Local Government likes to descibe itself as being the level of government closest to the people.  It's a fairly sensible argument given the type of services local government provides and the smaller areas its elected members represent. 

Typically this means people's experiences with their local government representatives are personal.  They might volunteer with them at the local football club, their kids go to the same school or even just see them at the supermarket.

The problem with this is that it is where scrutiny of elected members typically ends.  Residents might know a lot of personal information about the person they vote for, but have absolutely no idea what they vote for or say at Council meetings.

This piece is mostly about the Kingborough budget, but I want to try and give a sense of the sort of debates that actually happen at Council meetings with almost no public scruitiny.  On this occasion, there were only two members of the public present and no media coverage of the debate itself.  Kingborough meeting audio recordings have low listenership and few people know when the meetings are or what is on the agenda.  

Obviously, I'm biased in my assessment, but I've linked to the source material, so you're welcome to make up your own mind.

 

Worst Kingborough Council meeting I have attended

This year’s Kingborough Council’s Special Budget Meeting was by far the worst meeting of Council I’ve attended in my two and half years here.

It was marred by bad decisions, misinformation, inconsistent resolutions and poor governance in the weeks following it.  

Some relevant links for the below piece are:

 

Bad Decisions

Kingborough Council’s budget deliberations are not just a one meeting event.  Councillors discuss what should be in the budget over a number of months before the meeting.  During those budget discussions, Council staff provide professional advice about what activities Council should undertake and how much money (eg rate revenue) is needed to pay for them.

In part this is to ensure the Budget recommended to Councillors at the public meeting is actually passed.  There is not much point in staff proposing a budget if it does not have support from the elected members.

So you can safely assume that when an 8.8% rate rise is proposed, most Councillors have expressed support for it during budget discussions. I’ll let our Deputy Mayor, Paula Wreidt’s summary of this at the budget meeting speak for itself:

“This is an entirely different situation (considering a 4% rate rise) than we saw when we discussed this matter at the budget workshop in March, because at that time it seemed like the majority were in favour of an 8.8% increase and I was one of the few who was speaking against it.”

So after just the slightest of public pressure during budget day after a blog I wrote and a radio interview, they backflipped and the 8.8% rate rise didn't happen.

So you might be thinking, ‘good news, they back flipped, no 8.8% rate increase’.  In part, I agree with you.

But I’d argue that what Councillors did was actually worse than accepting an 8.8% rate rise.

Councillors accepted all the spending in the budget, but did not accept the rate rise that was required to pay for it.  Council now plans to deliver yet another large underlying deficit to go with the seven consecutive underlying deficits before them.

(It should also be noted that Council didn’t actually record underlying results before 2010, so it’s possible that under the same accounting measure this has been going on for significantly longer.)

Underlying Deficit

Note 2016-17 and 2017-18 are estimates

These results are unsustainable.  Council is going to have to continue large rate increases above CPI or cut costs.  The long term financial plan indicates Council will go for its 12th consecutive rate rise of 4% or higher next year to try and finally reach an underlying surplus, but I’m not convinced even that will work.

A 4% rate rise rather than an 8.8% rate rise might have saved some political skin, but it has only deferred the issue until next year and continued an unsustainable financial strategy.  Unsustainable for ratepayers who are continually asked to pay more and unsustainable for Council as it fails to adequately fund its depreciation.

 

Misinformation

The Special Budget Meeting Agenda includes estimates of annual revenue and draft motions that set rate levels.  This is required under Section 82 of the Local Government Act.   

The estimates of revenue are included in the agenda and considered as the first motion of the night. 

The debate was commenced by Cr Paul Chatterton:

“This particular motion purely refers to – as the Mayor quite rightly said – is to do with the budget and the expenditure on the budget.  It’s got nothing to do with the setting of the rates.  This is purely the budget.”

That’s incorrect.  The motion being debated was in part:

“in accordance with Section 82 of the Local Government Act 1993 (as amended)

1. the  Council  adopts  by  absolute  majority  the  estimates  of  revenue  and expenditure  (excluding  estimated  capital  works)  for  the  2017/18  financial  year as detailed in the Annual Plan;”

So Councillors were actually undertaking an important function, legislated under the Local Government Act, accepting both estimates of revenue and expenditure.  To say rates are irrelevant to that is objectively incorrect.

Following that, Cr Flora Fox referenced workshop budget figures modelling a 4% rate rise. 

“The Budget that was presented to us at the workshops was based on a 4% (rate rise) budget increase.”

Cr Wreidt, following from that, sought clarification:

“I just want to ask for a point of clarification about this particular motion, because I thought that I understood what it was about and now that I’ve heard a couple of the contributions, I want to make sure (I’m on the right track).

“It’s my understanding that this is just the mechanism for us to then consider the various increases in the future.

*Inaudible ‘yes’ answers*

“…it’s just a couple of comments were made by two previous speakers that this was linked to the budget that we had presented to us at the workshop in March.  That concerns me because that Budget had a proposed increase of 8.8%, which I don’t support.

“So I want to be sure that this is just a procedural motion that we need to pass to enable us to pass a budget, regardless of what figures are contained in the preceding motions.  Because if we don’t… am I correct in saying that if we don’t pass this particular motion, we can’t pass subsequent ones.  Is that correct?”

Normally during meetings the Mayor, as Chairman of the meeting, would defer questions of this nature to professional staff, but he decided to answer this for himself:

“Yes.  This one was – as all those that attended the budget workshops (know) – is calculated, as Councillor Fox quite rightly says, on a 4% (rate rise) under the long term financial plan.”

The problem with Cr Wass’ response is that while some figures within the workshops might have been based on a 4% rate rise, the estimates on the agenda being debated were not.  They were actually based on an 8.8% rate rise.  More on that later.

Cr Wreidt had also asked for clarification about whether this was a ‘procedural motion’.  It was not a procedural motion and the figures do matter.  It was a substantive motion required under Section 82 of the Local Government Act. 

Cr David Grace is also confused.  He asks:

“I thought the way Councillor Chatterton presented his speech to us was the fact that because the estimate capital works… we’re passing the whole lot in one bang go.  But when I read this again…”

Cr Wass decides to interject from the Chair:

"It’s the Operating Budget which is calculated at the 4% long term financial."

There you have it.  The Mayor is now instructing Councillors, unequivocally, that the budget estimates in front of Councillors are based on a 4% rate rise. 

By this stage I’m now ready to concede to myself I’ve misunderstood the Agenda.  I had read it assuming the estimates were consistent with the recommended rate rise of 8.8%.  But I want to be sure so I ask for absolute confimation:

“Can we confirm the estimates of revenue are based on a 4% or an 8.8% rate rise?”

Cr Wass: “They are based on 4%.  That’s been the intention from all the workshops we’ve done.”

I didn't know it at the time, but that is a completely incorrect answer.  I know this because I investigated it after the meeting and asked the question on notice at the following Council meeting:

Budget Revenue Estimates

Cr Winter has submitted the following question on notice:

During  the  5  June  Special  Budget  Meeting  of  Council  it  was  repeatedly  claimed  by  Councillors that estimates of revenue contained within the report were based on a 4% rate rise in 2017-18.

Is this correct?

Officer’s Response: The  estimates  of  revenue  contained  within  the  report  to  the  Special  Budget  Meeting  of  Council held 5 June 2017 were based on an 8.8% rate rise in 2017-18.

Subsequent resolutions of Council at that meeting reduced the rate rise to 4% and subsequently reduced the estimates of revenue accordingly.

So it’s confirmed.  Councillors fundamentally misunderstood the estimates they were voting on when they approved them.

The misinformation didn’t stop there either. 

As debate continued, Cr Chatterton continued to reinforce the incorrect information:

“What’s been said is correct.  The budget estimates were calculated on 4%.  This is not saying the rates are going to 1% or 8% or 12%.  This is purely accepting the operating Budget.

“The budget, as I said before, was set on a 4% rate rise.”

There can be no doubt then, that all eight Kingborough Councillors, including myself, voted on estimates under the misinformed view that they were based on a 4% rate rise. Councillors affirmed those budget estimates 6-2, which showed a budget income of $37.7m for 2017-18 and an underlying surplus of $250,259.

 

Inconsistent Resolutions

Council then proceeded to ignore the rating resolutions printed in the agenda which corresponded with the estimates.  The advised 8.8% rate rise resolutions recommended by staff were never considered.  Instead, the Mayor gave Cr Chatterton the call to move his own rating resolutions which were based on a 4% rise, not an 8.8% rate rise. 

Again, you might say that’s good, but here’s the problem:

Council had already accepted estimates that were based on an 8.8% rate rise (even though they were told they were based on a 4% rate rise).  So when Councillors only raised rates by 4% they created a budget black hole to the tune of $1.1 million in 2017-18.

Total Council Income (based on 8.8% rate rise):  $37,682,040

Underlying Result (based on 8.8% rate rise): $250,259

Total Council Income (based on 4% rate rise):  $36,571,540

Underlying Result (based on 4% rate rise):  -$860,241

While the estimates approved in accordance with the Local Government Act show a $250,259 underlying surplus, we know there should be an $860,241 underlying deficit.

 

Poor Governance

Since the meeting I have asked two questions about the situation on the public record a number to the General Manager directly. 

The first question, confirming Councillors were given the wrong information at the Budget meeting is as described above. 

I asked another question without notice at the 13 June Council meeting as follows:

Rates Increase

“At  last  week’s  Special  Council  Meeting,  we  debated  the annual  estimates.   It was  explained  four separate  times  to  Councillors  that  the  annual  estimates  were  based  on  a  4%  rate  rise.   An  answer  to  a  question  on  notice  that  they  were  in  fact  based  on  an  8.8% rate  rise.  Do  you  accept  that  Councillors  fundamentally  misunderstood  the  budget  estimates  that they were adopting when the motion was passed?”

Officer’s Response: (contained here)

The  resolutions  of  Council  set  a  4%  rate  increase  as  opposed  to  the  officer  recommendation  of 8.8%.    The  only  material  change  this  makes  to  the  estimates  is  to  reduce  the  estimated  rate income  which  in  turn  altered  the  bottom  line from  a  projected  underlying  surplus  to  an  underlying deficit. The  decision  was  made  by  absolute  majority  of  the  Council  in  accordance  with  the  Local Government Act requirements.

That’s right.  The answer I received back was that the ‘only’ material change was the underlying surplus was altered from a surplus to a deficit! 

What could be a more fundamental change to a budget than altering the outcome from surplus to deficit?

I have since requested that the estimates be formally amended under the Local Government Act to reflect the rating resolutions.  I was originally told Council intends to take no action.  The latest is that, despite the minutes of the Special Budget Meeting already having been confirmed at the last Council meeting, they have again been included in Monday 26 June’s agenda with an attached set of estimates. 

The estimates included in this (page 2) are different to the ones Councillors actually approved at the meeting, yet somehow Council proposes to:

  • Adopt the same set of minutes twice; and
  • Include a set of summary budget estimates that were never presented to Councillors at that meeting.

Further, on page 75 Council now proposes to adopt an annual plan with estimates which are different to those adopted at the Special Budget Meeting.

In summary of all of this (thanks if you made it this far):

  • Elected members need to be provided with accurate information when making decisions, but they were completely mislead;
  • The public need to be able to be able to clearly follow Council's progress, but anyone reading the budget agenda or listening to the meeting would not have got an accurate understanding of Council’s financial situation; and
  • Legislation needs to be adhered to.  Council has adopted an inaccurate set of estimates under the Local Government Act and should re-sit the Special Budget Meeting to properly consider them.