The Council is coming under increased pressure to reduce its spending and re-prioritise current projects to better position the city for a very, very long recovery period. However, shuffling money around is a little more complicated than it looks, and what exactly are worthy projects that could help as we reduce the lockdown levels?
The Council met last week, and while the level of unity was encouraging to see in action, the outputs were somewhat lacklustre. The city has been looking for strong leadership to organise ourselves through recovery, and we do not see it yet. Squabbling over when parking wardens will reappear on the streets sends a very, very negative message to the residents.
Increasing commentary and calls this week then for the Council to cut spending in a more meaningful way, re-prioritise “vanity” projects with the Convention Centre at the top of the list, and provide more clarity on recovery.
I got some help with this article, while I have experience in running large capital programmes, I don’t always understand how the Council operates itself, so, thank you to those who answered my questions.
First, you can forget about canning a capital project like the Convention Centre, stupid as it is, and redirecting that money into operational spending, though, we should stop it and put that capital money into something useful.
That’s not how the accounting rules work. That’s a lot like going to the bank to get a loan for a home extension, getting the money, and spending it all on your bills. It’s a no-no.
That means then that the Council has two issues. Foremost, reducing operational spending (the bills) and secondly using project money in a way that could help stimulate the recovery of the city.
As of last week, reducing the spend hasn’t been on the cards. There is a discussion about lowering the revenue, rates, well covered here by Dr Jenny Condie, which was the subject of last week’s meeting.
At our meeting last Thursday, Wellington 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 on tough recovery. Based on what Treasury forecast today, in their various scenarios, the Council can 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 suggested before this pandemic, reducing the 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, ever, 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, WellingtonNZ, is entirely 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 for a bit, or at least wind it down to a heartbeat. Sadly, the same for some other Council Controlled Organisations that are primarily driven by events and tourists, both of which 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 (which is good, don’t get me wrong) for the city.
Do not think for a moment that WREDA is in any state to manage our economic recovery that would be a disaster, nor the Chamber of Commerce. There is chatter around town that may happen; however, all you need to do is examine their record over the last four years to see that is never going to work.
Frankly, a line by line approach, possibly already going on, by Council on operational costs is required before they come back to us asking for extra money. Also, Council putting pressure on their suppliers and outsourcers where they can, even asking for a contribution, is appropriate, without driving all of us complete broke in the process.
How about we immediately dump the subsidy to Singapore Air? They won’t be coming for a while, if ever. There are many areas like this where operational costs can be cut without compromising what is essential before coming back to the ratepayers for a top-up.
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. That’s the first thing. There are some boundaries around this that the Council doesn’t want to cross because it could force them into lengthy public consultation with residents when it needs to start acting soon.
Here’s another little snippet. Currently, I am told, the Council underspends it’s capital money each year by around 30%. Also, capital is effectively approved, however, spread over many years. So, the goal should be to unlock that capital far 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. That 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 onto the local economy and our communities.
Sadly, I fear that the current leadership is going to make these moves very difficult, which is what I need to write next, what may happen if we don’t get this right.