By John McDonald (Hamilton East Candidate and CityWatch NZ Editor)
To make major improvements in Hamilton City Council (HCC), and get skyrocketing rates under control, we need to know why we have such major problems. Increased transparency is an important first step to addressing this.
The Council bureaucracy needs to provide accurate, objective, and balanced information to both councillors and to the wider community. Too many key details, costs, and negative impacts are being hidden. This happens across a wide range of projects and policies; from minor (though ridiculously expensive) speed bump installations, though to grand plans for providing water services.
Related to transparency is the need for genuine consultation with the community. Consultation should happen from the earliest stages of a proposal. It should be ongoing and honest. Community input should be steering the projects. Unwanted and unnecessary projects should be stopped. The community should be provided with full information promptly. The practice of token consultation after most of the important decisions have been made must stop. Communities need to be involved in the important decisions that shape their neighbourhoods. We need to know the costs and implications of those decisions. We pay for them.
We need to have internal financial discipline for the benefit of Hamilton. The communities in Hamilton need to place limits on Council spending and intergenerational debt. Councillors should be enforcing and encouraging this internal financial discipline. You as residents and ratepayers, voters and electors, also have an obligation during election time to send quality, skilled councillors into Council.
HCC has been relying on external organisations to impose constraints on spending and debt levels. Council will effectively keep spending and keep borrowing until they approach the debt-to-revenue limit set by the Local Government Funding Agency (LGFA). Sometimes external financial discipline will be in the form an international credit rating agency giving Council a worse score.
Council staff have used schemes to increase the debt limit and allow extra borrowing. One scheme was discussed when Council was about to lose NZTA funding for the proposed “Eastern Pathways School Link” project. Council staff have been using central government subsidies for installing raised crossings and in-lane bus stops to increase the Council’s debt limit. This is how Council staff described losing the subsidy in February 2024…
“61.Given the government’s stated priorities on transport, staff believe there is a growing risk that NZTA Waka Kotahi will not provide the expected subsidy of $14 million over the first three years of the Long-Term Plan for the Eastern Pathways School Link (Te Aroha St) project.
62. As well as meaning that project would not be able to go ahead (unless we can find replacement funding), this would have a significant impact on our debt to revenue ratio noting we are already close to our limits. Every $1 million of revenue that Council loses represents $2.8 million it cannot spend.”[1]
In principle, LGFA setting a debt-to-revenue limit at 280% is to make sure that a council has enough regular income (mostly from rates) to financially support its level of borrowing. NZTA funding is provided for individual projects, they are not a recurring or stable income stream. If council stops getting as many projects each year subsidised by NZTA, then council “revenue” can fall. Extra borrowing means more annual interest on that debt. Borrowing against ‘windfall’ NZTA funding is irresponsible.
Many of the notorious projects which turned parts of Hamilton’s roads into clownish obstacle courses were fund through the “Climate Emergency Response Fund”; with around 90% of each project’s cost funded by an NZTA subsidy. Council documents have the Hukanui Road project (for two “in-lane bus stops” + “cycle bypasses” + one raised crossing) receiving $945,000 in NZTA grant funding and the Rifle Range Road project (“cycling and walking improvements”) receiving $2,574,000 in NZTA grant funding[2]. The Pembroke Street in-lane bus stop was also funded through this 90% subsidy scheme according to the HCC website[3].
Hamilton City Council was operating very close to its debt-to-revenue limit in 2022-2024 and that 90% subsidy created a perverse financial incentive to go for more expensive options on roading projects. This could explain why each raised crossing costs around $300,000 to install in Hamilton. Using the 90% NZTA subsidy and the ‘each $1 of extra revenue allows $2.8 in extra borrowing’ approach, a $30,000 raised crossing would only allow the Council to borrow an extra $75,600. If the cost for that raised crossing happens to be $300,000, then the Council can use that one speed hump to borrow an extra $756,000.[4]
These dubious financial schemes are something to consider every time you crunch your vehicle over another raised crossing or wait behind that new in-lane bus stop.
It appears that the large numbers of raised crossing and raised platforms installed throughout Hamilton City were part of the journey to get the Council over $1 billion into debt. It is critically important to stop this behaviour in Hamilton City Council. A strong culture of prudent stewardship needs to be created within the Council, and instilled throughout the organisation.
Hamilton City Council should have internal financial discipline, keeping both spending and borrowing within what the community decides is acceptable. Instead, we have had external organisations such as LGFA and credit rating agencies determining what is an acceptable debt level, while Council staff have developed schemes to push that debt limit even higher.
The only solution is a changing the councillors, and supporting them to reform the Council bureaucracy. Our new councillors must keep a close eye on council finances and stop these debt creation schemes. These new councillors must possess the technical skills to address the current bureaucracy and challenge the culture of wasteful spending. They need to be capable of deeply investigating situations and be willing to genuinely consult the community, rather than just approve projects based on recommendations from Council staff.
[1] Page 46, Hamilton City Council Agenda v2, 20 February 2024
[2] Page 44, Hamilton City Council Infrastructure and Transport Committee Agenda, 21 September 2023
[4] OPINION: Why Vote Against “Safety” and “Free Money”?, John McDonald, 01 October 2024
