Video: Napier City Council proposes setting up a trade organisation to manage city assets
The Napier City Council is proposing setting up a Council Controlled Trade Organisation (CCTO) to manage the city’s assets in a bid to find ways of reducing debt.
Assets falling under a proposed CCTO could include Ocean Spa on Marine Parade.
This is part of the proposed Three Year Plan that was unveiled at a Council meeting last week, which saw a draft rates rise of 23.7 percent – the largest in the city history – sent out for consultation.
The Council is under pressure with mounting debt arising from an underinvestment in the city’s infrastructure. The Council’s external debt is expected to increase from the $10 million now to $500m by 2034.
In an interview with Hawke’s Bay App last Friday, the Mayor of Napier, Kirsten Wise, was at pains to stress that the proposed CCTO would not own the city’s assets, but would just manage them.
“There are a few councils around the country that already have a CCTO set up, and essentially it's an entity whereby we could transfer the management of, not the ownership, but the management of some of our assets so that they could manage those with more of a commercial lens.”
“So for example, we could transfer something like Ocean Spa, which is a top-end aquatic facility into that entity for them to, like I said, look at it with a commercial perspective and it takes away the politics, which of course are an inevitable part of the decision-making of a council.”
Wise said another example of what could be transferred into a CCTO was the remainder of the Council’s land holdings in Parklands.
“They could sit within the CCTO and there could be more of a purist property developer lens put across that.”
“And ultimately the end goal is that you maximise the revenue that you are generating out of these assets and that revenue is paid back via a dividend, for want of a better description, to the council and ultimately offsets rates. So it's about maximising our assets for the benefit of the community.”
A number of local Councils in New Zealand, most notably the Auckland City Council, have set up CCTOs. There has been criticisims of Council Controlled Organisations and CCTOs over the years because of the risk that they move assets out of the control of democratically elected councils.
However, Wise was adamant that this would not be the case.
“I definitely think we would still retain the open, transparent nature that we have an obligation and a legislative requirement to meet. One example at the moment is that the Hawke's Bay Airport is a council controlled organisation.”
“We are one of the major shareholders and there is requirements in place to ensure that there's transparency around the Hawke's Bay Airport via us. We enter into a statement of intent arrangement every year, and that's a publicly available document to outline what that organisation's plans and intentions are for the year, which we have to sign off on.”
“And all of their reporting comes through to us and then is released publicly. So any CCTO entity would have exactly those same requirements that are in place for us currently with the Hawke's Bay Airport or any other CCO.”
Wise also did not think that crating a CCTO would add to the bureaucracy of the Council and thus raise costs.
“We've crunched the numbers and we are confident that the end result will definitely be better for us. And there are a couple councils around the country that have been doing this for a significant period of time and very successfully.”
“And so their CCTO each year pay millions and millions of dollars back to the council. So we know that it can work if it's set up properly. And once we get the feedback from our community through this three year plan as to whether we should be progressing with this, we're definitely committed to ensuring that we set it up to succeed, if we do proceed.”
Asked by Hawke’s Bay App what ratepayers can expect with rate increases in years to come, Wise was confident that they would not be as large as this year’s proposed increase.
“So yes, we have forecast out 10 years based on obviously our capital programme and ongoing operating costs. And from memory, year two and three at the moment are both sitting around that nine, 10%.”
“I appreciate that is still high, particularly in comparison to if you looked at our track record over the last 20 years. But again, it is recognising that what we've been rating for the last 20 years has simply been inadequate and we are in catch up mode.”
Wise is also aware that her and her Councillors’ future election prospects rest on whether they get rates increase right.
“I'm confident that we are doing the right thing and at the end of the day, if that means that I'm not re-elected, well, so be it. Because the reality is we can't continue to do what we've been doing for such a long time because it won't benefit anybody.”
“I'm incredibly proud of my whole council because we are all putting our neck on the line. As you say, rates rises are the things that get you re-elected or not re-elected, and we all know that, but we're prepared to go ahead with this proposal anyway because as I said, we know it's the right thing to do.”
Watch the accompanying video to see the interview with Napier Mayor Kirsten Wise.
