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Trimming the budget or increasing the rates

by PCGM
In response to the global pandemic, the Wellington City Council is proposing to increase the rates by either 2.15% or 4.95%, rather than the 9.2% they originally had in mind – and these increases are being pitched by councillors as a fantastic, special one-time deal, brought about by prudently taking a hard look at the accounts. In reality, it’s nothing of the kind. The fact that there’s to be a rise at all seems symptomatic of a council that refuses to dial down its unnecessary spending, despite the crisis.

Let’s start with the basic numbers. According to the council’s accounts for the financial year 2019-2020, rates revenue (including general and targeted rates) is expected to be just under $326 million. If you think that’s a lot of money, you’d be right.

It’s also just the rates component – the fees, charges, grants, subsidies, fines and all the other revenue items add up to a further $180 million or so, meaning that the council is extracting something north of half a billion dollars from the city and its citizens and its businesses this year – for which we get a closed Central Library.

Councillor Jennie Condie reckons that a 2.15% increase is the bare minimum the city can scrape by on. Which in simple numerical terms means that the council needs an additional $7 million just to keep the lights on next year. Which probably doesn’t sound that bad, given the overall size of the budget.

But most households that are coming up short by 2.15% aren’t able to simply go to their employers and say “give me more money”, particularly with unemployment rising and job security falling. On the contrary, most households would simply trim their budgets – cut back on the “nice to have” items in favour of the “need to have” items.

And surely, in these challenging times, it’s beholden on the city council to do the same.

So the next question becomes: is there anywhere the council could save $7 million, rather than expecting hard-pressed ratepayers to dig deeper into their pockets? A short stroll through the council’s accounts reveals that there’s a wealth of opportunity – the council could probably strip $20 million out of the budget without anyone even noticing.

Currently, the council spends $23 million per annum on city promotions and business support. According to the accounts, the projections in the 2019/20 Annual Plan look like this:

Positively Wellington Tourism: $5,749,000
Events Fund: $4,874,000
Wellington Venues: $4,809,000
Destination Wellington: $1,813,000
City Innovation: $1,093,000
Wellington Convention and Exhibition Centre: $1,183,000
Economic Growth Strategy: $592,000
City Growth Fund: $1,787,000
Indoor Arena: $9,000
Film Museum: $0
International Relations: $908,000
Marsden Village: $0
Business Improvement Districts: $335,000

Leaving aside all the small fish – the stuff worth less than $500,000 – we’re left with some big-ticket items that would seem to have no functional purpose in a post-COVID world. For instance, it’s a pretty good assumption that our borders are going to remain closed for quite some time, so we don’t need to spend $908,000 on International Relations – let’s face it, Zoom calls just aren’t that expensive.

And the more you look for possible savings, the more you find them. Will we really be spending $4,874,000 on events for the next 12 months? Why do we need to spend $5,749,000 paying for Positively Wellington Tourism when there are no international tourists, and none on the horizon. And why does Destination Wellington really require $1,813,000 when everyone in the country knows where Wellington is?

The icing on the cake is the $1,183,000 for the White Elephant – sorry, the Wellington Convention and Exhibition Centre. Presumably this is promotional money to persuade conferences to relocate to the capital, which (a) won’t work in a post-COVID world, and (b) will add to our climate change woes. So here’s a novel idea – let’s not spend that money at all.

Adding a few items together and turning off the needless expenditure pretty quickly saves the $7 million Cr Condie is concerned about. In fact, sharpening the scalpel a touch could easily save $14 million without anyone noticing – in which case, the council could lower the rates bill by 2.15% instead. And given the opportunity to pay less in rates by foregoing the joys of promoting a convention centre we don’t want, most Wellingtonians would probably prefer to see the money in their pockets, thanks very much.

Now, perhaps the council has already been through the budget line-by-line and no more money can be saved. But in an environment where some other councils have committed to 0% rates rises, the WCC looks well out of step.

As the Prime Minister said about the lockdown, “we need to go early and go hard”. In a pandemic, the same applies to council budgets.

14 comments:

  1. John Locke, 20. April 2020, 9:47

    Great story – indeed, a small walk through the numbers reveals an additional $16.9M spend on the white elephant. One suspects that the council hasn’t thought any of this through. Or even bothered to look at the numbers. For the rest of us suddenly on 80% of our usual salary (or less!), we’d like some rates relief, not rates increases. By my count, there’s a lot of room for a 10% or more decrease in rates. Shame on you city council.

     
  2. Concerned Wellingtonian, 20. April 2020, 10:28

    How much is in the budget to subsidise the development at Shelly Bay?

     
  3. TrevorH, 20. April 2020, 14:07

    Over $900,000 annually for “International Relations”? You must be kidding? A slush fund for foreign travel for councillors? Wining and dining “Sister City” delegations? What do we ratepayers get for all of this useless indulgence? It’s not as if the Council will rescue you if you get into trouble overseas. In any case there will be precious little in the way of “International Relations”for councillors over the next few years thanks to COVID 19, so please delete this farcical line item.

     
  4. Peter S, 20. April 2020, 15:13

    Totally agree that councillors need to wake up and smell the (withered) roses. The Annual Plan, and Long Term Plan, should be thrown on the fire and new plans developed that remove all the “vanity spending” as detailed in this article. We need a concerted campaign of pressure on the council to do something about that $#&% convention centre. I am bitterly disappointed in the three Green Party councillors who voted for it (two of whom are still sitting councillors). Petitions, an email campaign, etc are needed? Why are they completely silent on this matter, as well as about the restoration of our library, when they are quite happy to trumpet about their generous 10% “pay cut”?

     
  5. Andrew, 20. April 2020, 15:21

    It’s hard to believe that the officials referred to in Jenny Condie’s article haven’t managed to stumble over some of these by now (or at the very beginning for that matter). Maybe there’s some extra trimming to be done there too.

     
  6. Pablo, 20. April 2020, 16:55

    Councillor Paul’s amendment to WCC policy for supporting business calls for $8million of council funding set aside for events to be redirected towards revitalisation and job creation, and for the fund to be available to a wider range of businesses such as start-ups. Funding startups is not core council business and is a high risk activity. A rates increase at a time like this should not even be an option.

     
  7. Marion Leader, 20. April 2020, 17:41

    As someone very interested in the environment I join Peter S in being disappointed in the three Green Party councillors (two of whom are still sitting councillors) who voted for the Convention Centre, the more so because it should be paid for 100% out of business rates since it is of no interest or value for residential ratepayers.

     
  8. TrevorH, 20. April 2020, 18:57

    I am shocked by the sheer effrontery of this budget. This Council is deluded. Where do they think they are? Paris, New York?

     
  9. John M, 20. April 2020, 19:01

    The whole WREDA thing is absolute nonsense. Their budget per annum is around $30million and approximately half of that I gather is salaries.
    There is no inbound tourism. Events and hospitality will be virtually non existent for some considerable time.
    Private enterprise in the event and hospitality business is taking a huge hit, sadly many of our favorite operators will disappear for ever. However Wreda at the ratepayers’ expense is allowed, courtesy of the WCC, to carry on regardless running “coloring in” and “Lego building” competitions along with ridiculous full page ads in the DomPost.

     
  10. judi m, 20. April 2020, 19:23

    Could someone/anyone explain why we cannot stop that convention centre? If it was a viable commercial concern, the Council wouldn’t have needed to build it, and now it is guaranteed to be a millstone around the ratepayers’ necks.

     
  11. Northland, 20. April 2020, 20:08

    Great article PGCM. It is extremely disappointing that the Council has failed to engage on this topic on this site. More disappointing is the complete lack of any empathy with the local population’s enforced pay cut. Can a Councillor, or even better the Mayor, comment on this thread and / or submit an article to explain either that the savings PGCM outlines are not possible (and why) or that they are not desirable (and why).

     
  12. michael, 20. April 2020, 20:38

    The problem is that, no matter how much we debate the issues and ask questions, unless it suits them we are ignored by council. And, because councillors are never held accountable for their actions, nothing is likely to change. Therefore, ratepayers will be expected to continually pay the costs resulting from council mismanagement, as is the case right now with the sewerage and water infrastructure crisis.

     
  13. Peter S, 20. April 2020, 23:59

    Well, their emails and phone numbers are publicly listed on the WCC website, so feel free to phone or email them, keeping it respectful of course!

     
  14. graeme, 21. April 2020, 1:12

    Put the whole lot on hold for a year and save a fortune. No one is going to be coming here for quite a while now anyway.