projects” are aimed at tourism. Council needs to concentrate on the maintenance of streets, footpaths and core infrastructure, not go spending money that ratepayers can’t afford on grand schemes.

After seven years of evidence of what they regard as unsatisfactory outcomes, Residents and Ratepayers’ respondents have little confidence that The Message’s recycled Vision 2030 strategies are now appropriate to lead a post-Covid reconstruction of Rotorua’s economy.

The Message’s “Driving Rotorua’s recovery” approach (p. 5) is a promise to balance “the delivery of essential services while also helping to keep our economy, local businesses and local people going.” This promise lacks credibility to Residents and Ratepayers who have long questioned profligate spending on prideful and heritage schemes and on patronage through political and commercial partnerships, while enduring disrespectful and exploitative marginalisation.

Residents and Ratepayers now refuse to accept a promise largely forced by Covis-19 that Council will refocus on the delivery of essential services and provide equitable support. The RLC’s selective co-governance and public-private-partnerships (PPPs) have alienated ratepayers, divided our community on ethnic lines and violated the district’s motto; tatau tatau – we together.

Many respondents also indicated that they are wary of another promise in The Message (p. 5); to “cushion the impact and position Rotorua for recovery to ensure our resilience as a community and district.” This promise is regarded as hollow because it lacks any vision of how the district’s economy will pivot through reinvention towards competitive advantage. It fails to recognise that the Vision 2030 policy ‘bubble’ has been ‘popped’ by Covid-19. In effect, as one respondent put it:

If the Draft Plan is carried out it will make Rotorua “Steady as she sinks.”

Recommendation 1: With Vision 2030 being rendered obsolete by Covid-19, that it be replaced by a vision that retains social, environmental, and cultural well-being aims and commits Council to helping people, families and businesses to survive and prosper with essential services and appropriate infrastructure.

MAINTAINING DIRECTION

The most important of eight strategies in the draft Annual Plan for 2020-21 is continuing to deliver on Vision 2030. It is important to understand why parts of this vision are increasingly unacceptable to Residents and Ratepayers, in addition to the impacts of Covid-19, and why a new direction is considered appropriate.

The elements of Vision 2030 are clarified in foundational claims about Rotorua as a community: this is our home, we are its people, we’re the heart of Te Arawa culture and expression, we’re innovative and we share what we learn, we’re driving opportunity, enterprise and diversity, we’re supporting a legacy of sustainability for our environment, and Rotorua is a place for everyone.

Three key problems for many Residents and Ratepayers consulted are that, since 2013

this vision has been used to favour Māori interests, who number about 40% of the population, over everyone that have equal human rights in a democratic community,
many aspects of this vision of our community have been promised but not delivered, and
some of Vision 2030’s priorities have been outdated by Covid-19.

Respondents pointed out that the moral and political obligations that bind our community together have been increasingly flouted by Council not adhering to the democratic social contract that they have with the diverse people of our district. There is a widespread perception that Council has weighted Te Arawa’s special cultural rights as mana whenua over everyone’s equal human rights, especially in its investment and resource management decision making.

Two respondents of many put it this way:

I am also not happy at the degree to which funds have been directed towards Maori, partnerships and so on. Many years ago, I went to a meeting where there was a Council proposal to develop facilities on land that was merely leased from local Iwi (Longmile Rd/Forest?) – if I remember correctly.

The word ‘partnerships’ is getting right up my nose. Council’s partners do NOT respect ratepayers because they can simply take our rates! Investing another $29 million in recovery is a [central] government job. Not a ratepayers’ responsibility. ‘One off’ funding is becoming a regular occurrence. ‘Tatau tatau’ is beginning to have a degrading two-faced meaning. Who is running Rotorua?

The continued delivery of essential services is given high priority by all respondents, as is organisational rationalisation and right-sizing staff, to achieve that end. They are very critical that investment into infrastructure improvement and maintenance has been diverted into Council’s ‘redevelopment’ or ‘pet projects’ without a public financial rationale. Five respondents summarised many others:

I was amazed when it was announced that there would be no redundancies due to Covid-19, for now. That put job protection above rates affordability and productivity. It got worse. About 50 staff doing non-essential work got transferred over to the Emergency Operations Centre into pretend essential jobs, instead of being furloughed. With fewer staff being paid more, and more out-sourcing of management services, it’s time for top-down cost compression by cutting staffing to essential functions and structures.

Considering first the ‘Cost to deliver Services’ bar chart on page 8, in my opinion, it does not reflect any change to the Council’s priorities to adapt to the changed circumstances in which we now find ourselves. The largest bar is Sport & Recreation. Surely this segment is far less important than any of the other items. Of the Big Four, bringing the Museum and Sir Howard Morrison Theatre back into commission are very important for the income streams they will reinstate. The Lakefront, however, will not produce any [public] income and will benefit only Pukeroa Oruawhata Trust and Te Arawa Lakes Trust. While the project is obviously too far advanced to be halted, can it be stretched over a longer time frame to reduce the amount of debt being proposed?

I think the allocations are very wrong. Why is Sport and Recreation at the top and stormwater languishing at the bottom. Stormwater issues are seriously impacting on suburban growth and development. Maybe the Mayor does not actually believe the growth predictions she makes!

The juggling game between an increase in Sport and Recreation of $2M and the reduction in Art and Culture of $2M does nothing as savings to the ratepayer. My beef is that those active in Sports/ Arts/ Cultural see the RLC as a cash cow to be milked at will, by just appealing direct to RLC for large grants when in fact most are already benefitting from remissions or assistance in kind. I want the ratepayer to be saved the pain of funding $500,000 p.a.to such organisations and insisting they learn to stand on their own feet. Any application should be backed up with proof of their own funding efforts and the source of the funding they have received from those efforts. No group should be handed finance on a plate. They need to get real and not bleed the ratepayer who is also a taxpayer.

I agree entirely with everything in our submission, especially about having a Chinese company involved in our wastewater project and Sports and Recreation being top of the list for grants especially to private companies to run their events e.g. Crankworx. I also think that the Deputy Mayor’s interests come to the fore too often. I am very pleased that they have put the Springfield sports development on hold till 2024 and think that they should employ a local planner rather than someone who does not know the city or the people.

Residents and Ratepayers agree with the view expressed in the draft Annual Plan (p. 9) that the “severe impacts of COVID-19 on our community and economy will require greater additional support from central and local government.” However, they are ambivalent about scarce local resources being diverted from the delivery of essential services to fund ideological priorities that are justified by reference to an unfunded central government mandate; the ‘four well-beings’ – social, economic, environmental, and cultural.

There is also a growing perception evident in some responses that lip service is being paid to the four well-beings and sometimes to divert attention from the need to find savings in all areas of the Council services, especially to offset the higher costs of delivering wastewater, fresh water and refuse collection.

On other recent occasions the four well-beings have been used to deflect calls for right sizing staff not immediately engaged in the delivery of essential services and consultants. For example, a source of savings recommended by some respondents are the costs of mounting legal action against other levels of government, ostensibly to protect the environment, rather than developing effective problem-solving relationships.

The wastewater management proposal is to rationalise individual contracts into one that will manage all wastewater services and to out-source management to a consortium. It is attractive in principal to Residents and Ratepayers because there are many potential efficiency and effectiveness gains. On the other hand, no numbers have been provided to illustrate the projected savings. There are also risks in outsourcing wastewater management services because they are mission critical to Council. There is also some unsurety about Trility, the lead company in the consortium, because it is owned by a Chinese company, the Beijing Enterprises Water Group.[5]

Preliminary responses to the Statement of Proposal – Sewerage and Sewage from three respondents highlighted some of the complexities and a ‘bottom line’ for Residents and Ratepayers – that outsourcing the management of services should not cost ratepayers more:

On Waste water services, p. 9, I can see that consolidating the “multitude of individual contracts” has a logic however, I am uneasy that having only one supplier can lead to inefficiency, corruption, abuse and loss of control. I think that employment of a professional Project/contract manager (from commerce and industry not local government) would preserve healthy competition in pricing.

Constantly out-sourcing also seems to come into a similar category [as Council out-sourcing the management of the Aquatic Centre] where we lose the skills, knowledge and control [and locals face higher prices].

For every dollar spent on transferring service to private contractors puts a minimum of 15% in their pockets. After all, they need a return.

Maintaining essential services, such as wastewater, fresh water and refuse collection, must also be managed by Council in a sustainable manner. By ‘sustainable’ Residents and Ratepayers mean that the costs of delivery must be kept under review and be mitigated by innovative management and new technology, not automatically and habitually passed on to ratepayers as increased targeted rates.

For example, increases in the cost of electricity required to maintain water supply and the loss of recyclables to overseas markets should be accepted as a corporate research challenge to offset costs with technological and other inventions. The need for constant innovation was also highlighted by a rural respondent with regard to refuse:

Unfortunately, the Covid 19 pandemic has increased the amount of recycling that we have – so much more is now wrapped! Maybe we should look at burning the non-toxic waste then using the ash as a form of fertilizer, instead of telling us all that we are not allowed to burn or create smoke! … Any other [refuse] is removed by Waste Management as farmers can have a skip on site – for payment of course – and this is emptied on a regular basis. We personally have the Dial-a-Drum company come and take away a lot of our rubbish that the council do not want, at a cost of $20 per month. Unfortunately it seems that a lot of the Rotorua residents like to fly-tip their unwanted goods because they either cannot afford the extra costs … or the Council doesn’t actually offer alternatives that the average householder can afford, especially in today’s economic climate.

Similarly, the estimated downturn in fees and charges in 2020-21, and the significantly lower proportion of revenue from fees and charges in Rotorua than achieved by other councils, suggests the need for urgent financial research at corporate level in Council. Unhelpful confusion was created (p. 10) by a “forecast approximately $20-25M revenue from fees and charges” being followed by a caveat; “due to the impact of Covid-19 we anticipate a $4.5M in this coming financial year.” A noun was missing. Did this mean revenue of only $4.5M from fees and charges or a shortfall of $4.5M in revenue from fees and charges?

The last and key priority in maintaining direction in the proposed Annual Plan, and deemed an essential service, is the Rotorua Housing Strategy (p. 11). The strategy framework was reportedly developed last year by Council and Te Arawa and “supports and gives local direction to the work being done by the central government agencies, coordinated by the Ministry Housing and Development, iwi, landowners, developers and social housing providers” through a “comprehensive set of work streams have been developed which will form the focus of work over the next 5-10years.”

These claims are exaggerated. The reality is much more modest. The draft Annual Plan proposes a budget of only $300,000 in 2020/21 to complete the Housing Strategy, develop locality plans and invest in infrastructure to support the implementation of the locality plans. The Strategy is to be launched in coming weeks. In the interim, Residents and Ratepayers have three preliminary questions.

If central government has responsibility for housing, why has Council elevated it to be an essential service?
Why was participation in public policy making on local housing restricted to a co-governance partnership and therefore needlessly offensive to other legitimate stakeholders and their elected representatives?
If housing is a key priority to maintaining Council’s visionary direction, then why has it not progressed past planning since 2013?

Recommendation 2: That a more equitable balance be restored between the recognition of the cultural rights of mana whenua and the human rights of all citizens in Council’s investment and resource management decision making, most especially in its governance and commercial partnerships.

Recommendation 3: That greater priority be given to essential infrastructure related to the three waters, less to Sports and Recreation, less to legal advice, more to revenue from fees and charges, more to corporate research into productivity, and less to functions that are a central government responsibility, such as housing.

ECONOMIC RECOVERY PLANNING, INVESTING IN RECOVERY AND PLANNING TO ADAPT

These are three of eight strategies in the draft Annual Plan 2020-21.

The Economic Recovery Planning Strategy has a proposed capex budget of $117M (p. 13). Of this, $58.8M or 50.2% will go to the ‘Big Four’ Projects in 2020-21, specifically $14.6M to the Lakefront Redevelopment, $17.9M to the Museum, $6.2M to the Long Mile Road/ Forest Hub Project, and $19.9M to the Sir Howard Morrison Performing Arts Centre (SHMPAC).

Each of these proposed allocations triggered feedback from respondents. Four responses typical of most regarding the Lakefront Redevelopment were:

I work in tourism as a tour driver (or did before Covid 19, now my job has gone as have many peoples’) and I took tourists around the Lakefront every two or three days. When I explained to them what the Council was proposing, without exception they said that they loved it as it was because they come to New Zealand for the beauty of nature not for some fancy Lakefront which they can see in plenty of other places in the world.

The last sentence irks me! I quote, “This development is going to celebrate our culture and community – it will be uniquely Rotorua and distinctly different to any other lakefront in the world.” I wonder how many lakefronts have our Mayor or the designers of the ‘said’ lakefront actually seen throughout the world to make such a statement. I seem to remember similar statements being made regarding the City Focus and look how awful that is!

New jetties for commercial operators at massive cost. Where is the debt recovery plan? How do these commercial operators reimburse the districts’ ratepayers? What fees do they pay and how does that recovery uphold debt repayment and the obvious ongoing maintenance of the facilities provided? Private enterprise should be self-supporting rather than sucking on the ratepayer.

We can do without this at the moment. Overseas tourists won’t be here anytime soon.

Representative comments regarding the Museum follow:

We need this opened yesterday to honour our tupuna and our marketing promises and to get the cash flowing again.

There was never any insurance or prospect of Council ever being able to afford it.

A restoration project was converted by big spenders into a redevelopment project over the three years since the earthquake on 14 November 2016.

Respondents’ views on the Long Mile/ Forest Hub Project were to the point:

This is another pet project of Council, like Crankworx, that is based on a PPP that favours their co-governance and commercial partners, not ratepayers. Enough cash had already been poured into such tourism infrastructure before Covid hit.

I think it’s wrong to build tourism facilities on private land using ratepayers’ money and guaranteeing upkeep forever without getting any returns for the ratepayers.

It concerns me greatly that yours and my tax money are being applied for by the RLC to fund private enterprise projects. The Hub 2 project (which … I feel should never have been funded by RLC) has been forwarded to receive funding to build, amongst other things, a 302 sq/m shed for [private company] to house their mountain bike shuttle fleet. This surely is not something that should be funded under the [CIP] scheme. It will benefit not one person in the community except [private company]. This [applies] to other funding for the site including buildings that will be occupied by the same company’s operation. Hub 2 is another example of our Council in bed with local iwi, to hell with the rest of the community. If it advances money to this project, then it should be repaid on completion.

Responses typical of many about SHMPAC were:

The Museum or Sir Howard Morrison Performing Arts Centre. One or the other not both. Shelve one until we are over COVD-19 and the financial crisis that is coming.

The earthquake proofing restoration has been finished, a new manager has been appointed and it should have been reopened for business by now.

Council has lost control of the planning and budgeting process. All sorts of unnecessary and expensive options have been added to set back the opening for years.

Recommendation 4: That the proposed capex budget of $117M for 2020-21 be substantially revised to downscale and delay the Lakefront Redevelopment and the Long Mile Road/ Forest Hub 2 Project, and to refine and accelerate the restoration of the Museum and SHMPAC.

The Investing in Recovery Strategy comprises “partnership projects which create employment and stimulate the economy.” (p. 18) Three funded programmes are proposed.

The proposed Community Support programme will be a one-off fund of $1M intended to provide support and co-ordination for community and voluntary groups focusing on initiatives that build resilience. Respondents asked:

How is this programme different from the Community Development grants scheme already operating whose real costs total about $1M per annum?

To save costs, can this programme of partnership projects be administered by the Community Development grants scheme?

Why are ‘make work’ and economic recovery services being valued over the other well-being services of community and voluntary groups in Rotorua that already deliver social, cultural and environmental support services?

Recommendation 5: That the proposed one-off $1M Community Support programme be replaced by an additional $0.5M being allocated to the Community Development Grants scheme

An Economic Recovery Fund of $9M proposed will be a programme of capex projects with partners that are intended to create employment and stimulate the economy. A further $20m will be allocated in 2021/22. Given the growing criticism of ‘partnerships’, how are project allocations to be made?

The draft Annual Plan (p.18) confirms that “opportunities will be identified and scoped by Council, Te Arawa, local business and Council’s Rotorua Economic Development CCO so that projects are consistent with the Build Back Better – Rotorua Economic Recovery Plan” (RERP). A cynical objection to this approach was:

Any idea who/ what the $29M partnership fund will benefit (in addition to Te Arawa affiliates!)?

The key point is that respondents have little confidence in the RERP. The most-often reason cited is that the identification and scoping process will give voice to selected stakeholders/ beneficiaries but exclude others, such as the ratepayers who fund these ‘partnership’ projects.

The second most common reason given is the fear that Te Arawa’s economic interests and cultural values will dominate the priority given to the community’s social and environmental values.

The third reason why ratepayers doubt the RERP is that it was conceived in haste and in secrecy by officials and consultants without public consultation. It was rubber stamped by most elected representatives without debate. It is widely regarded as an extension of Vision 2030 and as forming the conceptual basis for the draft Annual Plan 2020-21 but without authentic consultations and public legitimacy.

The fourth and practical reason for low ratepayer confidence in the RERP is that it focuses on recovery, that is, on recovering a past that has gone forever due to Covid-19. RERP will do little to reconstruct or reinvent the tourism industry or contribute anything of significance to the non-tourism sectors of Rotorua’s economy, in addition to central government’s Covid-19 relief packages.

The fifth reason for ratepayers’ money not to be used to fund and manage RERP projects is that the public sector does not naturally develop such economic investment and management skill sets. Private enterprise normally takes risks with their own capital and reap the rewards and learn from their failures. They develop a culture of entrepreneurialism that advances knowledge, skills and attitudes that are different from those customarily developed in the public sector. The public benefits typically include jobs, taxes and growth in GDP.

Recommendation 6: That the proposed Economic Recovery Fund of $9M in 2020-21 and $20M in 2021-22 be cut to avoid any duplication of central government packages or competition with entrepreneurialism and innovation in the private sector.

‘Shovel Ready’ Project Bids totalling $209M were submitted to the Crown Investment Projects (CIP) Fund (p. 18). These projects had to be capable of being started within 6 to 12 months. Some have already received funding from the Provincial Growth Fund although these allocations are now under review due to Covid. The outcomes not yet known and private sector investment is also on hold.

In the interim, respondents have clarified their views on the project bids. The bids have been reordered to indicate the degree of support they enjoy from respondents.

The Urban Land Development project bid for $20-30+M is strongly supported. It should enable housing and industrial developments on the Eastside, hopefully by improving traffic flows on Te Ngae Road.

The Eastside needs roading and stormwater infrastructure urgently to enable housing and industrial development, help develop Māori land for housing and industrial use, and generate short and long-term employment.

$15m-20M is needed for new intersections on SH30 at Wharenui Rd, Brent Rd, Basley Rd and airport/Eastgate Rotorua to manage traffic flows from planned housing and industrial developments.

$5-10+M is also needed for new stormwater infrastructure in the area, although the whole city’s stormwater infrastructure needs to be upgraded to meet current demand and future subdivisions. Council continues to significantly under invest in core services infrastructure across the District, especially in stormwater infrastructure.

The Wastewater Treatment Plant bid for a $60-65M upgrade is also strongly supported as necessary by Residents and Ratepayers. The project is needed to achieve water quality targets and meet growing demand but does not include the nature and costs of an acceptable discharge solution.

The laudable aim of this bid is to reduce nutrient levels to new agreed standards and to cope with increased demand from new housing and industrial development. The downturn in tourism now needs to be taken out of the estimations of demand.

Conversely, Council needs to accept that pumping treated sewage into Lake Rotorua, albeit over contact beds, will never be tolerated on cultural grounds by both Māori and non-Māori communities who agree that “Lake Rotorua is a taonga, not a toilet.” To this point in time, only Māori cultural objections have been recognized by Council and this discrimination is deeply offensive to Residents and Ratepayers.

Further, the ‘rapid infiltration trenches’ approved by the Bay of Plenty Regional Council for managing discharges from the new Rotoiti WWTP now need to be considered as a more acceptable option and could be added provisionally to the estimated costs. It is deeply distressing to many that Council has refused to provide local public hearings in recent times on its proposal to discharge treated wastewater into Lake Rotorua and has, instead, gone straight to the Environment Court in search of a ruling against the wishes of Māori and Residents and Ratepayers.

The Kaingaroa Village Plan bid for $4.9M bid is supported. The joint submission with Te Puni Kokiri indicates a total cost $14M. It will provide capex to build much needed infrastructure and facilities.

The project could serve as an example for other iwi, rural and lakes community development plans.

The Aquatic Centre bid for $15.43M is supported only in part because it significantly exceeds the slow growth in domestic tourism now predicted from a modest base. The 50m outdoor pool does need upgrading.

However, new capex is proposed for a Learn to Swim facility, hydro slide and water splash attraction, bombing pool, poolside gymnasium, and an expansion of change rooms and administration areas. Additional space is also proposed for future facilities such as a food outlet, retail, children’s party space and child-minding services. A serious problem here, as expressed by a respondent, is the need to:

review the costs in the [proposed investment in] the Aquatic Centre. What is the contribution from the current operators, which was one of the points lauded when they came on? From the financials I saw they were not in a position to do anything.

Further, the estimated 80 jobs projected muddle construction professionals on short-term contracts with staff to be engaged to work in the new facilities. Sadly, the key justification for the project – that the enhanced centre will become “another key tourist attraction for the city” – ignores the post-Covid reality of slow growth in domestic tourism. Indeed, the Hanmer Springs hot pools are predicted to lose $3.3M in the coming year.[6] Accordingly Residents and Ratepayers suggest that a much more modest bid with phased development is appropriate.

The Rotoehu Sewage Connection bid for $10M, to connect the community to the new East Rotoiti/Rotoma sewage network, is not supported by Residents and Ratepayers.

The potential benefits are clear. The Rotoehu connection will improve health and safety, encourage housing developments, potentially improve water quality in Lake Rotoehu and add significantly to the productivity of Rotoiti’s WWTP. The project would also provide about 15 construction jobs for two years.

However, the claimed benefits from environmental, recreational and cultural tourism have been outdated by Covid-19 and should be set aside. Further, the proposal has very little local support. A respondent explained that

In 2014 a large majority of the community rejected the proposed connection due to the very high projected costs. The Rotorua Lakes Council and EBOP [now BOP Regional Council] agreed not to take any further action. Since then all residences have become compliant with the BOPRC’s ruling that septic tanks must be more than 50 meters from the lake. Research has shown that pollution was coming primarily from a few farms.

The Airport CCO’s bid for $21.95M capex (with the same amount again yet to be borrowed) is not supported by Residents and Ratepayers. The bid was to build a new aviation hangar and a new light industrial/ commercial park.

Three respondents asked:

What is happening now that the Air traffic control service is to be withdrawn? Is this investment based on now pre-dated assumptions? Why get involved with an Industrial Park when business will be contracting?

… can the airport precinct development be cancelled? The current Eastside industrial park is under-utilized so there is no need for another one. It seems pointless developing the aviation side of the project given that the loss of the control tower will occur, regardless of how much time and [dollars] are wasted protesting that. It’s a profit/ loss decision by Airways. [Our leaders] are kidding themselves if they think that

significant tourism is going to be restored anytime soon, and that
Rotorua can become an aviation hub.

funding further the CCO Airport development also seems non urgent and not the function of Council. The Council are only shareholders not the company’s bankers. Perhaps equity capital from outside might be obtainable even if it dilutes the ratepayers’ shareholding. It is an Airport Management issue.

The bid became obsolete when Covid-19 ended international demand for tourism and operations all but ceased. Air New Zealand cancelled all flights coming in and out of Rotorua, with a few flights since restored. Airways have withdrawn air traffic services and international tourism has ceased.

In sum, the radical reduction in demand means that the CCO’s business plan and the organisation itself should now be rationalized and its assets secured. Residents and Ratepayers take the view that there should be no further public investment until new business and investment plans have been developed and approved by Council that reflect post-Covid market realities.

The Whaka Forest Hub 2 bid was for an additional $13.9M to be added to the $14.5M already allocated. The bid is to construct commercial buildings on private land at public expense with returns going to the tribal landowners. The commercial retail space is to be leased to tourism operators to offer bike hire, shopping and hospitality at a café/restaurant.

While 85-100 construction and maintenance jobs have been estimated for 12 months, with over 40 moving into the leased spaces, these calculations were pre-Covid. The post-Covid reality in domestic tourism, even including an Australasian ‘bubble’, points to slow growth from a low base.

These changes in demand suggest that the landowners should now revise their business plans and source alternative venture capital without expecting any further public investment. This bid is not supported at all by Residents and Ratepayers.

The Lakefront Redevelopment bid is for another $17.2M to be added to the $40M promised from the PGF and Rotorua’s ratepayers. The bid is for the construction of new jetties and playground, commercial buildings to house tourist operators and hospitality and retail outlets, and tourism infrastructure in Ohinemutu Village. The bid estimated 28 jobs during construction with another 54 in the proposed tourism and hospitality precinct.

Objections by respondents have centered on the public losing dearly beloved parking spots and road access, tourists’ needs taking precedence over locals’ needs, and significant public investment into a private tribal enterprise without any prospect of public returns. The facilities are to be leased by tribal authorities to operators and retailers but will continue to be owned and maintained in perpetuity by Council. This subsidy is unacceptable to Residents and Ratepayers.

The collapse in international demand due to Covid-19 has significantly undercut the financial viability of the project. It is notable that the Lakefront’s sister project, the new Spa Hotel, has been put on hold by Pukeroa Oruawhata Trust due to Covid-19. This bid is not supported at all by Residents and Ratepayers.

The Absent Bids confirm that Council favoured the Vision 2030 projects preferred by their co-governance and commercial partners. There were no bids for business development projects in sectors other than tourism, such as forestry and wood processing, farming and manufacturing. There were no bids which addressed climate change.

Recommendation 7: That three of the ‘Shovel-Ready’ projects (Urban Land Development, Wastewater Treatment Plant Upgrade, Kaingaroa Village Plan) be implemented if fully funded by CIPs.

Recommendation 8: That, if not fully funded by CIPS, then

the Rotoehu Sewage Connection proposal needs to attract strong local support before any further planning occurs,

the Aquatic Centre proposal needs to be significantly downscaled to reflect domestic demand,

the Airport CCO needs a newly authorised strategic development and investment plan to reflect post-Covid market realities,

the Whaka Forest Hub 2 project requires a new strategic and business plan that does not assume any further public investment, and

the Lakefront Redevelopment project should be downscaled and rescheduled to significantly reduce the degree of ongoing public investment.

ASSET RENEWAL AND IMPROVED LEVELS OF SERVICE

Residents and Ratepayers agree that Council must ensure that “current assets are well maintained, safe and fit for purpose now and well into the future.” (p. 20) While this commitment in the Long-term Plan 2018-2028 remains appropriate it does not follow that another $25.3M should automatically be spent on renewals and another $23m on levels of service (LOS) projects in 2020-21.

Many respondents indicated that the financial context has been changed irrevocably by Covid and that Council should now ‘cut its cloth’ according to its reduced revenues. LGNZ initially estimated 15%-20% reductions in councils’ revenue for the 2020-21 year. [7] LGNZ has since revised the estimated range as 2.3%-11%,[8] which has a midpoint of 6.65%. RLC’s estimate of a ~$4.5M shortfall, that is a 3.8% reduction in the $118.6M total revenue indicated in the draft Annual Plan, it is towards the bottom end of LGNZ’s revised range.

The reduction in revenue may have been underestimated in the draft Annual Plan 2020-21. Keeping the estimated reduction in revenues artificially low would help preserve a high debt ceiling. This would lessen the need for cost compression. Four implications follow:

Any shortfall in revenue will lower the headroom for debt and increase the risk of insolvency.
The estimated shortfall in revenue (currently between 3.8% and 6.65%) should be adopted as an initial range for cost compression in prudent asset renewals and improving LOS.
As the estimates of reduced revenues are updated, the cost compression targets should be revised and implemented, and
In such a context, redundancies will be inevitable and should be anticipated.

Recommendation 9: That the expected reductions in revenue (currently estimated as being between 3.8% and 6.65%) be applied as a benchmark for cost compression to expenditure on asset renewals and improved levels of service and to other opex, including through redundancies.

Buy Local has been implemented by popular demand. Most respondents agree in principle that ‘buy local’ (p. 20) is appropriate, although some noted that this approach is protectionist and may run counter to the principles and advantages of free trade in the longer term.

Free trade internationally[9] tends to have six main advantages; increased economic growth, more dynamic business climate, lower government spending on subsidies, more direct foreign investment, improved sharing of expertise, and greater technology transfer.

On the other hand, free trade can also enable job outsourcing, the theft of intellectual property, crowd out small businesses which can aggravate unemployment, increase crime and poverty, result in poorer working conditions, degrade natural resources, damage native cultures, and reduce tax revenues.

The consensus among Residents and Ratepayers is that ‘buying local’ should be regarded as a relatively short- or medium-term recovery measure.

Recommendation 10: That ‘buying local’ be regarded as a relatively short- or medium-term measure.

CUSHION THE BLOW, PRUDENT APPROACH TO RATING, PRUDENT USE OF DEBT, PLANNING TO ADAPT, MAINTAIN DIRECTION

It is claimed (p. 21) that these five “fundamental elements of our financial strategy have not changed in the light of COVID-19.” Five rhetorical claims then comprise the “platform for investing in our community’s recovery from COVID-19”; financial prudence and sustainability, maintaining existing infrastructure so it is fit for purpose now and into the future, providing infrastructure to accommodate a growing district, investing in the future of the district and keeping rates affordable and managing debt.

However, given their experiences since 2013, residents and ratepayers regard these claims largely as unfulfilled political promises and, at best, as aspirational commitments for 2020-21.

It was noted above that Council has a limited capacity to ‘cushion the blow’ of Covic-19. Further, its precarious financial position was exposed by the draft Annual Plan in proposals to

Borrow $30M for ‘recovery projects.’ As with the PGF- and CIP-funded projects, these projects can be expected to focus on generating jobs and political dividends. Instead, Residents and Ratepayers suggest that Council expect it’s CCO, Rotorua Economic Development (RED), to focus on encouraging (a) the reinvention of enterprises, (b) the reconstruction of industrial sectors, and (c) the transformation of the knowledge, skills and attitudes of people needed for a successful post-Covid community and economy.

Borrow an additional $4.5M for short-term opex shortfalls. This is traditionally regarded as a highly risky measure only to be used briefly in extreme circumstances.

‘Cushion the blow’ of Covid on ratepayers by allowing rates deferrals. This is essential to the survival of companies suffering from interrupted cash flows. It will have to be actively managed to avoid putting Council’s own revenue and cash flows at risk in a depression.

Make the rest of the RERP vulnerable to PGF and yet-to-be-announced CIP grants.

Leave the Council with a maximum of $19M debt headroom to ‘cushion the blow’ of any further unanticipated events, such as a natural disaster.

Recommendation 11: That Council accept that it has limited capacity to cushion the blow of Covid-19 and that its proposed Annual Plan 2020-21 is provisional and vulnerable due to its dependency on central government grants yet to be announced.

The ‘prudent approach to rating’ promised in the draft Annual Plan 2020-21 (pp. 21-24) is not delivered. The draft Annual Plan proposes as 0% increase in the General Rate (p. 22), an average 4.7% increase in the Targeted Rate (p. 6) and a $25 decrease in the Uniform Annual General Charge (UAGC) (p. 23) to achieve greater equity.

While prudence is taken to mean cautious, shrewd, reasonable, and/ or wise, the key concept of ‘equity’ is not defined in the draft Annual Plan 2020-21. If the General Rate (which includes the UAGC) is considered a property tax, then greater equity can be achieved by being fairer in terms of affordability to those paying the tax. Equity, in taxation law, is characterized as the ability to pay.

It is acknowledged that potential sources of inequity are introduced by using the capital value of properties as a proxy for ratepayers’ ability to pay rates and for the productivity of their properties. And that a reduction in the UAGC may make slight improvements to the equity of rates bills although it can act as a disincentive for investment in higher value properties.

If a Targeted Rate is regarded not as a tax but as a charge for services received, then greater equity can be achieved by being fairer in terms of value-for-service, as perceived by those receiving the service.

It is acknowledged that potential sources of inequity are introduced by the Council having a monopoly on service delivery, which can undermine the efficiency and effectiveness of services over time, or, when there is not a strong and direct link between the ratepayer and the service provided, it can weaken the value given to the service.

To what extent, therefore, will the proposed 0% increase in the General Rate, an average 4.7% increase in the Targeted Rate and a $25 decrease in the Uniform Annual General Charge (UAGC) (p. 23) achieve greater equity given the estimated impact of Covid-19?

Infometrics’ early estimates of the economic impact of Covid-19 on Rotorua’s economy[10] are that it’s GDP will contract by 7.8% over the year to March 2021, more than 3,700 jobs will be lost, lower skilled jobs will be hardest hit, Māori households will be hardest hit, job losses will push unemployment to 10.7% and result in lost earnings of $186M, down 9.2% from $2,031M, before wages relief. It is acknowledged that all of these estimates could change.

A 0% increase in a property tax is an inadequate response to a projected 7.8% contraction in GDP, the regressive impacts by demographic group, and up to a 9.2% loss in earnings before wages relief, and is especially unfair in terms of affordability. A more prudent approach to rating based on ability to pay would have cut the General Rate by at least 7.8%.

It is similarly imprudent to claim that a $25 reduction in the UAGC will “achieve a fairer and more even impact of the targeted rates increases” (p. 23) when the impact is minimal. The Table on p. 24 in the draft Annual Plan 2020-21 shows that the proposed 4.7% increase in Targeted Rates will continue to impact most heavily on lower capital value properties, that is, on the poor, who are mostly Māori, and on pensioners with CPI-indexed incomes. These regressive outcomes suggest that the $25 reduction in the UAGC is largely symbolic and falls well short of achieving significantly greater equity in terms of affordability or value for service.

There is another source of inequity that Residents and Ratepayers resent that does not appear to be justified by reference to either affordability or to value for service. There are markedly different average increases in rates bills by rating category proposed, without justification. Farming rates will increase by an average of 1.5%, rural residential by 2.7%, business by 4.7%, and urban residential by 5.7%. There may well be historical patterns that would help clarify these differences.

Overall, given Council’s estimated reduction in revenues as being between 3.8% and 6.65%, Residents and Ratepayers take the view that a prudent approach in the Covid context is to, at least, freeze, or preferably, to cut rates by about 7.8% to match the estimated contraction in GDP. One respondent spoke for almost all when he argued that:

I am not in favour of a rates increase at all. The recent COVID-19 crisis has hit all New Zealanders. One thing I am keen on is that a Council should live within their means. To just increase their budget and expect that the ratepayers will pay, is simply arrogance. A recent survey released by the Office of the Commission for Retirement showed that close to 50% of families were close to financial crisis as a result of COVID-19.These families will be the very families having to pay the rates albeit through rent or directly as home owners. Our business has taken a 76% reduction in income (all overseas related) due to the COVID crisis and I do not see that coming back soon.

Recommendation 12: That a more prudent approach to rating be adopted by freezing General and Targeted rates at 2019-20 levels to reflect (a) the estimated decrease in the affordability of rates to ratepayers (currently between 7.8% and 9.2%) and (b) Council’s capacity to sustain value for services being reduced due to the estimated reduction in revenues (currently between 3.8% and 6.65%).

The ‘prudent use of debt’ promised is unlikely to be achieved without a debt reduction strategy. The approach favoured in the proposed Annual Plan 2020-21 appears to be tactical risk management while continuing with some wasteful capex commitments and unchallenged opex levels.

With staff redundancies ruled out, for now, the sole remaining levers available for debt management are to rescale and reschedule project capex and to compress opex. One respondent asked bluntly:

Where is the evidence that the RLC are “Keeping rates affordable and prudently managing debt?” I couldn’t pick up the evidence. What I did pick up was further debt funding of $30 million plus short-term debt of $4.5 million. Is that inter-generational debt? Need answers.

The main reason for the scepticism is that Residents and Ratepayers have their own cash flow problems due to Covid-19. They acknowledge that the draft Annual Plan 2020-21 (p. 23) “continues to grapple with the challenge of rates affordability and the equity of rates distribution” and continues the national trend of “driving more rates away from fixed charges and to leverage rates against the capital cost of a property.” This assumes, as the draft Annual Plan states, that “the higher the capital value of a property the more likely the ratepayer can afford and pay for the rates.” This highlights the problem of ratepayers who are ‘asset rich’ but ‘cash poor.’ One respondent agreed when she asked:

What if house prices have risen because of changes in an economy and an elderly couple are living in the family home and now have only a pension to live on. That comment that they are living in a house that would sell for a large amount of money means that they can afford to pay a higher rate for the property does not ring true with me.

Apart from this liquidity problem, residents and ratepayers are reluctant to accept Council running up more debt on what they regard as a pretext – that it will fund growth. It hasn’t since 2013 so they assume that it probably won’t, unless the Council’s financial strategy changes fundamentally and corporate financial evaluation starts including organisational productivity factors such as staffing and assets.

Ruling out redundancies is inappropriate. Fortunately, some respondents have confirmed that an organisational development consultant used before by Council to review staffing has just been engaged to conduct another evaluation.

Further, the debt strategy proposed to fund economic recovery is unlikely to achieve its objective. Put simply, the draft Annual Plan 2020-21 proposes that another $30M be borrowed to (a) support rates deferrals, (b) spend $9M on ‘economic recovery’ projects, (c) establish a $1M ‘community resilience’ fund, and (d) cover shortfalls in fees and charges. Apart from rates deferrals, the reasons given for these borrowings and for lowering the debt headroom to $19M, are principally about quickly creating jobs and winning political dividends.

Residents and Ratepayers take a different view and regard debt as the least worst lever available for responsible financial management in a post-Covid world. They believe that their taking responsibility for additional debt is far better justified if it results in long-term community capacity-building in all four ‘well-beings’ terms. As regards economic development, they want any additional debt to be indirectly focused on boosting innovation in businesses, on evidence-based reconstruction of economic sectors and on helping people transform their lives and work opportunities with education and training.

Recommendation 13: That a more prudent approach to debt management be adopted to raise debt headroom to safer levels, stop using debt for opex, stop borrowing to fund job creation and public relations initiatives, and to only use debt for long-term community capacity-building, especially in essential infrastructure, to deliver on all four ‘well-beings’.

Planning to adapt while maintaining direction are contradictory promises. Given the fundamental impact of Covid-19 on all economic, cultural, social and environmental aspects of our community, Residents and Ratepayers consider that ‘planning to adapt’ must now take precedence over a vision conceived six years ago in very different circumstances.

Further, the context of local government has changed irrevocably. Once formally adopted, the Annual Plan 2020-21 must be regarded as a provisional position enabling operations to proceed while retaining the flexibility to cope with updated information and central government decision making.

The issue of rates affordability to ratepayers has become far more salient with the advent of Covid-19 than in the past. Residents and ratepayers urge proactive leadership to further cut costs and match debt to reduced revenues with two aims in mind; to take Council through these difficult times, and to set the scene through systematic evaluation and organisational development to boost Council’s productivity.

Three final comments from respondents summarise the views of Residents and Ratepayers regarding appropriate leadership:

I have not been impressed with the Council’s leadership during the shutdown. We have all taken financial hits, and firms have had to reduce salaries. Government ministers and Heads of Departments have also taken reductions. They are in the trenches sharing the same pain. However, the Rotorua Council have been somewhat arrogant in stating they will not decrease salaries – all very well being able to levy ratepayers who are an endless supply of money. But what if the ratepayers don’t have the money? Please show some leadership and save costs.

I want leadership and I want a caring Council. I want them to go back and re-examine all expenditure. [Identify] ‘that which is necessary’ and not ‘that is nice to have or was planned for pre-Covid-19.’ It is not business as usual, but a whole new way. Nothing is the same and there should be no sacred cow projects.

To be honest I feel helpless as a ratepayer. Seems we are always having the Council’s hand put in our pockets. I have no objection about expansion and growth, but with responsible management. They need to show that, when the community goes through hard times, they are exhibiting restraint and are sharing the pain with us too. Am I angry? Yes. Do I agree with the increases? No. Can the Council do better? Hell yeah.

Concluding Note

It was noted at the outset that an attempted adherence to a now obsolete Vision 2030 in the draft Annual Plan for 2020-21 had created an expectation that cost structures would be able to remain largely unchanged. That expectation is demonstrably no longer possible.

The need for further economies in the draft Annual Plan has been indicated by the ongoing need to recalculate Council’s revenues and to take account of central Government decisions over CIPs.

With great respect, Residents and Ratepayers call on all elected representatives and officials to recognise that the economic crisis caused by Covid-19 has created a situation where both Council and ratepayers must economise in the light of reduced revenues, exercise great prudence in their spending and borrowing decisions, and search for improved productivity in Council’s delivery of all four well-beings.

[1] Rotorua Lakes Council (2020) Annual Plan consultation, Rotorua: RLC.

[2] The draft Annual Plan 2020-21 is based primarily on a report commissioned by the RLC from Infometrics (April, 2020) Economic Impacts of Covid-19 on the Rotorua Economy – Early Estimates, Report, available at https://www.rotorualakescouncil.nz/our-council/council-publications/surveysandReports/Documents/Infometrics-impact-of-COVID19-on-Rotorua-economy-April-2020.pdf

[3] https://ecoprofile.infometrics.co.nz/rotorua%2bDistrict/Gdp

[4] https://ecoprofile.infometrics.co.nz/rotorua%2BDistrict/QuarterlyEconomicMonitor/Gdp#:~:text=GDP%20(provisional)%20was%20%243%2C526%20million,March%202020%20(2019%20prices).

[5] https://www.sustainabilitymatters.net.au/content/water/news/trility-group-acquired-by-beijing-enterprises-water-group-1211796503

[6] https://www.stuff.co.nz/the-press/news/north-canterbury/121640010/hurunui-rates-rise-likely-as-council-predicts-33m-loss-from-hanmer-springs-hot-pools

[7] Local Government COVID-19 Response Unit (14 April 2020) Local Government Sector COVID-19 Financial Implications Report 1 – Initial Analysis, Wellington: LGNZ, p. 29.

[8] Local Government COVID-19 Response Unit (2020) Local Government Sector COVID-19 Financial Implications Report 2 – Alert Level Scenarios, Assumptions and Updated Analysis, Wellington: LGNZ, p. 4.

[9] https://www.thebalance.com/free-trade-agreement-pros-and-cons-3305845

[10] Infometrics (April, 2020) Economic Impacts of Covid-19 on the Rotorua Economy – Early Estimates, Report commissioned by the Rotorua Lakes District Council, available at https://www.rotorualakescouncil.nz/our-council/council-publications/surveysandReports/Documents/Infometrics-impact-of-COVID19-on-Rotorua-economy-April-2020.pdf