Salima

KCDC — home territory for a huge debt

Salima Padamsey reports the Kāpiti District Council now owes more per head than any other council in NZ, bar one!

She says:” On the 20th October 2018, the Mayor and CEO of Kapiti Coast District Council (KCDC) received a visit from the Deputy Auditor-General Greg Schollum. Mr Schollum followed up his visit with a letter to KCDC on the 5th December 2018, in which he stated:

“…the Council (KCDC) currently has the second highest level of debt per capita of all councils in New Zealand.”

A sobering picture

A review of the Council’s finances for 2017/18 paints a sobering picture.  Once you take out $19million for depreciation, it shows current staff costs are over $28 million, while the balance of operating expenses is just under $23 million.

These figures show a financial imbalance between the cost of staff and the cost of the duties they perform.  Put simply, KCDC is overstaffed.

The results of a comparative analysis of KCDC with 11 other Councils in the Wellington Region and lower North Island, is alarming when you consider that KCDC has the:

  • Highest staff expenditure per capita at $507.56
  • Lowest operating expenditure per capita at $414

What does a crdit rating of A+ really mean?

When KCDC is presented with these figures and challenged the usual response is that the Council has a Standard & Poor’s rating of A+, so everything is under control.

What our community, and our Councillors, fail to realise is that the Auditor General is referring to the level of indebtedness of ratepayers, while Standard & Poors is referring to the credit worthiness of KCDC.  The two issues are separate and a good rating in one does not negate a poor rating in the other.

So why does KCDC have a good credit rating when the council has the 2nd highest rate of debt in NZ?  

Simply put, KCDC’s good credit rating from Standard and Poors is as a consequence of the Council borrowing money using the private property of every ratepayer as collateral.  

Currently, KCDC’s secured debt is $205m. If you divide this figure by 22,000 ratepayers it reveals that each homeowner owes $9,318 to the bank should KCDC default on their loan.  This arrangement provides excellent security, hence that A+ credit rating.

Ministerial worries

Over the last year, the Minister of Local Government, Nanaia Mahuta, has expressed her concern that rate increases are rising faster than the rate of inflation.

When you consider that KCDC ended the last financial year with an operating surplus of $6 million of which  $2 million was used up by the reduction in value of its controversial financial derivatives, leaving the Council with a net operating surplus of  $4 million, we should all wonder why our rates continue to increase. This surplus constitutes 7% of the total rates gathered.

‘We should be seriously concerned’

As constituents of this district, we should be seriously concerned about the state of the Council’s finances.  

Despite the fact that there is a debt repayment schedule, the reality remains that KCDC will continue to borrow, whilst generating a surplus and maintaining unsustainable staffing levels.

Consequently, the need for good governance by our elected Councillors is made even more vital.  It is their responsibility to know the full story about what is going on and to ensure that our rates are being used efficiently and effectively.

What ratepayers need…

As constituents of this district,

  • We need to feel confident that any rates increases are for legitimate operational purposes, and not just to pay for additional staff salaries or consultants.  
  • We need to feel confident that those individuals we have elected are completely immersed in overseeing and managing council’s finances because at the end of the day the coffers are not unlimited.
  • We also need to understand why Council borrowing continues, even when we generate a surplus and why that borrowing is secured against the assets of private property owners

Exactly right. Unfortunately I am currently unable to carry out my duty to hold them to account. Appointing their own highly paid lawyer was a mistake. The senior staff of 3 ten years ago – is now name changed to group managers of whom there are 8.
Guru put the motion to increase the CEO salary (317000 dollars). I voted ‘
no’ enough is enough.

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