Council Digs Big Hole for Assets

The Council’s consultation process on the transfer of assets debacle continues to be a mockery. We can now add a series of additional breaches to the Council’s claims of proper process and transparency.

The original breach, back in August 2015, related to the Council decision to double the Gisborne Holdings Limited (GHL) directors fees and then a little later to transfer across the Council asset management staff to GHL. This all occurred before the public hearing in October and clearly pre-empted the final decision by Council to proceed.

Several official information requests made by Manu Caddie on behalf of Tairāwhiti Residents Association, to understand the calculations determining the new municipal building rental and current internal charges, have been stymied with obfuscation and what appears to be misinformation from Council. What is clear from the information provided (official responses below) is that there is a matrix of internal transfers between assets and activities that are not accounted for in annual financial reports. Information now released shows that what was initially claimed as current internal charges for the Fitzherbert St buildings, was not in-fact for Fitzherbert St, meaning the changed ownership will result in significant operating cost increases.

Council recently determined that the proposed transfer of the Waikanae Beach Holiday Park and Vehicle Testing Station is of low significance and of little interest to the public. With only two weeks of consultation planned during May and no opportunity for public hearings on submissions it again appears the Council is making a mockery of the process as it is now clear that GHL staff have already taken over the management of these assets.

We still do not know the terms and conditions for how GHL will manage the transferred assets as the Statement of Intent (SOI) has still to be finalised. This would never happen in the private sector – would you hand over management of your property without a signed agreement? The distributions policy, that determines the dividend paid back to GDC, and the threshold at which GHL can buy and sell assets without Council approval are major issues that have still not been agreed. Weren’t the municipal buildings transferred over four months ago?

The transfer of these assets is fundamental to the Council’s investment strategy, directive #4 in the Long Term Plan, to generate non-rate revenue for Council from new commercial activities. This was to be achieved by removing these assets from the political interference of Councillors, and having them managed at arms length by a commercial structure. The claim that these assets would generate more revenue under this new arrangement is without evidence. A review last week by Price Waterhouse Cooper supports our contention that there will be no financial benefit to Council. If you also factor in the lost benefit of GDC stranded overheads, taxation implications and the duplication cost of GHL management, we estimate there is in fact a significant revenue deficit of at least $500K.

This whole proposal has been ill-conceived from the start and the lack of any respectful public consultation only supports concerns that major Council decisions are being maneuvered from the chamber to the board room. The decision to transfer the burden of the rebuild for the municipal buildings on to GHL, to disguise the obvious cost and increased debt for ratepayers, has fooled no one. I hope those Councillors who are responsible for pushing through this proposal can explain why the public continues to be excluded from the process and why they pursue this proposal when there is clearly no financial benefit to ratepayers?

Rick Thorpe, 4 May 2016

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Gisborne District Council LGOIMA releases:

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