Monday, March 4, 2024

OAG: Palmerston North council had no credible funding plan

The Office of the Auditor-General has issued an adverse audit opinion on Palmerston North City Council’s consultation documents in its report to the House of Representatives today.

“We determined that Palmerston North City Council’s consultation document did not provide an effective basis for public participation in the Council’s decisions about the proposed content of its 2021-31 long-term plan,” the OAG said in a statement.

“This was because, in the auditor’s opinion, the underlying information and assumptions in the consultation document were unreasonable.”

It said the Council had included an upgrade to its wastewater treatment plant from year four of its long-term plan. Concurrently with consultation on the long-term plan, the Council was engaged in public consultation about which environment the water would be returned to after treatment and the anticipated annual cost for each household associated with each option.

“At that time, there was no certainty about the proposed three waters reforms, including whether the Council would be financially responsible for the upgrade. This meant that the Council made the decision, in the interests of transparency, to include the anticipated costs in its long-term plan.”

“However, the underlying information and assumptions on which Palmerston North City Council’s consultation document were based were inconsistent with the Council’s own financial strategy.

“The Council had adopted a financial strategy that capped the Council’s debt at 200% of revenue. With the inclusion of the wastewater treatment plant upgrade, the forecasts underlying the consultation document showed that the Council planned to exceed its own debt cap after year four of the long-term plan (and was forecasting to exceed the debt limits set by the New Zealand Local Government Funding Agency after year five). Further, the Council disclosed in its consultation document that it would be highly unlikely that lenders would be prepared to lend the amounts that were included in the underlying information.”

In the OAG’s view, this meant that Palmerston North City Council did not have a credible plan for funding its activities and planned projects.

“In our view, the Council needed to consider other options, such as reducing levels of service, removing or deferring planned projects, and increasing rates further to keep debt amounts within its own parameters,” it said.

“We determined that the consultation document would not provide an effective basis for public consultation because of the unreasonable assumptions and underlying information and the inconsistencies with the Council’s own financial strategy.”

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