Cool Capital, Cold Comfort

Does the elected council in Wellington even know what’s happening to its Council work force and services?
by Gordon Campbell

Chronically, Wellington runs the risk of being overlooked by a central government fixated with the Christchurch rebuild, and by the economic and political powerhouse that is Auckland. The Wellington region’s strong centre-left showing at the last election also risks making the capital look like something of a lost cause to the current inhabitants of the Beehive. For these and other reasons, the capital needs a political leader able to represent its interests at national level – and able to make the most of its existing resources, both around the Council table and out in the community. Len Brown makes a good fist of it on both levels in Auckland. By contrast, Wellington functions with a relatively inexperienced mayor in Celia Wade-Brown and a Council chief executive in Garry Poole who has barely one month left in the job.

Wellington is also working within a largely self-imposed economic straitjacket. Seen in the light of the strictures of its “Towards 2040” planning document, the Basin flyover and the debate about light rail seem like mere incidentals. In a 19 February memo to Council staff on staffing issues and the current rounds of work sector consultations, Poole outlined the situation as he sees it :

Firstly, we needed to reorganise our structure so that it is aligned to our vision: Wellington Towards 2040: Smart Capital. This document sets a course for our city over the next 30 years….To achieve all of the outcomes stated in our Long-term Plan, we need to find $240 million of savings over the next 10 years. Increasing rates or borrowing to find these savings are not options.

Many Wellington citizens could dispute that prognosis. Presumably, they elected a Green –leaning mayor and several centre left councillors because they wanted an alternative to service rollbacks, job cuts, increases in fees and charges and outsourcing. Yet this route appears to be the one being taken, regardless – and there is some evidence that the centre-left leadership Council have been largely unaware of the extent of change that has been occurring on their watch. If they have been unaware, there has been little public sign of them voicing their concern, or of them rallying effectively against the prevailing trend.

Take the impact of that $240 million savings target on the city’s libraries as one example. On 14 June last year in a document called “Libraries Business Review Decision deputy chief librarian Jane Hill set out proposals for a new management structure for libraries. In appendix 2, she says :

The Library has to make operational savings of $852,000 in 2012/13. It is not 100% the right structure but I believe it is the best one for the Library. It positions us for future decisions regarding the small branch libraries; provides more flexibility across sites; gives CICM staff more work opportunities; Brooklyn and Wadestown are on bus routes to Central…

To many Wellingtonians, even those on Council, it would come as news that library services “have” to be cut by $852,000 this financial year. The reference to Brooklyn and Wadestown libraries being on ‘bus routes to Central’ and their inclusion – regardless of geography – in the new mooted “central cluster” of library management can only be taken as signs that those branches are headed for closure, or downgrading at best. Unfortunately, the grim prospects for the city’s libraries are also symptomatic of a wider problem.

Early in March, Kevin Lavery, 51, is due to arrive from the United Kingdom to take up his post as the new chief executive of Wellington City Council. Initially, his appointment raised fears in some quarters about his possible privatisation agenda.

As CEO of Cornwall Council in the United Kingdom, Lavery’s track record certainly had been one of enthusiasm for (a) outsourcing Council contracts, (b) privatising Council services via joint ventures with the likes of British Telecom and (c) presiding over the amalgamation of six regional councils into one entity. This agenda proved controversial and was eventually met with staunch local opposition and divisions on the Cornwall Council. On the same day that Lavery heard of the defeat of his joint venture plans in Cornwall, he was headhunted for the chief executive job in Wellington.

Lavery has argued that many of his actions in Cornwall had been driven by massive cutbacks in central government funding. This would be more convincing if Lavery hadn’t written a book in 1999 called Smart Contracting For Local Government Services that waxed enthusiastic about the gains that local government can allegedly make from outsourcing. In Wellington however, this particular horse may have already bolted, without any assistance from him.

By the time Lavery fully takes over from current CEO Garry Poole in late March/early April, Wellington will have gone further down the track of outsourcing and its related mechanisms than is commonly realized. Such is their strategic disarray, the left-leaning faction on Council appears to have become only belatedly aware of this virtual fait accompli. During a wide-ranging interview with Labour councillor Paul Eagle, Werewolf explored some of the reasons for this largely ineffectual response.

From the outset, Eagle explains, management has held the initiative. “There’s been a culture ever since I’ve been here, ” he begins, “that anything to do with Council operations has really sat with management.” Councillors were thwarted ‘constantly’ by the distinction between governance vs operational matters. “But in plain English, when things get contracted out, when services get cut, councillors get given very little time, or information about the impacts…I really think what has been missing is the fundamental discussion around what is a public service, and what is commercial. ”

Along the way, has there been a failure by the Council leadership to make clear what its expectations were, and what the acceptable commercial parameters would be? Eagle thinks so. The ideology of whether you deliver the services in house…for some councilors that debate simply hasn’t happened, he says. “It has not been debated in changing times.”

In his view, the city management was entrenched in certain ways of doing things. So…was there a general failure by the incoming Council – or at least some elements on it – to provide direction to officials as to what it would be expecting of them ? Eagle thinks that has been the case. “ I would say there was a failure on refreshing the expectation of a new Council – with a different Mayor. The mayor has a different political ideology than what I would deem to be [held in] the previous decade plus. My expectation was that some of these things should have been refreshed.”

Whose responsibility was that? “I couldn’t pinpoint a particular person.” Was it due to the incoming Council failing to appreciate that business as usual would otherwise continue? “I think on reflection, definitely. If I knew what I know now I would definitely be saying we’ve got a centre left mayor – supposedly – and that ideology and culture needed to start being reflected through. Because I think there was an expectation that there had been a change in the political dynamic. Therefore, things like contracting out, exiting services, setting up more unelected governance structures. The expectation [was]: this is a no no.”

Eagle continues : “Add that to the economic climate we’re in, of needing to change. Because the ‘business as usual’ that we’ve seen in the last 10 to 15 years… the conditions are no longer like that. There was a high level of expectation from people on the centre-left saying : We would not have expected this.” But the necessary action didn’t happen? “It didn’t happen.” On this matter of perception, Werewolf asked Eagle, the Mayor and some other councillors have publicly supported the Living Wage campaign – but if the left-leaning councillors can’t even protect job security for their own Council staff, that commitment can’t mean very much, can it ? “True,” Eagle replies.

In order to try and quantify the extent of job losses via outsourcing and contracting out in Council-related services in the past two years, Werewolf sought the relevant numbers from both trade union sources and – to cross check – and within Council, from Eagle himself. The following numbers are conservative estimates, and readers should be mindful that further consultations are taking place right now in sectors where jobs are on the line. The proposed new structure for the Building Compliance and Consents unit at Wellington City Council for instance, will be signed off by the by the WCC Executive Leadership Team (ie, Garry Poole and co) on March 4th, at which point the scale of the loss in full time equivalent positions (FTEs) and redundancies should become apparent.

For now, the extent and pattern of job losses through outsourcing looks rarher like this. As indicated these figures should be treated with caution, as merely a best attempt. At Citi Operations, trade union sources identified the following as being lost due to contracting out: Recycling/Rubbish – 24 jobs ; Citi Operations Workshop – 4 ; Drainage -37 ; Drainage CCTV – 6 ; Landfill – 8. This amounts to a total of 79 over the last two years.

In addition, the following numbers arose from restructuring within WCC since May of 2012. Finance – 3 ; Libraries – 12.5* ; Environmental health – 4 ; Building Consents – 2 (so far) ; Urban development – 3 Property – 1. For a total of 20.5. At City Communities, Werewolf was advised, up to 20 jobs are still in consultation and five more are at a similar point within Project Management. It should be noted * that while was only one redundancy in the initial library re-structure last year, a total of 12.5 FTE’s were lost, mostly though people having their hours cut. In February 2013, a further round of administrative change began within libraries, with additional job security implications. From the above, we get a grand total of either 104.5 – or 129.5 if all the potential losses cited come to fruition. In addition, the full extent of the changes in the Building Compliance and Consents unit has yet to be assessed with any accuracy.

As mentioned, a key driver of these changes is to meet the “Towards 2040” targets. That rationale appears again and again in the wave of consultation documents on various Council staff restructurings over the past eight months. As Paul Eagle has indicated, there seems to be a clash of philosophies between those on Council opposed on principle to outsourcing (and opposed to the Council exiting the direct delivery of services) and those within Council management who seem to see this route as the path of economic virtue. The economic philosophy that appears to be in vogue among Council management was well articulated by Hadyn Read, the Council Manager of Strategic Asset Planning in a December 10 letter to Drainage CCTV staff advising them of a restructuring, and of the motivations behind it. It is worth reading between the lines of the management-speak to glimpse the wider outcome being envisaged :

…..As evidenced in recent changes to drainage maintenance and with upcoming contracting out of the landfill and the roading corridor, City Networks continues to evolve from a physical works unit into a service and contract management entity. This is consistent with the Council’s Infrastructure philosophy of managing service delivery rather than directly providing services [ Werewolf’s emphasis] where the scale of another entity, can provide employee growth and development and invest in assets that share common uses….

The Council is continually changing to meet the needs of the community and as a result, has successfully changed to reflect the environment it operates in. This is to ensure that it can undertake its business as effectively and efficiently as possible now and in the future. Council is committed to pursuing the above and this forms the rationale for this proposal.

So….officialdom sees the evolution of the Council from a deliverer of services to the manager of delivery by others, as being a desirable goal. But is it, in the long run? There are valid concerns whenever either central or local government voluntarily dispense with their in-house expertise and their ability to deliver expert services – in the belief that private sector delivery will be cheaper and more efficient. There is a political ideology that promotes such a point of view, but it isn’t one that has ever found much support at the ballot box in national elections, or in local body polls in Wellington.

In Eagle’s opinion, false economies can be readily assumed. Routinely with central and local government contracts, he agrees, private sector bidders will bid low in order to win the tender – and then once the in-house capacity is destroyed, they are then free to jack up the prices. Are we at risk of that outcome in Wellington?

“Absolutely,” Eagle says. “What will happen here is they will hold the intelligence, then they will start to say to Council that if you want this service its going to cost X. The expertise then lies in the private sector, and not with the neutral player, the right player, which is Council. And we end up being dictated to over time.” In the infrastructure sector and with refuse and recycling, duopolies will also readily emerge he says, “There are not a lot of players in the market. Transpacific International own just about everyone, and Enviroway….own everyone else, nationally.” In a tiny country, not many competitive players exist.

Does he accept the idea of Council becoming more and more just the middle manager rather than the actual deliverer of services? “Not really. There is an expectation from the public and the ratepayers that when things go wrong, I voted for you – our elected member – and that you will intervene. What they don’t [accept] is unelected governance structures [ie, CCOs or Council controlled organisations] starting to deliver services. I’ve taken groups through it and said that our only influence is a statement of intent, and they think that’s absurd. They think – how has this gone so horribly wrong? So you’re telling me 47 cents in my rate dollar goes to unelected governance structures? I said : ‘Yes. And my only power of intervention is through a statement of intent.” And people don’t get it. But they simply don’t know, either.”

Of course, with some of the job losses mentioned above, some of the workers concerned may be rehired by the private contractor. Again though, this situation goes tio expose the faklse economies at work. At least some of those workers will have taken redundancy payouts before being rehired – thereby saddling the ratepayer with the short term costs of the restructuring, (eg, the cost of ‘consultations’ the hire of ‘change consultants’ the redundancy payouts, the loss of expertise) and the long term costs in higher fees and charges as the private contractor extracts profits from its captive pool of citizens/customers.

As yet, there are no available official estimates of what the last two years of restructurings have cost Wellington ratepayers. In the name of meeting the Council’s Towards 2040 targets, potential cost savings of $120 million have been identified however. The operations of the CCOs have also been reviewed, Eagle says. For him. the key finding in the review was that the corporate overheads – in some of the feedback from staff – appeared to be massive. (So much for contracting out producing a lean and mean corporate structure.) At least in the transition phase, the cost of compliance and the loss of economies of scale appear to be producing more in the way of corporate overheads, not less. “Because some units became CCOs, they no longer pay a corporate overhead – and because CitiOps has now been contracted out, there’s a high corporate overhead and all of these units now have bigger corporate overheads than what they had.” His suspicion is that there will be less in the way of services on the frontline and more on the inside in order to keep the machine running – and thus it could well “cost proportionally more” to deliver less, in future.

In all probability, the task of keeping officialdom in check would stretch even the most talented, and united Council. Councillors get elected, come in, get given a cellphone and a desk, and are somehow expected to cope with a well-resourced city management team that has been ticking over nicely for over a decade. The way Eagle describes it, the situation is like a local government version of Yes Minister. With some mixed feelings, the Council now awaits the arrival of its new chief executive, whose appointment was reportedly voted in by a 9 to 6 margin.

Oddly enough, Kevin Lavery seems to have won the support of the centre left, despite his past enthusiasms for privatization. Did most of the centre-left councillors vote for a change of chief executive? “Yes,” Eagle says. “The only one who didn’t would be Leonie Gill…I’m not dobbing in a fellow Labour councillor, but this was something we had a very different opinion on..” The task ahead will require a centre-left grouping on Council that has so far failed to rein in Garry Poole and his team, to somehow find common ground with the highly experienced political operator who will now replace him.

Meanwhile, the process marches on. On 25 February this [necessarily anonymous] email came my way. It eloquently describes the current situation :

I have been with the council for 21 years myself and have seen our city grow into a rather unique and likeable place to be. I have read comments left by Travellers, Tourists, Backpackers even Wellingtonians to say the character Wellington has gained is irreplacable. As you are aware many departments of the WCC have been sold off to Contractors, this we are told is related to cost saving. I and many others alike think otherwise.

I was at a council meeting last year when Gary Poole told employees, change was inevitable. I wonder if he would have made the same rash decisions if he knew his position would be compromised months later. I also attended a meeting addressed by Celia Wade Brown trying to justify decisions made by the council. Which ever decisions are made by the CEO or board of directors, they directly reflect the councillors elected to sanction these decisions whether they knew about them or not.

We are a team of 27 council employees plus supervisors, we still operate under the banner of the City Council but are told sadly that on July 1st a new contractor will commence operations. We are as you would say the only recognisable entity of Wellington city that ratepayers could relate to. When we are sold the light will go out on a city tended to by its own caring residents.