Serious problem discovered in legality of QLDC's rating system

The Queenstown Lakes District Council has discovered that the way it is collecting rates may have been technically illegal for the past 10 years.

Council managers are attempting to correct the problem, but it could expose the council to the risk of legal action, especially over the recent claiming of $7 million of unpaid rates direct from personal bank accounts.

The problem is over who in the council actually has authority to collect rates, and how that authority has been delegated.

A staff report to councillors for Thursday's full council meeting notes:

"External legal advice at that time (2014) directed officers to prepare delegations to specified roles for the Act and for the Resource Management Act 1991 (RMA) which has a similar restriction on subdelegation. Whilst the delegations under the RMA were confirmed by Council resolution in August 2014, a resolution for the Local Government (Rating) Act 2002 cannot be evidenced in official minutes and records. It is therefore necessary to ensure these delegations are conferred by Council resolution to ensure functions, powers and duties under the Act can be undertaken efficiently by officers at the appropriate level."

The same report categories this issue as "high risk."

"This matter relates to the Regulatory/Legal/Compliance risk category. It is associated with RISK10029 Ineffective compliance management practices within the QLDC Risk Register. This risk has been assessed as having a high residual risk rating."

The report suggests that the "missing" authority or delegation regarding rates could be solved by the fact that the QLDC CEO was "generally aware" of what staff were doing, even though those staff members were acting without the required authority.

"The setting of rates has at all times been reserved to and made by Council. There is no suggestion that the rates have not been properly set; nor that there is any doubt that unpaid rates are debts due and payable to Council. Other actions undertaken under the Act during this period from April 2014 to now have been completed by officers employed by the Chief Executive and acting under the direction and control of the Chief Executive.

"The Chief Executive was generally aware that officers were carrying out these actions to implement the administration of Council rates, these being the activities the Chief Executive has employed officers in the Finance team to do. However, the officers were acting under the incorrect assumption that the their roles carried the authority to execute the tasks without a specific authorisation from the Chief Executive for each action."

It is expected that councillors will receive more information on the situation at Thursday's meeting. The proposed remedy is to adopt of new set of delegated authorities that complies with the Local Government (Rating) Act. It is not clear from the report to what extent this "fix" will work retrospectively. 

It is also not clear at this stage if a legal challenge against the QLDC regarding rates collection, especially council's debt recovery from personal bank accounts, could succeed based on the correct delegation of authority not being in place.