The Government is set to appoint a Crown Observer to Wellington City Council in weeks, Local Government Minister Simeon Brown has announced this afternoon.
Brown has written to Wellington City Council with a draft terms of reference and has given the council 10 working days to respond as required under the law.
The move follows months of wrangling over the council’s long-term plan. A planned sale of the council’s ownership stake in Wellington Airport, pushed by mayor Tory Whanau, was scuttled at the last minute following a vote by councillors earlier this month.
Brown announced he would implement a Crown Observer this afternoon, citing official advice from the Department of Internal Affairs in making the decision.
He said: “Following advice from officials I have identified there is a significant problem at Wellington City Council that warrants the Government appointing a Crown Observer.”
“Advice provided to me by the Department of Internal Affairs highlights that the council is not utilising its balance sheet appropriately in order to maintain critical infrastructure like water, and that is failing to manage its insurance risk appropriately.
Tory Whanau today called councillors in for an urgent meeting hoping to stave off possible Government intervention. (Source: 1News)
“These risks have been increased due to its recent decision to amend the long term plan.”
Whanau said she would “work constructively with whoever is appointed” as observer.
The mayor said: “We must use this as an opportunity to put past disagreements behind us and build a coherent plan that delivers for the people of Wellington.
“The decision not to sell our minority shares in the airport to resolve our growing insurance risk has meant we have some tough decisions to make in the coming weeks and months.”
Brown added: “The department advises me that while it is not uncommon for councils to amend their long term plans, it is uncommon for a council to reverse such a critical financial decision that requires such an amendment only four months into the cycle.”
A Crown Observer assists a council to address problems, monitors the council’s progress and makes recommendations to the Government about possible further action. They can also provide some guidance to councillors and management.
The observer does not have a direct decision-making role.
According to Brown, Internal Affairs found the council “has demonstrated an inability to understand the mechanisms it has available to manage financial pressures it is facing”.
“This includes the council choosing in its long term plan to use rates revenue to pay for its water infrastructure up-front, rather than appropriately using debt financing.”
The Local Government Minister suggesting financing mechanisms in the Government’s water reforms, known as Local Water Done Well, “enables further debt headroom for Wellington City Council to meet its under-insurance issues”.
“The advice from Internal Affairs highlights that the 2024-34 long-term plan shows the council’s net borrowings for water services increase by just $66 million to fund this investment — 6% of the total — with the remaining $1.1 billion of capital investment proposed to be funded by rates — 94%.
“This is an inefficient and expensive way to fund infrastructure investment. The council is front-loading costs on current ratepayers rather than utilising debt financing to spread the cost over current and future users of the assets.
It comes after the sale of airport shares was voted down, meaning the city’s Long-term Plan will need to be changed. (Source: 1News)
“The Department of Internal Affairs estimates that the Council’s financing approach to water services as set out in the 2024-34 long term plan would overcharge Wellington City residents by more than $700 million over ten years.
“Recent council meetings have also seen councillors walk out, refusing to participate in votes, and confusion regarding decisions, amendments, and voting. Councillors have also made repeated public criticism of one another and council staff.
“This environment is not conducive to the council effectively managing the long-term plan amendment and adoption process. Not resolving these challenges would likely have adverse consequences for Wellington residents and ratepayers.
“The Department of Internal Affairs is of the view that the appointment of a Crown Observer is necessary to better enable Wellington City Council to address the problem and allow me to monitor their progress in addressing it. I agree with their assessment.
“The Crown Observer would be appointed to assist the Council to ensure that it secures a financially sustainable Long Term Plan that prioritises the capital programme.”
Brown continued: “The Government is clear that by proposing a Crown Observer, the Government is not taking responsibility for any of the decisions made by the council.
“The council and mayor are democratically elected and are responsible for the decisions made by the council, and will remain accountable to their constituents.
“By providing a Crown Observer to assist the Council on matters of governance, financial strategy and planning, the Government will be working to ensure that Wellington City Council ratepayers can have increased confidence in their Council and that the Long Term Plan decisions are finalised in accordance with the Local Government Act.”
