Councils Holding the Country to Ransom

[speights boy]

Put 2 and 2 together.

No finance companies left, often because the developers didn't pay back the money that was lent to them.

[motivated]

Davo is right on the button. What is more, the councils expect to be paid all of the development contribution fees before title is granted---Meaning only the wealthy / well funded can do subdivisions--the cash tied up before any sales are made is horrendous---so the price of sections need to be well up to cover all the financial risks a land developer takes

[Shalodge]

So to say developers don't pay for offsite stuff is just ludicrous.

Sometimes they do pay up front rather than pass the costs on to be recovered by levies but often they dont. Depends what it is. Sometimes a stormwater upgrade is required and Council may decide that if they are going to upgrade they will make it bigger to cater for future growth or maybe improve levels of service elsewhere. Costs are divided among existing ratepayers getting better service, resident of the new subdivision and future ratepayers who 'inherit' the improvements.

[Shalodge]

Davo is right on the button. What is more, the councils expect to be paid all of the development contribution fees before title is granted---Meaning only the wealthy / well funded can do subdivisions--the cash tied up before any sales are made is horrendous---so the price of sections need to be well up to cover all the financial risks a land developer takes

Which is why developments are often staged and many of the levies only become payable when a building permit is issued. Developers taking financial risks? News to me bud! Nuther day .. nuther company.. Council is left holding the bag every time.

[speights boy]

---Meaning only the wealthy / well funded can do subdivisions--

Finance companies used to be a major funding source for developers.
What role did the actions of developers play in the demise of these companies?
Who suffered the greater loss when the developers were unable to repay their loans?

[Davo36]

Good (but long) article on council debt and the lies they tell: http://www.kiwiblog.co.nz/2013/05/la...ncil_debt.html

[Shalodge]

I had a read of Larry’s article. For a well qualified accountant and Local Government financial’ expert he doesn’t seem to have a good understanding of the basic drivers of Local Government finance and debt. He is very much a theorist.

There really is only one way to understand the drivers and that is to get your hands dirty. I will cover a few of the issues he raises from a different perspective.
Debt
Councils go into debt mainly because of the “intergenerational equity” philosophy which says that future generations should also help pay off an asset that has a life which spans generations. Council debt is also driven by the demands of ratepayers. They want it all and they want it now and want someone else to pay for it. If anyone dare suggest that they should be prudent .. out they go.

Imagine if children could vote for their parents?

What is sustainable debt? Well that depends on a huge range of factors. What is the debt for? Is it an investment? Will it return a cash dividend or a social dividend? Who will repay it. One Council may decide on a prudent level and the next may change it. Everyone would set a different level.

Why is internal borrowing so bad? Councils accumulate cash reserves for many reasons. Legal requirements to fund depreciation, Development contributions collected ahead of a major project, and various other lumpy income streams.. These funds amount to $millions so how should they be invested until they are needed? Given the reason they were collected, no risk is allowed, so the cash is simply held in term deposits. Doesn’t it make more sense to lend it to you self rather than borrowing from the public financial sector? You would not usually save on the interest rate but rather on the administration costs and margins being charged on external borrowing.

All Councils that I am aware of report both internal and external borrowing. It is not a mechanism to hide or distort debt levels as Larry seems to suggest.

Why are the financial reports not in plain Engish? Because the Government tells Councils how they are to report and currently this is in line with IFRS (International Financial Reporting Standards) so that Council financials can seamlessly integrate with Government financial reporting. In other words Government tells Councils to report their finances in way that is only easily understandable by accountants. Given that it is only human nature to want to hide the unpopular stuff any departure from this standard would only likely result in more ‘lies’ not less when it comes to TLA finances.

Councils are the ‘fall guys’ for Government. They have to collect an unpopular and arguably unjust tax to pay for stuff that everyone must have but no one wants. They are not masters of their own destiny but complete servants of the Government who will meddle whenever they want too. Government has debt too but somehow that’s different?

Guys like Larry are everywhere. He is an ‘expert’ on local government finance and if you look around you will find ‘experts’ on roads, water, Maori issues, representation, democracy and heaps of other stuff. Why is it that these guys will not actually stand for Council but would rather stand in line and get their consultants snouts as deep in the trough as they can while wailing about what everyone else is doing wrong. I have seen the odd one appear on Councils but they usually last as long as a chocolate fish in my granddaughter’s lunchbox.

Russell ORR

[eri]

thanks Russell

[Perry]

Love the lunch box quote?
May I borrow it, please?

[Shalodge]

Feel free.. Samantha doesn't mind!

[eri]

http://www.nzherald.co.nz/residential-property/news/article.cfm?c_id=76&objectid=10881912

"What was the cost of this indefensible council position to the ratepayers?" Hardacre asked.

"Isn't this an example of the council planners knowing better that anyone else and trying to force their own agenda on landowners and ratepayers where they are plainly wrong and refuse to listen to the fair and reasonable planning arguments, planning facts and law?"
The judge said the court was disturbed to hear how the council was wrongly applying rules over demolition. The council had also wrongly classified properties, the judge said.

[Shalodge]

Heritage is a thorny and emotive issue. Many people love the history and mystic of old houses especially when they don't have to bear the costs, and there are a great many of them (and large costs as well!)

Don't be too hard on the planners ... elected Councillors could easily have directed that they take another position but it was easier and more politically expedient to sit on the fence I suspect. Someone elected these Councillors and many would have been elected on a pro heritage ticket especially in Auckland so where does the buck stop?

[eri]

i've got no problem with people loving and buying old houses, cars, motorcycles etc

love them myself

but it seems beyond stupid to tell people

they must fix old things to modern standards

at horrendous costs

and then complain that they are over-priced and under-quality

we wouldn't force taxi drivers or bus companies to continually repair worn out old bangers from the 50's because we like their look

and then complain that they are unsafe and over-priced

but that's exactly what is happening with housing!

how can council complain talk; lowering housing costs, a rental warrant of fitness and preserving heritage all at the same time?

any fool can see that would be extremely lucky if you could pick 2 of the 3

3 of 3 is impossible!

[Davo36]

Well, the title of this thread is "Councils Holding the Country to Ransom". And so today, we have this:

New legislation will give Government power to over-rule local authorities on the development of land and housing

Posted in Property Updated May 16, 2013 - 03:07pm, David Hargreaves
I




The Government's playing tough with local councils on housing, saying that the special legislation it is implementing will give it the power to over-ride councils and go ahead itself to issue consents for housing developments.
In the wake of its announcement last Friday of an accord with the Auckland council to allow for a targeted extra 39,000 houses to be built in the Auckland area, the Government said today it was extending the accord concept to other areas around the country.
The special legislation, which will enable councils and the Government to streamline new housing developments in areas where housing is least affordable, will be introduced to Parliament today.

Rest of Article

So there we have it. The government has finally seen the light and decided to take some meaningful action towards stopping the rort that is council control of development.

IMHO they need to go much further, repeal the Local Government Act 2002 which would remove the right of councils to charge development levies and so on. But this is a very good move.

[Shalodge]

Seems a bit of an overkill to repeal the LGA 2002 to stop DC's? Why not just repeal the DC provisions? I have no problem with that myself.. But I suspect the ratepayers might not like the rate increases.