National has never forgiven Wellington – or its public servants – for voting for Labour and the Greens. (Red-blooded Kiwis work in the private sector.) No surprise then to find a right wing central government being willing to kick the Capital when it’s down. (See “Wellington is dying and we don’t know how to turn it around” – John Key, 2013. )
In particular, Local Government Minister Simeon Brown’s decision to install an “observer” at the council table in Wellington has been triggered by a sin against the privatisation of public assets. Namely, the council’s refusal to sell the public shares in Wellington airport to private investors.
No doubt, retaining those shares has made it necessary to speedily revise the city’s ten year Long Term Plan. Unfortunately for the democratic process, the council hasn’t been left alone to devise the new mix of spending cuts, rates increases, and further borrowing options. Instead, Brown’s hair-trigger response occurred before councillors had even received reliable estimates of the size of the shortfall, let alone what options remain to deal with it.
For their part, voters have been denied their right to assess for themselves the viability of Council’s Plan B, free of government meddling, and then pass judgement on the council unhindered at next year’s local body elections.
Reportedly, the still-to-be-appointed “observer” (name, salary, qualifications, terms of reference as yet unknown) will be able only to “advise” council and not direct it. However, in the Corleone family sense, it would be a real shame if something bad happened to a nice little city like Wellington, should the council choose to reject that advice.
Not only has Simeon Brown jumped the gun, but his rationales for the intervention – council disagreements, big rates increases, apparent inability to fund water infrastructure – are hardly unique to Wellington. If the rationale for intervention is weak, the timing is bizarre. Brown and his Cabinet colleagues have yet to reveal the essential details of their plan for water infrastructure, and especially for the funding splits between central and local government – let alone the passing of these proposals into law for councils to plan accordingly. It makes you wonder whether Brown knows what is happening inside his own portfolio.
All we do know is that the government intends that its new water entities – which will operate at a distance from councils – will be operational by 2026. All the signs are that the cost of water to households is about to sky rocket, thanks to decades of neglect by central and local government alike.
Details, Shmetails
Under the existing Long Term Plan passed mid year, Wellington council is already putting $1.8 billion into water infrastructure. That phased investment will plainly not be sufficient, especially in the short term. As mentioned, Brown has yet to reveal the crucial details around what central government has in mind, in the wake of it scrapping the Three Waters reforms. In the meantime, Brown’s comments this week – based on DIA advice –chide the council for not using debt financing tools, even though these are not yet available to it.
Yesterday on RNZ, Lower Hutt mayor Campbell Barry made that point in response: “We have been waiting for the government to give us enabling legislation, and going through a process which they have put on us, to be able to look at those options for our respective councils…” Point being, the existing rules around long term planning, balance sheets and “debt headroom” are restrictive. This has meant that Simeon Brown is blaming Wellington council for not doing what it could not – legally – have done. As Barry concluded:
“What the government is saying [Wellington] should have done, they couldn’t have..”
Again, it makes you wonder if Brown has a proper grip on his portfolio.
Sealing the debt ceilings
Presumably, the new rules will include changes to the local government debt- to-revenue ceilings. According to Brown, Wellington council was wrong to frontload the expense of water infrastructural renewal onto rates, and should have borrowed more. Really? This is rich, coming from a government that’s utterly phobic to borrowing, in every other area of social need and investment.
Moreover, Wellington is already operating with a high debt-to-revenue ratio – 286% by some counts. Taking on still more debt would almost surely see Standard & Poors further downgrade Wellington’s credit rating.
Reportedly, S&P’s credit downgrade in September did not alter the city’s borrowing margins, and thus did not increase Wellington’s cost of borrowing. However, taking Brown’s advice would almost certainly trigger another S&P downgrade, and this would cause the council’s cost of borrowing to rise sharply, just as it tries to arrange – in tandem with central government – the necessary extra funds for water infrastructural renewal.
Meaning: even if Wellington council could take on more debt, that extra debt burden would be somewhat self-defeating. The conspiracy theorists might wonder if this outcome is intentional on Brown’s part – to urge the council to increase debt and incur another credit downgrade, which could then be used to justify an even more extreme form of state intervention into Wellington’s affairs.
At the end of the day, there seems to be only one outcome acceptable to Brown, Finance Minister Nicola Willis and PM Christopher Luxon: namely, the sale of those airport shares to private investors. For now, the coalition government is doing a great job of bad-mouthing Wellington, and of talking down the market price for those airport shares.
Cause and effect
Every narrative needs a villain, and – to her critics – all of Wellington’s current problems can be sheeted home to mayor Tory Whanau, and to the current council. This POV requires a degree of selective amnesia. Obviously, investment in Wellington’s ageing water infrastructure has been kicked down the road for decades by Whanau’s predecessors.
A squabbling, conflict-ridden council? Again, that’s not unique to Wellington, or in its recent history. Surely, everyone can recall the fractious mayoral reigns of Andy Foster, Julian Lester, Celia Wade-Brown, Kerry Preendergast and Mark Blumsky – a guy whose personal foibles never managed to attract quite the same levels of vitriol as what is being directed at the current mayor.
For better and worse, local government happens to reflect the same democratic divisions as the wider society. By nature the council is, and should be, a contentious space. There are countries that are run autocratically just like a business, but no one in their right mind would ever want to live there, even if the trains did run on time more often.
No Mea Culpas
The current coalition has been unwilling to admit its own significant contributions to the Capital’s problems. According to Willis, the city is a “shambles” and Winston Peters says Wellington has been “destroyed.” No mea culpas though from either of them. Yet the dire state of the city’s retail sector has been aggravated by the culling of at least 2,000 well paid jobs from the public service (The 6,841 figure of job losses oft quoted, includes positions not filled.) Spending has also been short-circuited by the anxiety visited on 70,000 more public servants whose jobs have been put in jeopardy.
Simultaneously, what could any Wellington mayor have done to counter the contractionary effects on household spending and retail turnover, as pursued by a Reserve Bank that had deliberately set out to create a recession – in order to counter the inflationary effects of the Bank’s own prior, pandemic-related bout of quantitative easing?
I’m not saying Whanau should be exempt from criticism for her administration’s spending priorities. Yet nothing Whanau has done on her watch, I would argue, has been comparable to the mega-waste of ratepayer funds involved in building the Convention Centre, even though the original business case for it never stacked up, and the Convention Centre is currently failing to meet its own commercial targets.
We can agree to disagree about Whanau’s management of the city’s affairs. Wellingtonians are well able to sort such matters out among themselves, eventually at the ballot box. Instead, we are having to contend with a central government using the flimsiest of excuses to strong-arm its way into the city’s debate over its airport shares, one year out from the local body elections.
Footnote One: Opinions differ as to whether the foreseeable annual returns from those airport shares outweigh the one-off gain from selling them, at current market valuations. The majority of the elected council rejected the sales proposal. Let’s move on.
Footnote Two: Like New Zealand as a whole, Wellington has an unhappy history when it comes to selling public assets. The city’s electricity company used to be council-owned. So was its rubbish collection system. Both these essential services are now owned and run for private profit by the Chinese billionaire Li Ka-Shing. If that name sounds like a cash register, so be it: Bloomberg News lists Li as the 61st wealthiest person in the world.
But here’s the thing. Of late, the GCSB has wittered on about the alleged security risks posed by sister city relationships, most of which involve China. Yet at the same time, the GCSB and Overseas Investment Office are ignoring the elephant in the room. We talk a lot about the juggling act involved in fostering our trade with China, while pursuing closer defence ties with the US and Australia. Both of those defence and security allies seem to regard war with China as inevitable.
On that point, New Zealand is widely expected to join the second pillar of the AUKUS military pact. Yet if push ever came to shove i.e. if AUKUS was ever put to the test, this country’s electricity supply to central government, to the banking system, to the HQ of our armed forces and to every household in our capital city would all be in the hands of China’s richest man. Guess which side he would take.
Unless and until we ask Li Ka-Shing to divest, this chronic vulnerability is a good reason for us not joining the AUKUS club. Because if that pact was ever activated, Mr Li could simply turn off the lights, and stop collecting the rubbish. Trade is not the only dimension of our dependency on China. AUKUS advocates need to tell us how they aim to protect Wellington from this energy vulnerability, inflicted on us by the market gods.
Strange gods
As one British critic said recently, it would be scary to be the object of Dana Margolin’s affections. The charismatic singer, painter, songwriter and lead guitarist is the dominating presence in the band Porridge Radio. So far, Margolin’s avid intensity has kept her pigeonholed as a cult favourite, rather than the megastar she would have been in an earlier era. That said, the videos for early Porridge Radio tracks like “Sweet” and “Lilac” are once seen, not easily forgotten.
Here’s the most overtly optimistic track on the band’s new album. The repetitions in Margolin’s songs are less an attempt to hammer the listener into submission and more like a mission statement of howling defiance, and integrity under fire:
This new album comes in the wake of a long 18 month touring stint through 2022 that left her burned out, and reacting to a devastating relationship breakup. Several of the new songs deal with that heartbreak, including this track…. which is built around a killer concept: “I’m the god of everything else/You’re the god of losing me…”
For old times sake, here’s Margolin’s breakthrough moment from 2020: