Most of QLDC's debt crisis has nothing to do with leaky building claims

Analysis

The Queenstown Lakes District Council has been quick to blame “historic” leaky building claims as the root cause of recent budget blowouts and a critical leap in debt levels.

The finger pointing features heavily in the recent QLDC annual report and is liberally spread throughout recent PR and communications messaging from the CEO’s office.

But regardless of the rights and wrongs of the leaky building claims – and of course it still comes back to council building inspectors approving what turned out to be poor construction – the cause of what Crux believes to be a current breach of debt limits lies firmly in the past three years. And it’s nothing to do with Covid either.

In basic terms ratepayers are being hit with $100 million of leaky building claims that QLDC has known about for at least ten years, without making any clear provision in their budgets for the near inevitable claims that are now hitting home.

This failure to make prudent provision for these claims is clearly reckless from a financial point of view, especially given the lack of doubt that the legal “last man standing” law puts local councils 100% in the firing line for these claims.

So, with that background in mind, it’s hard to see that “reckless” would be a strong enough term for the recent debt that CEO Theelen has committed ratepayers to – debt that totals over $200 million on what is basically speculation and a focus on loss-making vanity projects.

On top of all that, add in the $100 million plus that cleaning up our tap water is going to cost – deferred from many years ago – and we have a situation that will surely warrant scrutiny from the Auditor General if not the Minister for Local Government.

For readers who have not been following this sorry tale, the recent debt is linked to a budget blowout subsidising the very wealthy developers of the Lakeview luxury hotel/retail project, subsidising the large (over budget) construction companies working on the arterial road (stage 1) as well as the disastrous CBD cosmetic revamp and subsidising the very wealthy property developers who apparently can’t afford their own development costs in Kingston.

Then there’s $50 (initial) million provision for a luxury new council HQ, the strange $14 million purchase of the Ladies Mile toxic mould house and then a wharf and other assets purchased for non-existent future ferries that the Otago Regional Council is supposed to look after under their public transport remit.

Finally there's a council forecast revenue reliance on $163 million linked to a bed tax that is almost certainly is not going to happen.

Let’s reduce this to absolute basics.

QLDC’s job is to maintain the place where we live and pay rates. We give them over $100 million a year to do this job. We also elect councillors to make sure they understand this mission and stay on track.

QLDC does not provide any social housing apart from some modest, indirect support of the Queenstown Lakes Community Housing Trust.

So basically, we are talking of the council’s job being roads/transport (fail), clean water (fail), controlled wastewater and rubbish collection.

All the rest is arguably a luxury. Tourism support and development is supposed to be the domain of the tourism operators and economic development is a specialist task best left to specialists. All of the council’s promises around diversifying towards better economic productivity have been matched by significant costs and no discernible results.

One industry that QLDC has managed to boost significantly is that of the external consultants who previously worked as council managers. Plus the local employment market has benefitted from the council CEO’s decision to virtually double the QLDC payroll from 300 to 600 staff over recent years.

Crux is very aware of how this type of commentary can sound negative and might even be perceived as an attack on council staff. It’s certainly not an attack on the 95% of council staff who work hard and believe in the ethos of public service.

Our analysis is focussed, quite correctly, on the man in charge – CEO Mike Theelen.

If someone does not act soon, he’ll slide off into comfortable retirement, with a personal bank account boosted by multiple pay rises funded by our out-of-control debt, and he’ll be well clear of the ultimate discoveries – years down the track – that under his supervision this amazing part of New Zealand was driven to effective bankruptcy, causing damage that will take decades to repair.

Some of that damage may already be beyond repair – and that’s our reputation down the toilet. Our visitor reputation, our business reputation, and our community reputation, all gone, due to one man’s personal ambition and lack of social empathy.

The first step is not to allow these failures to become normalised.  Our councillors need to understand that it is not normal for a small council to lose hundreds of millions of dollars on financial speculation and corporate welfare for wealthy property and construction companies.

Theelen has gambled and lost all of our money. He must go.