Mangawhai estuary.

Kaipara commissioners get debt report, obliged to adopt annual plan, and Mangawhai group says it will appeal case

This is the first part of a 2-part story on the Kaipara District Council debt saga. The second part goes into more detail on aspects of the debt and what’s to come. To read it, go here: 2 questions for Kaipara: How to cut debt, and how to allocate it

Kaipara District Council’s commissioners will consider a long & detailed report tomorrow on the council’s debt position, including the allocation of debt from the Mangawhai EcoCare wastewater scheme.

The report by council chief executive Steve Ruru rebuts positions taken by the Mangawhai Ratepayers & Residents Association in the wake of the incomplete decision of Justice Paul Heath on 28 May on the association’s application for judicial review.

The association told its members on Saturday it would secure its right to appeal the judge’s decision, which has yet to be finalised, by the 26 June (this Thursday) deadline for filing. In an email to members, the association said it had also prepared a detailed settlement plan for the council to consider and, if the commissioners accepted it, an appeal would be unnecessary.

The commissioners – chairman John Robertson, Richard Booth & Peter Winder – will follow their decision on the debt management report with a decision on whether to adopt the council’s annual plan or seek further adjustments. The council has to adopt the annual plan before it can set the rates for the year starting 1 July.

But the Mangawhai association’s opposition extends to that, too, as it explained in its letter to members: “After the case conference (final hearing), the court will either re-issue the judgment in final form, or it will issue a further judgment tidying up all the loose ends.  At that time the judgment will be sealed and will go into effect.

“Until that happens the council cannot enforce anything that it believes the judgment entitles it to do, such as forcibly collecting unpaid rates. The commissioners have been crowing about how the judgment gives them authority to forcibly collect the past rates. They are being very quiet indeed about the things they cannot do as a result of this judgment. For instance, unless they reconsult the community about how they propose to repay debt, they cannot pass a rates resolution for the 2014-15 year.”

However, the recommendation before tomorrow’s meeting carries a note that the council has consulted on debt-servicing options and another that it has followed the local government rules, allowing it to adopt the annual plan.

Mr Ruru’s report briefly mentions one aspect of the whole saga that has mostly been pushed aside – recovery by “holding those responsible for the failings identified in the [Auditor-general’s] inquiry report to account. Work is well advanced on exploring the options which might exist. At this stage it is expected that decisions will be able to be made in the next 2-3 months.”

The council report on issues & options outlines its position on the Mangawhai debt under the heading Need for change:

“The debt attributable to the scheme is $58 million of the forecast $80 million of debt. This level of debt is, under the current funding arrangements, projected to grow significantly as interest & other operating costs were projected to be funded from additional borrowing until further development occurs.

“At present the council is borrowing about $2.3 million/year to finance the scheme operating costs. One of the challenges the council faces is that there are currently only 2000 users connected to a scheme that was designed to have 4500 users. As a result there are significant interest & other holding costs which need to be incurred until this additional growth eventuates.

“In developing a funding model for the scheme, the council needs to find a balance between the level of rates the current community can afford and the level of risk it is carrying around future growth levels and the timing of such growth.

“In the draft long-term plan, the council proposed that the operating revenue required for the scheme be funded as follows:

  • 60% of the cost is allocated to the existing users of the system and those who have properties that are capable of connection
  • 25% of the costs is allocated to the properties in the Mangawhai Harbour restoration area as the scheme benefits the harbour and those who live in the vicinity, and
  • 15% of the cost is allocated to all ratepayers in the district.”

The ratepayers association sought a declaration from the High Court that ratepayers should be reimbursed for rates levied unlawfully for the wastewater scheme, even if the judge found the Validation Act passed to make those rates lawful did just that – made them lawful.

Justice Heath said in his May decision he had no basis to go behind Parliament’s decision to validate the levies, and it wasn’t for the court to second-guess Parliament’s political judgment in finding that a local bill was desirable. He said removing the association’s ability to seek meaningful relief on its application for judicial review, through enacting the Validation Act, “must be characterised as a reasonable limit” under the Bill of Rights. So, although he found an apparent inconsistency, it was legitimised.

Despite a proposed indemnity for the association’s costs in seeking judicial review, Justice Heath didn’t interfere with the requirement under the Validation Act that levied rates must be paid, even if levied unlawfully.

Part 2 of this story: 2 questions for Kaipara: How to cut debt, and how to allocate it

Link: Council agenda 24 June, debt management item pages 29-106

Earlier stories:
30 May 2014: Commissioner says Mangawhai rates liability now “crystal clear”
28 May 2014: Judge to issue hamstrung Mangawhai ratepayer group indemnity costs, accepts new validation law, wants more debt options considered
30 April 2014: Mangawhai wastewater court decision scheduled for May
4 December 2013: Auditor-general releases Mangawhai report – and audience as disbelieving as ever
18 November 2013: Minister cites Kaipara debacle in move to new council finance rules
6 October 2013: Commissioners reject “unfair” Mangawhai ratepayer proposal, seek sewage options, adopt annual plan
25 September 2013: Kaipara commissioners seek help to fight ratepayers over illegal rate collection
20 September 2013: Kaipara commissioners try to sweet-talk ratepayer group as they appeal judicial review decision
30 August 2013: Kaipara commissioners fail to stop court challenge to Mangawhai debacle costs
19 August 2013: Judge to make quick decision on attempt to strike out Mangawhai ratepayers’ quest for judicial review
30 August 2012: Minister names 4 commissioners to run Kaipara council

Attribution: Mangawhai Ratepayers & Residents Association, council agenda & report.

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