WRCC Submission on GWRC Proposed Annual Plan 2010/11 - April 2010


 

Submission to
Greater Wellington Regional Council
from the
Wellington Regional Chamber of Commerce
Proposed Annual Plan 2010/11
April 2010

Introduction

The Wellington Regional Chamber of Commerce has membership of 1,100 businesses in Wellington city and represents a regional hub of Chambers of Commerce with a further 4,500 businesses as members. While most of our members are in the SME category we also have as members 15 of the largest 20 companies in New Zealand. The Chamber promotes policies that reflect the interests of the region’s business community and the development of the Wellington economy.

In the Greater Wellington region, the Wellington Regional Chamber of Commerce is at the forefront of business development and advocacy locally and regionally. In fulfilling this role, the Chamber works closely with other Chambers in the region, and with council-controlled Economic Development Agencies such as Grow Wellington. Monitoring local councils’ performance and activities is a key role of the Chambers to ensure an optimal environment for business and the community generally.

The Chamber is pleased to be able to make this submission on the Greater Wellington Regional Council’s (GW) 2010/11 Proposed Annual Plan (the Proposed Plan). This year’s Proposed Plan is largely business as usual and there are few departures from last year’s ten-year plan.

Submission Summary

  • We are pleased with the effort GW has made this year in reviewing many of its services. However, we think the growth in GW’s overall expenditure and rate-take is still too high and we hope further savings can be found as the Annual Plan is finalised.
  • GW’s 2.2% rate increase has been pulled back from the 10.9% as proposed in last year’s 10-year plan. However, much of this reduction is due to deferred expenditure rather than genuine savings which will have to be incurred in future years. The $16 million reduction from changes in the expected timing of payments for rail infrastructure and rolling stock is an example of this.
  • The Chamber encourages a thorough and continual assessment of overheads and non-essential expenditure within the council’s overall operations.
  • We support targeted rates but only where the intention is to recover costs of particular activities from groups who benefit from these. The business sector must not be used as a cash cow. The upcoming review of the formulae used to calculate the transport rate should be extended across all targeted rates to ensure this principle is being adhered to.
  • GW has a number of assets which it should consider divesting. These assets include GW’s stake in Centre Port and interests such as Civic Assurance and Airtel. The proceeds of any sale should be reinvested in improved infrastructure and to reduce the rate burden.

Submission

Chambers of Commerce across the country are concerned about the rapid growth in the cost and scope of many councils’ activities.  As a general rule, we believe councils should aim to keep the population-adjusted rate increase below the rate of inflation.

It is vitally important that as monopoly providers with guaranteed sources of income councils find efficiencies in everything they do.  It is too easy for councils to increase expenditure and pass on the costs to rate-payers.

GW is one of the better performing councils we monitor and we are particularly pleased with the effort GW has made this year in reviewing many of its services to reduce its overall expenditure and rates.  However, notwithstanding the savings that have been made, we think the growth in GW’s overall expenditure and rate-take is still too high and we hope further savings can be found as the Annual Plan is finalised.

GW’s proposed rate-take for 2010/11 is up 2.2% on the year before.  This increase is less than the forecast rate of inflation plus rate of population growth which is encouraging. Furthermore, the 2.2% rate increase has been pulled back significantly from the 10.9% as proposed in last year’s 10-year plan.

However, we note that much of this reduction is due to deferred expenditure rather than genuine savings.  For example, changes in the expected timing of payments for rail infrastructure and rolling stock are responsible for a net reduction of $16 million of expenditure in 2010/11.

Adjusting for this significant amount of deferred expenditure, overall expenditure, mostly in the transport area, would seem to be up.  This spending will in part have to be incurred in future years and will contribute to more than a doubling of the transport rate in less than 10 years.

Outside the transport area, savings and reductions in expenditure appear to be more sustainable and we congratulate the council for those.

Because GW’s rates are collected by each of the TAs in the region and are relatively small, GW’s contribution to the rating burden is not highly visible. However, as the new trains are paid for and the rate-take increases, this relativity will change and so we think it is essential that GW looks to reduce spending in other areas of the council’s activities at this point in time.

The Chamber encourages a thorough and continual assessment of overheads and non-essential expenditure within the council’s overall operations.

In this submission, we have identified one or two areas where we think expenditure could be reduced. However, we think the onus should be on GW to look for efficiencies in everything it does and to identify areas outside its core business where expenditure can be reduced.

In future years, to help us and other submitters ascertain the worth of each of the council’s proposed projects and to identify areas where savings can be made, it would be appreciated if the full cost of each project were provided in the Proposed Plan.

Transport Activities

We fully support the thrust of the Proposed Plan’s transport activities including the objectives of attracting more users to passenger transport by modernising the network and improving service levels (frequency and coverage, real time information, electronic ticketing etc).

Transport is GW’s largest area activity representing 76% of total expenditure.  For this reason we would like the Plan to provide a more complete picture as to how the money is spent. We realise there may be commercial sensitivities involved and that information is available elsewhere in some cases but we would appreciate more financial information on the operation and development of the transport system. Information on what each of the key projects (listed on page 21) costs would also be helpful.

Because of its size there is likely to be scope for significant savings in the transport area.

We are pleased to note the $1.2 million saving in the real time information project and the $3 million saving in the provision of diesel bus services.  However, as stated earlier, too much of the proposed transport reductions are due to the delayed timing of payments (eg $16 million on rail projects) and other deferred expenditure (eg on electronic ticketing).

A significant amount of resource, and a large number of the proposed activities, in the Proposed Plan relate to the writing of strategies, plans, programmes, reviews and monitoring-reports etc all in compliance with the Land Transport Management Act.  We think there is too much politics, bureaucracy and consultation in the land transport system and a more commercial approach is needed. We realise this is an issue for central government to resolve and it is beyond the scope of the council’s Annual Plan.

We look forward to receiving details of the proposed review of the transport rate formula and the public transport fare review and participating in these reviews. It is important for the functioning of Wellington’s transport infrastructure that these things are got right.

Other Activities

We are sceptical about Greater Wellington’s involvement in the Government’s home insulation scheme.  Whilst not opposing the scheme itself we question whether the council’s involvement is legitimate core business.  The Chambers of Commerce strongly believe councils should focus on their core business and while definition of this is open to interpretation, this seems to be a good example of the council stepping outside core business.

Differential Rating

Generally speaking, the Chambers of Commerce support councils applying targeted rates and differentials where the intention is to recover costs of particular activities from particular groups who benefit from these. However, we are wary of councils using these mechanisms to overcharge the business sector.

Businesses provide employment, pay wages, produce goods and services, and determine the depth of the rating base. If businesses are ill-treated by council rating policies they are liable to relocate, close down or contract.

In the case of GW, targeted rates are apportioned across different districts and categories of rate-payers/properties in the areas of transport, the stadium, the EDA, rivers and pests.  GW does not apply differentials to the general rate (other than across districts).  Through the Targeted Rate differentials, business ratepayers pay a disproportionately large amount of the Transport, Stadium and Economic Development rate.

The Proposed Plan provides good information on what each category of rate-payer (rural, residential, business etc) is paying in terms of cents per dollar of capital value for each of these targeted rates but there is insufficient explanation as to how the rates/differentials are determined, how the benefits of each program are deemed to fall on the different categories of rate-payers and how the rates are arrived at.

For example, we question why Wellington city businesses are paying a greater stadium rate than residential businesses when not all businesses benefit directly from the stadium.

Also, Wellington city businesses - downtown and suburban pay well over half the transport rate while residential rate-payers pay very little (residents need to travel to work as much as employers need them to.)

The calculation of these rates is something we would like to explore more fully with the council this year.   We note the upcoming review of the formulate used to calculate the transport rate.  We would like the scope of this review to be extended across all targeted rates.

Assets

As a general principle we believe councils should focus on their core business assets and steer away from the ownership of activities such as ports, farms, forestry and property investment.

GW has a number of assets which we believe the council should consider divesting.  Reinvesting the proceeds in improved infrastructure would ease the rate burden considerably as GW continues with its capital investment program.  These assets include GW’s stake in Centre Port and interests such as Civic Assurance and Airtel.