Just one week after the imposition of the council’s regressive fuel tax and a bunch of new targeted rates, came the disclosure in the NZ Herald that mayor Phil Goff has been planning ways to impose a so-called ‘Toilet Tax’ on the ratepayers of Auckland.
The new tax would be used to repay the $1.2bn capital cost of the long-talked-about ‘Central Interceptor’, the planned sewer pipeline, in a tunnel, running deep beneath the city, 13 km from Western Springs to the Mangere Wastewater Treatment Plant. The new interceptor is needed to take the extra sewage and to reduce overflows resulting from Auckland’s continuing population growth. Subject to funding, construction is planned to start in late 2019.
Heavily redacted Treasury documents obtained by the National Party reveal that Goff has been talking to the government since November last year about ways to borrow the money for the project and yet keep the debt off the council’s books. Central to the plan is a ‘special purpose vehicle’ (SPV), which is jargon for an entity, separate from the council, underwritten by the government, which would be set up to borrow the $1.2bn and empowered to send ratepayers bills to repay the principal and interest.
Why would this SPV be needed, you may ask, with council income (rates and charges) now $4.1bn per year. After all, sewerage provision is a basic local government responsibility, and in Auckland the job of Watercare Services, the water and wastewater agency established by the ARC in 1992. Over the past 26 years Watercare, the ‘quiet achiever’ in the Auckland Council family, has successfully delivered a number of major projects, including Project Manukau, the $500m upgrade of the Mangere Wastewater Treatment Plant, Project Waikato, the $100m, 37 km water pipeline and treatment facility bringing water to the city from the Waikato River, and Project Hobson, the $114m tunnel from Parnell to Orakei which enabled the replacement and demolition of the old Hobson Bay sewer line.
Watercare says it could fund and build the Central Interceptor itself. Furthermore it admits this approach would work out cheaper for ratepayers.
So why? The answer sadly is that the Super City, since its establishment in 2010, despite hundreds of millions of dollars in asset sales, has profligately run up an enormous debt – currently at $8.7bn and rising, with interest costs currently at $471m a year. Council finance managers fear that the cost of the Central Interceptor would push the council over its borrowing limits, endangering the council’s credit rating with the international rating agencies, resulting in an increase in interest costs.
The SPV then is essentially a financial instrument, a bankable package if you like. But we are told it will come with ‘governance’ attached – that is people – directors, managers, consultants – in other words the usual suspects.
So the SPV will also mean the establishment of a parallel local authority in Auckland. Except that it will be an undemocratic, unelected authority, and given its proposed legal stand-alone status it is unclear to whom it would be accountable. It is supremely ironic, given the cost and disruption of abolishing the old legacy city councils and the ARC to form a single unitary ‘Super City’, that the mayor and council management are now attempting to persuade the government to establish another, non-democratic, authority to rate Aucklanders.
This is all very disingenuous – up until now carried out in secret. Sadly, as we are learning, Phil Goff is proving to have form when it comes to concealing important information. He apparently hopes to claim he is not increasing rates to repay this loan; Auckland ratepayers apparently being expected to take comfort that the ‘toilet tax’ bills they will be getting is from the ‘SPV’ – not the council. The government would be mad to go near it.
In response to the disclosures, Goff is saying, quite correctly, that no formal decisions have yet been made. However he did tell the Herald, that if the council could move the cost of the Central Interceptor from its books to appear on the SPV books, that would free up $1b to invest in other ‘areas of public need’.
However Mr Goff’s ideas on spending for ‘public need’ such as a $2bn ‘downtown national football stadium’ are not necessarily shared by the public.
Auckland really deserves better than this.
Mike Lee is an Auckland City Councillor