Mayor, councillor explain how and why CEO Theelen got an 8% pay rise

Analysis

At a time of rising council costs and debt many ratepayers were surprised to see an eight percent pay rise awarded to QLDC CEO Mike Theelen in September.

The increase took his annual salary to more than $415,000 in spite of his performance including major budget blowouts on arguably speculative projects including the Lakeview development. Mr Theelen has sole delegated authority over Lakeview and opted to enter into a long-term deal that gave the Australian developers 20 years to pay for council land in return for a share of “super profits” when and if they happen.

Mr Theelen could have sold the land outright for $42 million but instead left ratepayers paying close to $100 million in land preparation costs even before the developers start their construction work. A number of other projects have also gone massively over budget while having little beneficial effect to the community, such as stage 1 of the arterial road (with stages 2 and 3 in doubt) as well as a CBD cosmetic upgrade that caused years of financial damage to both retailers and ratepayers.

Another controversial project being pushed by Mr Theelen is a grand new council HQ that is expected to cost hundreds of millions of dollars, dubbed Project Manawa. Confusingly “Manawa” is defined with multiple meanings by the online Māori dictionary:

• (noun) last faint breath of a dying person, last gasp, give up, concede defeat, yield, give in, admit defeat, surrender, throw in the towel, forfeit, submit.
• (verb) (-tia) it was lucky, it's heart-warming - used with or without a passive ending at the beginning of a sentence as an expression of appreciation or surprise.
• (noun) heart (seat of affections).

In the light of these issues, prompted by one of our readers, we asked the three members of the Chief Executive Performance Review committee how they measured Mr Theelen’s performance and made the eight percent pay rise recommendation.

The three committee members are Mayor Glyn Lewers, Councillor Lisa Guy and Councillor Lyal Cocks. Mayor Lewers provided written answers on behalf of the committee and Councillor Guy agreed to talk by phone.

We start with the conversation with Councillor Guy and then publish in full the statement from Mayor Lewers on behalf of the committee. We’ve shortened the Councillor Guy transcript considerably as the full conversation ran for 30 minutes.

Crux: An eight percent pay rise for council CEO Mike Theelen suggests that there we no problems at all with his performance. But keeping in mind the dramatic rise in council debt were there no areas where you thought his performance could have improved?

Councillor Guy: So, while there’s three of us on the review committee, Mike's KPIs (key performance indicators) and review of his performance involves the whole of council. So all the elected members, create the KPIs. The ones where we assess Mike against this year, of course, were created by the prior council. However, there was a raft of workshops and discussion and inputs from everybody as far as how the year had gone.

“Our role as the committee is to represent the feedback from all of those elected members and to participate in the review process with Mike. Also that has an independent facilitator to guide us through that to ensure that it is independent and that we cover everything that needs to be covered because there are, of course, regulatory considerations across the country for the review of chief executives along with our localised content and assessment tools.

Crux:  It’s important to acknowledge that the council CEO has a difficult job, but that’s why he’s paid a high salary. Did the committee look at issues such as the consistently low level of trust in the community related to council management under Mr Theelen and the dramatic levels of debt from CEO-delegated projects like Lakeview?

Councillor Lisa Guy - one of three members of the CEO Performance Review Committee

Councillor Guy: Any feedback that was given was certainly included in the performance review. The process is robust. I think there's definite opinions around some of the things that you've just listed there that might vary across the diversity of all council members to be fair. Everyone got to express their point of view against that. When you look at the KPIs and how anyone's performance is measured in an organisation you can only measure against what targets you've put in place. There's some very clear regulatory targets that any chief executive has to meet and they were all achieved. There are also subjective measures where you talk more perhaps against relationships and engagement and how you are operating as an individual.

“Mike can't control everybody's behaviour. He can control elements of his role that are within his influence but if there’s an individual or issue that is outside of his influence, control or interest, he can't be measured against the performance of other people.”

Crux: But surely, as CEO, and the sole employee of the elected members representing the community, the buck stops with the CEO. Surely it's that clear?

Councillor Guy:  We have a chief executive who's very highly regarded in the country, and who I frankly feel we can value the skills and knowledge we've got. And ideally we'd like to keep that in the district and preferably in the country too. So, you know, its a competitive marketplace, Mike, as the chief executive, the market indicators we looked at indicated that he is in the low (pay) range of chief executives in the market. He's well experienced and skilled and actively no doubt headhunted. We do have a commitment to the district.

Crux: Can we see the Key Performance Indicators (KPIs) that were used to measure the CEO’s performance?

Councillor Guy: The KPIs, the past KPIs, are done and dusted. The new ones are in the mix. Mike's employment agreement is confidential to Mike, so I can't release it to you, but they are strategically aligned.

Crux:  Was there any guidance that your committee gave to Mike in terms of how he might perform better?

Councillor Guy: “So we are always looking at ways that we can learn and, and make things better. I think something that we've all acknowledged in council is that we all want to work on our public trust and confidence in our communications and in our accessibility to answer questions. Mike understandably also gives his staff a safe work environment. And that hasn't always been an easy path to navigate through.

“We want the right information to be provided. We want our community to be reassured that the process we are taking is justified and defensible. We want to be accurate in our telling of the figures or whatever it might be."

In parallel with our phone conversation with Councillor Guy we sent the CEO Performance Review Committee a number of written questions, questions that were answered on behalf of the committee by Mayor Glyn Lewers.

• Crux: What are the KPIs that Mr Theelen’s performance is measured against? 

Mayor Lewers: Chief Executive KPIs covers a broad range of themes, such as capital expenditure programmes, climate change and biodiversity, community engagement, financial management, Health & Safety, organisational culture and engagement, as well as long term plan KPIs.   

• Crux: How did he perform relative to these KPIs?

Mayor Lewers: Following a comprehensive assessment of the performance of the chief executive, including full council workshops and meetings of the CE Performance Review committee, it was confirmed that the CE Performance Review Committee were very satisfied with the performance of Mr Theelen as chief executive.

• Crux: Who wrote the KPIs?

Mayor Lewers: KPIs are set annually by council resolution following a process of discussion and consideration via council workshops, the CE Performance Review committee, and finally a council decision.

• Crux: What was the rationale behind an eight percent pay rise at a time when ratepayers are expecting cutbacks in expenditure not increases?

Mayor Lewers: The recommendation about a salary increase considers market data and comparable positions in the sector.

• Crux: Would you agree that all matters relating to the CEO’s performance should be in the public domain and that public interest comes ahead of any concerns re Mr Theelen being an employee? He is the most senior public servant in our district - employed directly by elected members.

Mayor Lewers: No, although correct that Mr Theelen is a highly visible public servant, that profile does not remove or erode the right to privacy. Councillors must abide by the Employment Law.

• Crux: The eight percent pay rise in the current circumstances suggests that the three of you considered Mr Theelen’s performance to be 100 percent perfect? If that is not the case - what were the areas where you felt there was room for improvement and what is the process for these improvements to be delivered?

Mayor Lewers: There are a number of factors that contribute to deciding any employee’s remuneration, these include performance, market data, risk

• Crux: Do you agree that under Mr Theelen’s direct management, in some major cases with 100 percent delegated authority (Lakeview and Kingston), council debt has spiralled out of control on these non-core projects at the expense of drinkable water and other basic infrastructure? Is QLDC now over its debt ceiling considering Lakeview, Kingston, Arterial Road, $163 bed tax revenue that won't be coming in, $100 million water filter work (or higher) - if you do not believe the council is over its debt limit can you please provide precise details as to why not? This question is directly linked to your responsibility for the performance of the CEO.

Mayor Lewers: The debt ceiling has not been breached – the debt/revenue ratio was sitting at 252 percent for the 2023 year end against a limit of 295 percent for the year. We expect to push closer to 280 percent over the next few years as we look to re-prioritise capital expenditure whilst minimising rates increases. The issues we are facing are caused by the following factors:

• Significant cost escalation in the capex programme (existing budgets are short by 10 to 50 percent)
• Impact of $140m of unbudgeted borrowing to settle two large building defect claims in past two years
• Requirement of the Department of Internal Affairs to include three waters expenditure for first two years of LTP
• Delay in legislative process to introduce QLDC visitor levy due to covid (was assumed to be in place by 2024)

As a result, we are reprioritising current year capex and ensuring only essential capex is included in the programme for years 24/25 and 25/26.

The district is the fastest growing council in the country and the investment underway is responding to those pressures and historic underinvestment. There has also been desire by the previous councils to make progress on some historic long standing challenges, such as decisions on Lakeview and the arterials. These are crucial investments that will provide long term benefits to the district."

Crux is grateful to both Mayor Lewers and Councillor Guy for their time in answering our questions.