Centralising water services – who’s really calling the shots?

In case you missed it, the ‘Reform of Just About Everything’ is underway – including the inter-dependent reforms of Resource Management, 3 Waters, and Local Government.

Unfortunately, these pieces of work are being progressed all-at-once, rather than in a logical sequence and it’s impossible to tell how the multiple pieces of new legislation will work together. On 3 Waters Reform, the Government has considered just one solution (one model to address funding issues), and now the numbers presented in its defense don’t stack up. They’re not even in the ballpark.

A sledgehammer raised to strike a structural wall comes to mind. The ‘wall’ is local democracy and I’d say we have a very brief ‘window’ to stop the destruction.

A brief overview of amalgamation

A subset of the 3 Waters Reform program is the proposed amalgamation of water assets and services into 4 large ‘entities’. This is what Councils are currently grappling with – whether to hand over their assets or ‘opt out’ of the reform. Although there may no longer be an option; ‘Jump or be pushed’ is the word on the ‘street’ (or around Council tables).

If the Government has its way, the 4 proposed entities will control the delivery of all water services, with oversight from Taumata Arawai (the new water regulator) and an economic regulator. It’s essentially the same model used in Scotland (but with 4 entities rather than 1) and the team from Scottish Water have been working with the Department of Internal Affairs on this for some time now. However, it is worth noting that when Scotland had 5 service providers, it wasn’t working.

Under the proposed model, councils would collectively ‘own’ the assets but not in any real sense. Council and iwi would have 50/50 membership of a Regional Representation Group which has two functions.  The first is the selection of a Panel that appoints the Board of the entity.  This means that the councils and iwi cannot appoint the board of the entity directly.  This was insisted on by Standards and Poor to maintain the credit rating that will be needed for the entities to borrow money. Standards and Poor do not want elected representatives selecting the board. In other words the bankers are determining the democratic standards of Aotearoa.
The second function of the Regional Representation Group is to write the Letters of Expectation. This is the document that councils use to tell the Boards of Council Controlled Organisations what they want the entity to do.  However unlike a CCO, where the Letters of Expectation must be responded to with a Statement of Intent that binds the CCO to actions outlined in the Letters, the Board of the water entity would only need to take note of the Letters of Expectation – it would not be obliged to give effect to them. The same is also true for the relationship between iwi and giving effect to Te Mana o Te Wai.  The board would receive the iwi Te Mana o Te Wai statement but would not be obliged to give effect to their statement. This, in spite of the legal requirement in the Water Services Bill for them to do so.
So, in summary, under the proposed model the Regional Representation Group can’t appoint (or remove) the Board of the water entity directly and the water entity is not bound to give effect to the wishes of the Regional Representation Group.

Continued public ‘ownership’ is apparently a bottom line, but it’s also acknowledged that there are no immoveable protections against privatisation. It would always be a risk. And it’s not lost on Councils that if the Government can amend the LGA to take our assets now, the Government can also amend the legislation to remove privatisation protections ‘down the track’.

Of course we all want everyone in this country to have access to clean water, and we want to ensure wastewater doesn’t contaminate water bodies, and we want storm water to be properly regulated and managed. The Government’s objective is laudable and not up for debate – but how we achieve it is. There is never just one route to take – usually there are many and they all have upsides and downsides. The thorough consideration of different options and the weighing up of ‘pros’ and ‘cons’ and any unintended consequences is a critical step in ensuring good outcomes. So critical that it’s a requirement under the Local Government Act. So is consultation – with all stakeholders and with the community. It removes the risk of ‘group-think’, capture by lobby groups and loss of trust in our democratic institutions.

So, the big question is this: How and why did the Government decide it needed to wrestle 3 waters assets from local Councils without transparently considering other options and without talking to local government?

I can’t answer that but I can highlight the prominence of the infrastructure industry, the sidelining of local government and the laser-focus on economies of scale. Readers can draw their own conclusions about who benefits most from large entities procuring for large infrastructure projects and large service contracts. And who doesn’t. And where the profits might go…

INFRASTRUCTURE NEW ZEALAND

Infrastructure New Zealand (INZ) is an industry lobby group representing law firms, banks, construction companies, crown entities and some councils. The Construction Bank of China is on its membership list. Those that fund INZ are, for the most part, large companies that make their money from large infrastructure projects.

INZ’s website boasts an extensive back catalogue of reports and submissions. One of the consistent themes is advocacy for reduced local governance; regional governance is preferred. Another is increased funding for growth. No surprises there and none of this is a secret – the membership is transparent, the policy is transparent and well thought through, and INZ has every right to lobby. It’s the Government’s job to ensure it is not ‘captured’ and to ensure that it listens to everyone, including Councils.

In March 2017, 6 months after the water contamination incident in Havelock North, Infrastructure New Zealand led a delegation of 33 senior public and private infrastructure representatives to London, Edinburgh and Glasgow. The purpose was to investigate Scotland’s infrastructure decision-making system and bring back learnings for New Zealand. In June 2017, INZ produced a report called “Building National Infrastructure Capability – Lessons from Scotland”

These were the recommendations in the Report:

  1. Establish an independent body to identify long term infrastructure needs and monitor performance against these needs.
  2. Reform planning laws and local government structures and funding to provide an aligned spatial planning and infrastructure delivery system nationally, regionally and locally.
  3. Establish a specialised project procurement entity to help plan, prioritise and deliver national and local capital programmes.
  4. Reform the water sector. Consolidate water supply and wastewater services into a smaller number of large operators.
  5. Shift to independent regulation. An enlarged Environmental Protection Authority taking on responsibilities of regional councils would reduce conflicts of interest, support professional development and have the ability to modernise environmental management.
  6. Investigate the partial or full sell down of Watercare to fund growth.
  7. Revise council funding to align central and local government investment incentives

It’s interesting that most of these recommendations have either been implemented since the report was written, or are in the process of being implemented. The point is not that the policies are bad (although the recommendations to consolidate water services and to privatise Watercare are concerning); the point is we have an industry lobby group with a particular world view (whose members stand to profit from its policies), that is effectively writing Government policy without the checks and balances, or different perspectives and values, that multiple stakeholders can provide.

A MESSAGE FOR CAUCUS

This reform programme is a once in a generation (or 2 or 3) event so we need to get it right. Remember that Scottish Water is not perfect (Google “Scotland and sewerage overflows”) and that Government is not even pitching the ‘one entity’ Scottish model (it’s pitching 4).

Don’t think that the undermining of local democracy or the loss of economies of scope will be remembered fondly in years to come. Currently, councils can integrate projects like new active travel routes with 3 Waters works, achieving cost savings and consequential benefits that would generally not be possible if they didn’t control the assets. They can also integrate plan changes and infrastructure delivery. And so on. Properly regulated and funded, local government can be agile and clever about achieving efficiencies at every scale. Because of economies of scope.

So my request to Central Government is this: First, take a breath and stop the work the DIA is doing on amalgamation – there is no rush because the entities won’t ‘kick in’ until 2024 anyway. Secondly, release LGNZ from the Heads of Agreement that has rendered it a mute and ineffective lobby group for local government at a time when it needs its voice. Thirdly, go back to the drawing board in partnership with iwi, mana whenua and all councils to consider other options, including tools such as (and there will be plenty of others):

  1. Regulation to increase the funding of depreciation
  2. The creation of a fund to assist smaller councils
  3. Underwriting 3 Waters debt for councils that need it
  4. Incentivising/enabling co-operation and resource sharing between councils
  5. Centralised support services where needed
  6. Support for industry training
  7. Funding full-time councillors so the job attracts a wider skillset and people who can focus on the role.

Lastly, undertake a thorough assessment of all options for solving the current funding and capacity issues, taking into account all the costs and benefits, including the benefits of both economies of scale and economies of scope. One of those options must be the ‘wait and see’ approach plus any combination of 1-7 above, because it is entirely possible that with Taumata Arawai on the scene, a few tweaks to the system are all that is needed.

It would also pay to have a long, hard think about whether you want to amend the RMA and the LGA to take Councils’ water permits and water assets ‘by (legislative) force’ – because people will take to the streets.

You are messing with local democracy and with our wai; we know what’s at stake and it’s worth fighting for (speaking figuratively, of course).

END

Lessons from Scotland Report, Infrastructure NZ: https://infrastructure.org.nz/resources/Documents/Reports/Infrastructure%20New%20Zealand%20Scotland%20Report.pdf

‘Lakeview’

In October 2019 Council staff signed a development agreement with Australian developer Ninety-Four Feet and Augusta Capital to develop the Lakeview site in the Queenstown Town Centre.

In signing the deal QLDC became a property developer and took on a level of financial risk that I am increasingly uncomfortable with – not least because we are on track to get up close and personal with our debt limits in a few years time. There is no room for budget blowouts or unnecessary expenditure – but Lakeview is already delivering.

The costs of holding up QLDC’s end of the deal – that is, getting Lots to title for sale – are increasing. The cost of asbestos removal has just increased by $6.3 million, and the budget for the infrastructure works has doubled from $19 million in the last Ten Year Plan (LTP) to $40 million in the draft LTP (that’s pre-procurement).

The value of the deal is now public knowledge – just $75 million to Council over (potentially) 20 years – and questions are now circulating about the development and the deal, including “Can we get out of it?”. 

Given we’re consulting on the Draft LTP and this project is consuming a large chunk of our discretionary spend over the first 3 years, I thought it was about time I shared a few concerns and provided some background and sources of information for those of you wanting to know a bit more.

THE DECISIONS

The Council has for a long time debated what to do with the Lakeview land.  A report to Council on 26 October 2019 (link below) helpfully sets out some of this background including the rezoning to ‘Queenstown Town Centre’ under PC50 in 2016 and the failure of the Conference Centre proposal to take flight.

On 17th August 2017, Mayor Boult’s new Council approved development objectives for the site including to:

a. [Note this one] “Maximise financial return in a manner that minimises risk to ratepayers“; and

b. “Establish a thriving residential focused, mixed use precinct, which is stitched into the Queenstown town centre context.”

Council also agreed: to engage with the market and select a development partner (or partners); to undertake consultation with the community on the nature of tenure for the commercial land; and directed officers to report back to the Council on transaction options for disposal of the land.  To be clear that was both ‘agreement to consult’, and ‘agreement to engage with the market on land disposal’, all at the one meeting.

Just two months later on 26 October 2017, Council approved the intention to enter into agreements with the private sector. Council also:

  1. Authorised the CE to negotiate and execute transaction agreements with development partner(s) (subject to the parameters) [without coming back to full council]; and
  2. Committed QLDC to delivering the required internal infrastructure, roads and public space to allow transfer of the Land (serviced lots) to developer partner(s).  N.B. There were no financial constraints attached to that commitment.

The Development Agreement (DA) was eventually signed 2 years later in October 2019. So the commercial deal was done during the term of the current Council, but staff were acting on a Decision of the previous Council made 2 years prior in October 2017.

Also in 2017, QLDC applied for resource consents for a subdivision to enable a reserve land exchange (to swap reserve for freehold) and a further subdivision application to create the 12 Lots.  The applications (RM170923 and RM170924) were received by the processing planner on 21 December 2017 and a Decision was first issued on 8 February 2018. It was then reissued on 20th Feb. Obviously, given that timeframe it was processed non-notified.

An application for the reserve swap followed in mid-2018. That process relied on consultation under the Reserves Act and a decision of the previous council – both dating back to 2015.  The details are in the Resource Consent documents on Council’s EDocs site (RM170923 and RM170924).

CONSULTATION:

The land to be sold included part of the Queenstown Holiday Park.  The October 2017 Decision authorised the CE to cancel part of CCR Limited’s lease and remove Designation 211- Recreation Reserve (Motor Park) from the District Plan as it related to the Block for sale.  

There was a 3-week informal consultation that ran from 18 August to 8th September 2017.  A special consultative process was not been deemed necessary because the land was not considered to be a strategic asset. 

“All Queenstown Campgrounds” are listed in the Schedule of Assets in our current Significance and Engagement Policy but QLDC, although it was planning to sell the land, didn’t own the land at that point (it was still reserve) and the (Motor Park) designation was removed before the land became freehold. Whether QLDC owned built assets on the land proposed to be sold is another matter. I don’t have the facts on that just yet.

The consultation document – the ‘Lakeview Tenure Engagement Document’ – was a 4-pager (including title page) describing two options for the future of the land – a prepaid long-term lease of over 100 years was discussed or sale as freehold.  Both options are effectively a sale.  There were no other options considered and this was noted by submitters. 

The 2018 Long Term Plan was a special consultative process and it certainly allocated budget for getting Lakeview Lots to title ($19 million) but that total budget was scattered across multiple funding tables, and I believe the first time Lakeview is mentioned in the text is on page 111 where it says, under the heading ‘Economic Development’:

“COMMERCIAL PROPERTY Development of the Lakeview site, as agreed in October 2017 by the Council. This will enable investment in Lakeview to implement one of the key initiatives identified as a means to address specific opportunities and challenges faced by the district. The development of the Lakeview land will unlock significant funds” [Note the last sentence].

After the recent High Court Decision on the Wanaka Airport Lease I do wonder whether we have met the requirements of the LGA in terms of consultation on this extremely valuable and strategic piece of land. 

THE DEVELOPMENT AGREEMENT AND THE COSTS

QLDC is not selling the whole 10.4ha Lakeview block.  The agreement is for a leasehold interest in 0.5487 hectares of land and a freehold interest in 2.5457 hectares.  Over 6ha of land will be held by the council in perpetuity.  However, most of that is land between the hill and the development and/or is land that will accommodate infrastructure to support the private development i.e.roading corridors, rock fall mitigation infrastructure, 3 waters infrastructure, and the central plaza.

The details of the development agreement are commercially sensitive but the basics are that QLDC must clear and subdivide the land, put in the infrastructure (roading, rockfall mitigation and 3 waters) and get 12 ‘super lots’ to title.  The consortium will pay $75 million for the 12 serviced lots, with the lot sales staged – potentially over 20 years.  

The 2018 LTP set aside around $19 million to develop the land and progress the deal; the draft LTP, currently being consulted on, has had to budget $40 million.  Costs beyond that figure include:

  1. Repayment of outstanding loans (cabin purchase of $4 million);
  2. Asbestos clearance (currently budgeted at over $8 million)
  3. Management overheads (resource consenting, market engagement) estimated at 1.4 million back in 2017 and likely to have increased;
  4. 5% of land value contribution to the Queenstown Lakes Community Housing Trust (QLCHT); and
  5. The costs of the construction of the new stormwater line from Thompson Street down Brunswick Street. 

It’s clear that the costs are mounting and could easily increase once we get further into the groundworks.  However, at this point QLDC has only cleared the old cabins, completed a reserve swap and a subdivision consent, and is in the process of clearing asbestos from the site – we’ve not yet broken ground on the on-site infrastructure works. So the big questions are what are our options at this point and what does the community want to do?

MY CURRENT CONCERNS:

  1. In terms of the bigger picture – I think the Council needs to stop delegating authority for the negotiation and sign off on leases, land sales and development agreements. On Lakeview…
  2. The costs are increasing and the ‘not at risk’ profit (from the $75 million) is shrinking fast;
  3. This project is consuming a large chunk of our discretionary capex spend in the first 3 years and that may get larger N.B. this is a commitment with potentially huge opportunity costs (because our draft capex budget takes us frighteningly close to our LGFA debt limit).
  4. QLDC has to fund all infrastructure for all the Lots ‘up front’ but may not get paid for the last lot until 20 years down the track. The future value of the price of the last lots will obviously be a lot less than current value. Meanwhile, we will pay the interest, the depreciation and the maintenance on the infrastructure works for Lots that haven’t been sold; and finally,
  5. Lakeview is prime real estate – there are no guarantees regarding affordability or occupancy and therefore no guarantees regarding benefits to the community.

Moving forward, I believe we have a responsibility to understand all options open to the Council at this point, and we should be requesting an objective assessment of the Lakeview project and development agreement – against the objectives agreed in August 2017, but also against current needs and against our financial reality. Now is the time to do good governance on Lakeview.

The 17 August 2017 and 26 October Council Reports can be accessed from this page: https://www.qldc.govt.nz/your-council/council-documents/agendas-minutes/full-council#2017

Ladies Mile re-zoning – inevitable or not?

What follows is a collection of thoughts based on my understanding and what matters to me at this point in time. Don’t take it as gospel, don’t place too much weight on it (I’m no expert). I’ve written this because you have a right to know what I’m thinking. If I need to make corrections let me know; if you’d like to challenge my thinking please do!

Firstly, a little background…

QLDC is currently spending a significant amount of money on a Masterplan and District Plan Change for Ladies Mile. This work considers the potential rezoning of the land on the northern side of Ladies Mile, the use of council land at 516 Ladies Mile, and the future of the 75m building restriction area on the southern side of the road.

The proposal is to rezone the land to a mix of medium – high density residential, education, open space and commercial to create a more connected community with better facilities closer to home and the density to drive the use of public transport. It’s a worthy goal but it needs to be achievable and the ‘upsides’ must be weighed against the inevitable downsides. To that end QLDC has gone out for feedback. There are currently 3 Concept Plans available for the community to consider and comment on. That feedback will help to develop a final preferred option that will then go out for comment in February/March next year.

This survey will close at midnight tonight (Monday 16 November 2020): https://letstalk.qldc.govt.nz/ladies-mile-masterplan

And this brochure is helpful in understanding what’s proposed and why: https://www.qldc.govt.nz/media/3huh4pob/qldc_ladies-mile_masterplan_a3-folded-to-a4-brochure_web.pdf

Is development and rezoning of Ladies Mile inevitable?

There has been a lot of talk within and outside of council about the rezoning and development of Ladies Mile being inevitable – that if we don’t progress a plan change the land owners will. It’s a key assumption underpinning the proposed plan change but I’m not so sure it’s entirely valid. It’s always troubled me and has always been one of the reasons I’ve voted against the proposed plan change so far. Yes, there is the Queenstown Country Club development setting a precedent of sorts, and a National Policy Statement for Urban Development (NPS-UD) that requires us to provide sufficient residential development. But in terms of potential road blocks to a private plan change we have:

  1. A two-lane bridge across the Shotover and NZTA is an affected party
  2. An Outstanding Natural Feature in Slope Hill
  3. Class 2 (LUC) soils (the LUC system classes soil as 1-8, 1 being the most productive)
  4. A Proposed National Policy Statement for Highly Productive Land (NPS-HPL) on its way. The intent of the proposed NPS-HPL is to maintain the availability of HPL for ‘primary production’ for future generations and to ensure productive land is not lost to inappropriate subdivision and development.
  5. No private party can apply to change the Proposed District Plan – so by the time they can the NPS-HPL may well be in place.
  6. A Climate Action Plan that seeks to make our communities more resilient and support local food initiatives. Here are two of the planned actions: firstly, to review funding provisions and improve funding mechanisms for community-led climate action i.e. food and water resilience initiatives; and secondly, to support and guide the development of local food initiatives.

I’m not saying the proposed plan change shouldn’t go ahead – I just don’t think the assumptions underpinning it are water-tight. So when the master plan and associated plan change come to councillors for approval later this year I won’t be assuming rezoning is inevitable; I’ll be considering whether it is the right thing to do for the community and future generations given existing rights, obligations, policies, constraints and opportunities. And I’ll be keeping in mind that the land could be retained for food production should we choose to do that.

At decision time I’ll be thinking about a number of things including: QLDC’s obligations under the National Policy Statement for Urban Development (NPS-UD); the existing rights of developers to apply for private plan changes and our ability to defend the existing zoning; the willingness of landowners to develop their land; the current and future capacity of our water and energy infrastructure; the NZTA’s position and how we’d resolve traffic congestion; our Climate Action Plan outcomes, actions and targets; and so on… It’s complex and I’ve not yet made a ‘landing’ because, like everyone, else I still need more information.

Whether I agree it or not will probably depend to a large extent on any progress resolving the very predictable traffic issues, the treatment of storm water and the impact of that on Lake Hayes, and whether the proposed plan change has ‘teeth’ – because we don’t want to be spending further millions challenging applications for resource consent that undermine the reason for doing this work.

My decision will also depend on council stepping up to assess and protect sufficient productive land to meet the objectives of the Climate Action Plan to ensure this community is resilient – because we need to provide housing but people need food too. As a district that will continue to have good rainfall and access to water sources, we need to think carefully about the best use of land and more specifically, soil.

I also need to say that I love the fact that we’re proposing high density and increased height, and that we are trying to reduce car journeys and create a need for outstanding public transport. Reducing our impacts on the climate and our waterways is critical and making it easier to change our lifestyles (a bit or a lot) is key to achieving that.

I can’t bear the thought of using half of the land at 516 Ladies Mile for a park and ride.

Finally, while I can’t say what my decision will be, what I can say is that from what I’ve seen I have confidence in the consortium developing the plan change. They are thinking creatively, they’re listening, and sustainability appears to be ‘front of mind’ and that’s what’s needed. So I’m sure we’ll have an excellent, even ground-breaking, proposal to consider – the big questions for me will be ‘is it in the right place?’ and ‘do the benefits outweigh the costs?’.

Feel free to email your thoughts niki.gladding@qldc.govt.nz

Democracy Matters

Airports, growth and visitor levies have been debated to death (by boredom) this election, but we’ve forgotten to ‘have it out’ over perhaps the most important issue of all: our local democracy is heading down a very slippery slope and it’s time we dared to talk about it.

Some of you might think that process doesn’t matter if things are getting done – and recent comments suggest the Mayor might agree with you – but you’d be wrong.

Turn your mind to Canterbury for a minute.  In 2010 the region lost the right to be governed by elected regional councillors.  They also lost the right to appeal the decisions of Nick Smith’s commissioners, whose job was to get things done.  They cleared the way for huge irrigation schemes to ensure intensive dairying could spread across those leaky soils.  And it did.  Back then, those who benefited, and plenty of others, didn’t blink an eye.  This will be the first fully democratic election in a decade.  The big election issue is water – the polluted and dried up rivers and aquifers which were once the pride of Canterbury.  The big corporates and the banks made their money, the Government took the tax, and the farming communities are left with nothing but debt and dirty water.

Democracy matters and it doesn’t take the ousting of elected reps to lose it.  Where there is big money to be made and pressure to grow an industry, it might be enough if councillors are underpaid, kept out of the loop, are poorly advised or simply fall silent when they should be speaking up in the public interest.  Unfortunately, it’s fair to say QLDC is suffering from all the above…

The bed tax and the Spatial Plan

We’re told we must all want a bed tax because 81% of us who voted in the referendum ticked ‘YES’. Even though it was pitched as a veiled threat (‘tick yes or watch your rates rise’) and there were no options.  There was no options assessment and neither the bed tax option nor the referendum question was signed off by councillors.  But my greatest concern is that the levy seems to be linked to the mysterious ‘Spatial Plan’ and that we voted not really understanding the connections or the consequences. The Plan is being developed by staff and Central Government – councillors have been excluded. Does it plan for tourism growth and is it a condition of the levy?  The cone of silence around this Plan means we can only speculate but the ODT’s reporting suggests this is about partnership with Government and that it’s the Spatial Plan that would enable QLDC to investigate a visitor levy:

“The council has been clear that the ability of the district’s community to support growth in Queenstown Lakes through rates alone is simply not possible.

“Such a cost threatens to undermine the wellbeing of our communities.”

The council was seeking a partnership with Government that would consider long term growth and development, investment and future funding in Queenstown.

“Such an initiative recognises the unique role that Queenstown Lakes District plays in the international and national reputation of the country, and the stress that this popularity places on our local communities.”

The work would be centred on a 30 year spatial plan for the country’s fastest growing district and would enable QLDC to investigate a new funding model to enable new infrastructure investment based on a visitor levy.

The government has said it recognises our district’s challenges are exceptional, and that if there is clear support expressed through a referendum it would consider our proposal for a sustainable growth partnership, and legislative change to allow a visitor levy to fund the infrastructure the town desperately needs.”

Also: https://www.odt.co.nz/regions/wanaka/airport-depends-qldc-‘spatial-plan’

The Airport Statement of Intent (SOI)

Emails released under the LGOIMA show that in March there was a clear steer from the councillors to QAC not to extend the existing airport noise boundaries. So why the rather strange game of SOI hot potato? The released documents shed some light on that – they suggest that the Council’s Chief Exec Mike Theelen might have crossed a line. The CE assumed a governance role of sorts, penning the Council’s way forward via the Mayor’s Wanaka speech without the guidance of councillors. He worked closely with Colin Keel on the SOI, but not the councillors, and discouraged councillors from directing the CCTO. Along the way, through all the mess, he’s neatly managed to avoid ruling out expansion of noise boundaries in Queenstown. 

The Wanaka Airport lease and Project Pure

And then yesterday, QLDC released the Wanaka airport lease agreement between QAC and the Council.  It was the first time all councillors had laid eyes on it because the lease was negotiated under the delegated authority of the the Mayor and Councillors Hill and McLeod.    

It includes some fairly scary provisions to allow for airport expansion, provisions that never went back to the council for discussion or sign-off.  Those include the 100-year term and the ability for QAC to prevent the expansion of or demand relocation of Wanaka’s wastewater treatment plant and discharge field:

The Lessor [QLDC] will not carry out any future development of Project Pure, including any expansion of capacity of Project Pure, whilst it is situated on the Original Project Pure Site without obtaining the Lesseers [QAC] prior written consent, such consent not to be unreasonably withheld or delayed. The Lessor acknowledges and accepts that the following reasons would be reasonable for the Lessee to deny consent:   if the Lessor is proposing to develop closer to the Lessee’s planned runway;

  1.    if the Lessor is proposing to develop closer to the Lessee’s planned runway;
  2. if the Lessor’s proposing to develop new buildings or plant above the height of existing buildings or plant in Project Pure as the Commencement Date; and/or
  3. if proposed development materially conflicts with any regulatory and /or operational requirements of Wanaka Airport.

And:

The Lessee may on giving a minimum of 3 years prior written notice to the Lessor, require the Lessor to relocate Project Pure. In the case of the disposal fields, the notice can be given any time after the second anniversary of the Commencement Date. For the remainder of Project Pure, the notice can be given any time after the fifth anniversary of the Commencement Date.

These provisions should have been a consideration when councillors were mulling over the draft SOI;  the Mayor and Councillors Hill and McLeod should have highlighted the risk to that vital piece of infrastructure, if unlimited airport expansion was not written out of the SOI.  But they didn’t. 

And perhaps we should be asking whether they even had the authority to negotiate those provisions under delegation.     

Conflicts of interest

Finally, there’s the issue of whether the Mayor’s potential and perceived conflicts were appropriately managed.  He is Chair of Wayfare Group, the largest tourism company in the region if not the South Island, and yet he has been deeply involved in each of the above matters, all directly related to our ability to grow tourism in this district. A complaint has been laid.

Summary

If I had to sum this up, I’d say that under this Council’s leadership the management team has become very skilled at manoeuvring in the grey areas at the margins of democratic process. That’s the nicest way I can put it. And it’s something to be very concerned about.

If we don’t want to end up like Canterbury’s farmers – reliant on numbers to claw back the debt that enabled unbridled growth – we need to need to ensure that industry lobbies and corporate agendas can’t have an undue influence on decision-making. And to ensure that we need to do better than operating at the margins.

So, as councillors continue their public silence in the face of all this, let’s get behind those in the community (Wanaka Stakeholders Group take a bow) who are willing to stand up and challenge poor process.  Naturally, those with a lot to lose will push back and try to belittle, marginalise or discredit the threat – that’s PR 101.  As for the rest of us, it’s time to ditch the apathy, think about the consequences of continuing as we have been, and support those determined to wrestle our democracy back up the slippery slope.   

How not to lose control of QAC

With Queenstown Airport Corporation gunning for a massive expansion, it’s time for Queenstown Lakes District Council to wake up and assert some control over the CCTO’s spending.

Queenstown Airport Corporation (QAC) has lined up its ducks nicely. Thanks to the Council, the company has doubled its landholding.  It’s also obtained Requiring Authority status under the RMA and it almost clinched a Statement of Intent (SOI) with the objective to grow to meet demand. Fortunately, due to massive community opposition, that document (the last duck) was not accepted at August’s Council meeting.

QAC’s enterprise value is worth somewhere between $466 and $483 million. QLDC has a 75.01% share in that and Auckland International Airport (AIAL) has the rest. Current debt is $62.7 million but the company plans to spend unspecified millions on the purchase of Lot 6 and $400 million expanding Wanaka Airport.  All at a time when the future of aviation and the global economic situation are somewhat uncertain.

Until now QAC’s growth and spending have been constrained by location, but with the new Wanaka lease it finds itself without limiting noise and land boundaries and (here’s the thing) still with no constraints on its transactions or borrowings i.e. there remains nothing in its Statement of Intent or its Constitution that allows QLDC to control its spending.

All of this should raise a few questions. Like, how is QAC planning to fund a half billion dollar expansion? What would happen if QAC couldn’t meet debt repayments? What happens if there’s a downturn in the aviation industry and we’re left with a $400 million stranded asset? Could it come down to a choice between liquidation and a share sale? Could QLDC end up with less than 51% of the shares? You get the picture.

But as it turns out we have been so focussed on the noise and ‘over-tourism’ implications of QAC’s expansion plans that we haven’t, and Council hasn’t, considered the risk these plans pose to QLDC’s largest investment and its strategic majority shareholding.

Of course, neither QAC nor AIAL would shed a tear if the Council lost its hold over the company’s strategic direction – because QAC and the communities it serves are no longer on the same page. The Council should keep that in mind because history tells us it’s not beyond a QAC Board to resort to sneaky (if legal) tricks – in the name of doing what’s best for the company.  More on that later.

In hindsight, the Council should have assessed the risk to its investment even before it signed the Wanaka lease agreement, and certainly before considering the new draft SOI. But it didn’t.  Interestingly, when I looked for QLDC’s (s105 LGA) Investment Policy – to establish how the Council has resolved to assess and manage the risks to its investments – I couldn’t find it.  And when I asked the Chair of the Audit and Risk Committee, he told me he hasn’t seen it either.  I asked the CE for a copy last night but have so far had no reply.

So what next?

Councillors are right now (we hope) considering how to amend the draft SOI that sets out, amongst other things, what QAC can and can not do over the next three years. They need to get this right.

First off, I’m going to suggest they should not forget how councillors have been blindsided by QAC in the past. That was back in 2010 when the company had plans for a share sale and strategic alliance with AIAL.  In case you’ve forgotten or weren’t around for that particular drama, QAC didn’t trust councillors with the information about the share sale and sought legal advice about blindsiding them.  It was apparently considered legal.  In late June, QAC presented Council with a new draft SOI for signoff. It included a vague statement about looking to raise capital: “The company will consider the need for and source of capital subscriptions as may be required.”  That seemingly innocuous statement inserted into the SOI was all it took to enable a 24.99% share sale 2 weeks later.  The councillors found out about it just hours before the transaction.  Turns out the Mayor and CE knew about it but were gagged by confidentiality clauses. 

Given the communities’ current opposition, it’s not hard to imagine a similar scenario playing out over the current expansion plans. Sneaky ‘tricks’ with the SOI, confidentiality clauses – all legal but not quite fair play.

Regardless, vague statements in an SOI are clearly risky. This time QLDC needs to make the document crystal clear and without conflicting objectives.  It must state that there will be no work on expansion (including borrowing) until the economic and social assessments are complete and consulted on and council has signed off on a new and detailed SOI. 

Councillors must also reassess the appropriateness of the SOI, QAC’s Constitution, and the Board itself with a view to managing the risk to its investment, protecting its majority shareholding and retaining its ability to shape the future of this district.

And QLDC must add a clause or statement requiring shareholder approval for large transactions.  Auckland Council requires it for transactions over $10 million and so should QLDC. There’s too much at stake here to rely on trust, good intentions and fair play

Vote Niki Gladding for QLDC

For more about why I’m running for QLDC:

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No ordinary extraordinary meeting

It was a case of community 2, Queenstown Airport Corporation (QAC) nil, today in Queenstown’s Council Chambers.  Item 1 was Queenstown Airport Corporation’s Statement of Intent (SOI) – the SOI sets the objectives for the Airport Corporation, 75.01% of which is owned by QLDC.

Council Chambers was bursting at the seams and anticipation was high.  Public forum offered up a string of passionate speeches, a prophetic image, and a goose bump inducing ballad for the finale.  Thank you Craig Smith.

The decision that followed was riveting stuff;  QAC held its ground, the Mayor tried to calm doubts, and the councillors’ comments weren’t promising.  We were glum.  But then Alexa unleashed (at her absolute best), Penny at the last minute proposed a motion to get rid of “all the stuff about growth” and Quentin, in a stroke of genius, requested that each point within the motion be voted on separately.  And then to everyone’s surprise the ‘’Nos” were dropped like dominos. And the crowd went wild.  Almost unbelievably, QLDC’s councillors had made the decision to, once again, not accept QAC’s draft Statement of Intent with its ‘we will grow to meet demand’ objectives.

It was the right decision and it feels like a battlefield victory – in the middle of a war. 

What next?  Both communities have repeatedly and convincingly stated they don’t want more international flights, more noise, more tourists, more pollution.  We recognise that a $400 million airport expansion will mean massive debt that will, at best, lock us into tourism growth and at worst could lose us control of QAC and our future direction.  Successful profitable businesses can operate within growth boundaries – it just depends on how we define success.  Right now, success means meeting social and environmental bottom lines that can’t be achieved with expansion and growth in numbers.

So now the question is will they stop playing hot potato with this SOI – will QLDC have the gumption to take charge and direct the Airport Corporation as it is required to by law?      To comply, the council must draft a resolution to amend the SOI in line with the aspirations of the community, consult the QAC Board, then give notice and require it to comply.  It’s as simple as that – the consultation’s been done and QLDC has the mandate to stop any expansion. 

But there should be another motion carried at the next meeting: that the community be consulted on the terms of reference for the economic and social assessments QLDC has agreed to commission. 

The Mayor’s suggestion that neither the community nor the council should have input on the TORs just gives substance to the argument that these assessments are merely a way to get around community opposition and straight back to growth.  Without a mandate from the community on those TORs, the assessments will be meaningless and the battle to protect this place will continue.