KOA Submission on Long Term Plan

Presented To Christchurch City Council 19/5/15

Democracy

Democracy is such a significant asset that it was assumed to be significant without being listed in the assets list in the last three year plan. It is an asset that the people of Christchurch have rightly been proud of and prepared to defend in the past; to the extent that Roger Kerr described Christchurch as the “people’s republic.”

1. There are several Councillors who campaigned for the roles using a pledge to not sell assets.

We are unaware of any of the others campaigning for their positions as Councillors under the banner of a wholesale sell off of assets.

It is indefensible for those Councillors, who during the election period campaigned to hold on to the city’s assets, to in anyway support a sell down. They must vote against the sell down of all and any of the assets which were labelled as significant at the time they signed the pledge to keep them. The others must be able to present a very good reason for following a policy of selling assets other than very minor assets or car parks in Vicky Buck’s case, as they in no way indicated a whole sale fire sale of the people of Christchurch’s assets were in any way their policy, during the election campaign.

2. Open and clear access to information is a fundamental requirement of democracy; the people have to know what they are voting for and what facts the policies presented by their leaders are based on.

In this regard the Cameron Report is not a fair and open report on the finances of Christchurch.

• The terms of reference for the Cameron report in the much redacted form which we obtained as a result of a demand under the Local Government Official Information and Meetings Act 1987 make it clear that the decision to sell had been made prior to the report being written.

• The lack of independence of the Cameron Partners is obvious from their own web site which describes Rob Cameron role in the disastrous sell down of Telecom to Bell Atlantic and Ameritech through FayRichwhite

• The report appeared to be favoured over the KordaMentha report. It is worth noting that the KordaMentha report is cautiously optimistic and one can only assume that immediately promoting an alternative report is an attempt to bury a report that did not support a previously decided policy

3. TINA (There IS No Alternative) and Crisis Capitalism are not democratic strategies; but attempts to bamboozle the people into accepting a set of policies for which there is no support, or evidence of need.

4. The Challenge to put up alternatives; this is just a continuation of the TINA strategy. The council has several hundred employees working on plans and the financial situation. Many of the lobby groups that the council has been briefing also have full time staff and the resources to employ “consultants” while the ordinary citizens do not have these resources, the honest democratic approach would be for the council to investigate and put up all viable alternatives. This has not happened.

5. Where the major driving force for an unnecessary change is a central government that is committed to the failed neoliberal ideology of privatisation, the council should be honest with the people and alert them to the problem. It is a temptation to claim that such honesty would impinge on the council’s ability to negotiate outcomes but in reality the only strength the council has is the popular support of a well-informed community. The political system that relies on negotiation between strong vested interests is called corporatism or in its Italian form fascism and we do not want that here in Christchurch.

6. The assets enable to City to make decisions about economic social and environmental strategies that will not be possible if these assets were to be removed from democratic control.

7. The international evidence is that local democratic involvement has decreased where functions of councils have been partially privatised and/or Public Private Partnerships (PPPs) have been instituted

8. The previous process of having a voice has shown an overwhelming rejection of the councils plan to strip the city of assets. (Page 8 Final Report: Long Term Plan Community Pre-Engagement). In reality the use of an ignored “pre-engagement” exercise which is just ignored looks like a cynical ploy to exhaust the already tired people of Christchurch.

The Numbers

The Cameron Report which seems to have been imbedded into all statements about the City’s finances while the KordaMentha report has been quietly shuffled under the carpet is not convincing. In regards to the Cameron Report:

1. Without a full background on the figures the only figure which seems to have any validity is the 106 million that they show would exceed the borrowing cap set by the covenant with the Local Government Funding Authority.

2. This is a relatively small figure and its exceeding of the cap is only predicted to occur for a small number of years

3. Then the Cameron Report has what they describe as a “head room figure” of about 150 million to deal with unforeseen events. It is such unforeseen events that the insurance the Council buys should be covering.

4. The rest of the figures are not what economist would normally call risks which follow a recognised distribution pattern but as Rob Cameron himself admitted when questioned by KOA at a briefing are uncertainties. There is no methodology or evidence, empirical or otherwise, given in the Cameron report for these uncertainties. Perhaps the sky will fall on our heads.

5. Despite the above there are some vague hints that the uncertainties are driven by three things; the ability of the comfortable oligopolies set up under CERA and SCIRT to drive up prices where there is a high demand and a constrained supply, the free range given to the insurance sector to dodge its responsibilities and the amount of money the government is prepared to spend to meet its commitment to “do everything necessary” to get Christchurch up and running again.

6. Given the relative strength and size of the City Council compared to the international reinsurance sector, and the strong doubts that the sector negotiates in good faith, it is infeasible for the Council to hold the reinsurance sector to task. This is a role the central government must perform and which we have seen no evidence of it performing either in relation to the average mum and dad home owner or the city as a whole

7. The 60/40 split between the City and the Central Government in the cost sharing agreement signed between the Central Government and Bob Parker and Tony Marryatt without consultation with the people of Christchurch has an unreasonable cap on it and as so many of the relevant decisions have been driven by groups such as CERA, SCIRT, HIGGs and CCDU which are not controlled by the city it is unconscionable that there should be a cap and that the city should not receive more of the central government support promised in the early stages of this event.

8. The Council’s slavish adherence to the cost sharing agreement when the government has backtracked on its commitment by capping its contribution to the horizontal rebuild is indefensible. If the Council is concerned about a threat of statutory management, the Council needs to say so. The people deserve to know the truth

9. The earlier” your voice” process showed a clear public enthusiasm to hold the assets with almost all responses either demanding that the city hold all/most of its assets or squeeze money dividend from them without sale . This is a response a democratic council cannot in all conscience ignore.

10. It is normal accounting procedure when faced with wildly varying estimates to take an average so if the worst case figure of 1.2 is average with 106 we come to a figure of about $650 million

Resilience

The assets such as City Care and Orion played major roles in the city’s resilience after the earthquakes. “(Orion Chairman Craig) Boyce said city ownership of Orion had allowed the company to do some things that private owners would probably not have done such as earthquake strengthening from the 1990s. ‘This had a huge effect to get the power on quickly’. With regard to debate over city ownership of certain assets, Boyce backs Orion staying city owned. ‘Utilities providing essential services particularly where they are seen as a natural monopoly, I think they should stay with the community’” (Press, 12/7/12).

Governance and Future Decisions

1. Ownership of such an extensive and cohesive (not to mention profitable) portfolio of assets enables the people of ChCh, through the Council, to control the shape and destiny of our city much more so than if they are sold off to disparate, profit-first owners, who have no interest in the big picture or the public interest of the city and its people Without control of these strategic assets the city will have a reduced ability to make decisions for the common good of all Christchurch citizens and residents. One aspect of the Cameron report which speaks of this (Page 64) makes the point that increase “alignment of … mandates of CCC’s commercial assets and activities …directed at achieving CCC’s vision” is a strong statement of strategy but will be completely negated by the sale of the assets as proposed.

2. There has been some discussion about “Strategic Partners” without spelling out who these would be. The surrounding local bodies are also challenged financially and so are unlikely to be the purchasers of these assets or parts of these assets. Which leaves major multinationals who would make all decisions on what are in some cases vital infrastructure in their shareholders interests not in the interest of Christchurch and its residents

Rates

• Holding these assets has allowed the city to keep rates at much lower levels than comparable New Zealand cities.

• Whether the assets are sold or not the options given all require large increases in rates, and after the rebuild has taken place the council will no longer be able to use these assets to cap rates.

Alternatives

It is encouraging in the last days before submissions close to see that the People’s Choice Councillors are at last offering an alternative. To ensure an open, democratic process the council should have considered, investigated and presented to the people of Christchurch all the alternatives. By not having done so they aggravate the democratic deficit mention above. But what follows are some alternative

• The cost sharing agreement with Central Government should be renegotiate and the people of Christchurch informed and asked to support a campaign to help Central Government focus on being fair to the people of Christchurch

• Much of the extra burden is due to large “anchor projects” that the ideologically driven central government through CERA has imposed on the city, these should be reduced, deferred or abandoned (or paid for completely by the government which has driven the decisions). Many of the major anchor projects could be reduced, deferred or dropped; the October “making smart choices” information sheets speaks of $783 million in Anchor Projects. Deferring seems to be the preference of the vast majority of Christchurch residents

• The artificial borrowing cap imposed on the Council by the covenant with the local body fund authority is an artificial constraint and completely inappropriate for a city recovering from a major earthquake it should be renegotiated to allow more borrowing. Most families are happy to borrow 5 or 6 times annual income when buying their first home and Councils are better borrowing risks and pay lower interest rates. The Council with Central Government support should renegotiate its borrowing cap to a more reasonable level. It is not reasonable to; as Rob Cameron did during his briefing to KOA, equate the financial needs of city recovering from a major earthquake event with those of a city benefitting from growth. This issue could be solved by the Authority recognising that CCC is financing a major rebuild after an earthquake and lifting the cap to 3 ½ times income, holding the assets will increase the income used to calculate this figure.

• Set a budget that reduces, postpones or rejects wasteful white elephant projects that are not wanted or in the interests of the people of the city.

ENDS

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