Kaipara council wrong but deal stays

Justice Paul Heath says the former Kaipara District Council breached the Local Government Act in setting up the $57 million Mangawhai Eco Care wastewater plant. He made a ruling in favour of the Mangawhai Residents and Ratepayers Association receiving indemnity costs.

But he says he has no power to undo the deal. 

In 2006 public consultation documents disclosed a likely cost of about $35.6 million but it ballooned to about $57.7 million of mostly borrowed money by the time the project was completed.

An Auditor-General’s report concludes that by late 2007, the council had lost control of the project.

At that time, the council did not know what was being built, what it would cost, how many properties it would service, how it would be funded, and what legal responsibilities each of the parties” involved in the development and construction processes had, Justice Heath says in his judgment.

None of the elected members or executive officers of the time were available to give evidence at the latest hearing. While the latest proceeding was waiting for a court hearing pending the council pursued its promotion of a Local Bill in Parliament to validate the rates that had been levied for the plant. 

During this period when the council promoted the Bill, it was under control of government-appointed commissioners. 

In December 2013 Parliament enacted the Kaipara District Council (Validation of Rates and Other Matters) Act 2013 (the Validation Act). 

The judicial review application had been set down for hearing on February 3, 2014. 

The council contends that the Validation Act removes this court’s ability to declare unlawful any of the rating decisions to which it applies, and the judge agrees. “In those circumstances, my provisional view is that indemnity costs should be awarded to the association, in respect of all steps taken by it up to and including the end of the hearing in February 2014,” Justice Heath says. 

But he was highly critical of councillors and executives in charge at the time.“At an institutional level, this proceeding has exposed a high degree of incompetence among those who were elected to serve on the council, and their executive officers. 

“At a human level, it has caused a great deal of stress, anxiety and financial hardship to many ratepayers who will now be required to pay rates at a significantly higher level than they might reasonably have expected.  They might also be at risk of a significant capital loss, if they were to sell their properties in an endeavour to avoid continuing costs to meet potentially increasingly higher rates.” 

The Auditor-General report says the council did not grasp the complexity of the public/private partnership arrangement it entered into and the additional project management that this approach requires. The report says it appeared the council thought that using a public/private partnership would make delivery of the project easier because it had few internal resources to run a major infrastructure project. “In fact, using a public/private partnership arrangement is complex and requires significant technical skills beyond those required for a traditional design/construct project,” the Auditor-General report concludes.