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Finding new priorities for the city’s long recovery

by Ian Apperley
The Wellington City Council is coming under pressure to reduce its spending and re-prioritise current projects to better position the city for the long recovery period. However, shuffling money around is more complicated than it looks, and worthy projects are needed that could help create employment after lockdown levels are reduced.

The Council met last week, and while the level of unity was encouraging, the outputs were somewhat lacklustre. Squabbling over when parking wardens will reappear on the streets sends a negative message.

There’s been increasing commentary and calls for the Council to cut spending in a more meaningful way, and to re-prioritise “vanity” projects – with the Convention Centre at the top of the list.

(I got some help with this article. While I have experience running large capital programmes, I don’t always understand how the Council operates, so thank you to those who have answered my questions.)

Stupid though it is, you can’t just can a capital project like the Convention Centre and redirect the money into operational spending. That would be like going to the bank to get a loan for a home extension, getting the money, and spending it all on your bills. Nevertheless we should stop it [1] and put the capital into a project that is useful.

The Council has two issues. Reducing operational spending (the bills) and using project money in a way that will stimulate the recovery of the city.

There’s been a vigorous discussion about whether or not to increase the rates, a subject well covered by Dr Jenny Condie [1]:

At our meeting last Thursday, city councillors approved a timeline to finalise and consult on our annual plan, which includes our city’s budget. We voted for officers to prepare two options for rates increases – 4.95% or 2.15%. When the plan and budget are out for consultation in May, the biggest question for you is probably the choice between these two scenarios.

What is not being discussed, yet, is reducing the operational spend in order to stay within our means over what is going to a very tough recovery. Based on what Treasury is forecasting in their various scenarios, the Council must throw every strategy they have been thinking of out the window and start over with planning.

The city is not going to grow by the number of people that were expected before this pandemic, reducing revenue significantly and bringing into question “how big does the Council really need to be?” With a wage bill of $110m, it is a vast entity, and while I do not want to see jobs lost, a restructure could repurpose people to the right places while also making some notional savings. For example, repatriating Council Controlled Organisations into existing structures.

WREDA, which has renamed itself WellingtonNZ, is redundant now. An entity to which the Council pays millions a year, designed to promote Wellington as a tourist hot spot, now is the time to put it to sleep or at least wind it down. Events and tourists will not be around for many months.

The Council is more than capable of doing what WREDA is doing right now, including venue management, as well as colouring competitions, Lego building displays, and other feel-good stuff.

Do not think for a moment that WREDA is in any state to manage our economic recovery, nor is the Chamber of Commerce.

A line by line approach, possibly already going on, by the Council on operational costs is required before they come back asking us to pay more rates, Also, Council putting pressure on their suppliers and outsourcers would be appropriate.

How about we immediately dump the subsidy to Singapore Airlines? They won’t be coming back for a while, if ever. There are many areas like this where operational costs can be cut without compromising what is essential.

Now, back to capital projects. It makes no sense to continue with projects that are going to end up as a poor investment or worse, a negative investment, something which the convention centre is likely to be, which is why there are so many questions being asked about it. It may be better to take the hit on any penalties to unlock capital for other, better, investment.

It is possible to re-prioritise your capital spending, though there are some boundaries around this that the Council doesn’t want to cross because it could force them into lengthy public consultation when it needs to start acting soon.

Here’s another little snippet. Currently, I am told, the Council underspends its capital money each year by around 30% – capital is effectively approved but spent over many years. So, the goal should be to unlock that capital more quickly and in much more significant amounts. In other words, speed up the spend of capital money.

More than one person has mentioned to me that Paul Eagle’s idea of a city works department could be a way to do that. It would be established quickly, could be used as a vehicle for infrastructure maintenance, bringing all your renewals forward. It would also require a lot of people, and, if you stretched that across the Wellington region, then you could see a lot of employment.

Other ideas that have been sent to me are things such as moving mass transit under LGWM, to now. And spending money on our core water infrastructure. There will be others. Again, all providing employment. In short, we take our money that is planned to be invested, and we upgrade our city, while we have a chance.

What we must be careful of is draining cash into third party companies that offer little or no return on that investment including the employment of people, nor fluffy long-term investments or dice rolls on dubious startups. We must avoid the rorts that we saw in Christchurch.

Now is not the time for outsourcing. Now is the time for insourcing, so that the welfare of people is paramount, which then flows on to the local economy and communities.

A longer version of this article was first published on Ian Apperley’s Inside Wellington [2] blog.