Flimflam man

Just before we change the topic, we'd draw attention to this comment on the previous post:

Anonymous said...
Folks, we're getting sidetracked with frivolous issues. We need to get the word out to the public to pressure the WDC in[to] getting a S&P rating.
2:26 PM, January 15, 2007

As with most LawsWatch posts a whole raft of extraneous (but nonetheless interesting) issues were debated. And we welcome and encourage that. But where there's a chance to actually do something rather than simply vent, let's seize that opportunity. Talk to neighbours, write to the newspapers (yeah, we know, but the editors might just let through one letter critical of the Mayor, to "balance" the dozen or so he writes in praise of himself (using both his own name and those of his imaginary friends)).

If someone thinks Council is doing a great job, then a Standard and Poors assessment will surely provide that opinion with a sound factual backing. So no reasonable person could object, surely?

And now onto the next gulp of Michael Laws' Patented Fiscal Flimflammery (available in Snake Oil flavour from all good magic stores).

Apparently, it's okay to leave some rural settlements without a passable road (effectively rendering them unlivable and wiping out the value of private properties) because "the economic return on some of the roads servicing our region doesn't provide a return to the ratepayers" according to Mickey. (We await the spirited defence of rural dwellers from their Rural Community Board members - people like Nickie Higgie, Alan Taylor and Don McGregor. And wait. And wait...)

So projects are evidently now going to be assessed on the basis of cold, hard, financial criteria measuring economic return to ratepayers. Doesn't allow much room for human concerns, but at least it's not a flexible measuring stick. Economic returns from a project are relatively easy to measure, and once everyone agrees on the measuring tools it takes all the emotion; all of the purely personal, egotistical considerations, out of the equation.

So on that basis, we await Mickey's explanation (and objective measurement) of the economic returns to ratepayers of:

• Any of the "Heart of Wanganui" options
• The Splash Centre extension
• The $1.8 million waterfront project (originally costed at $260,000 in the 2005 Referendum, a cost blowout of seven times the original estimate before work has even begun).

And that's just for starters.

The prompt for his remarks was apparently Muriel Newman's suggestion that that all petrol taxes and road-user charges be invested back into roading. This has long been NZ First policy, which alert readers will recall Mickey often lays claim to having invented almost single-handedly. Yet offered the opportunity to resoundingly endorse Ms Newman's idea, he uses it as a platform to launch an attack on isolated rural settlements who actually have the audacity to believe that - as they pay rates too - they have a right to roading maintenance.

No prizes for guessing the ethnicity of most of those people.

Oh, and by the way, Rangi Wills? Yes you, asleep up the back there. These are your constituents that are going to suffer most under this bold new roading policy. Any thoughts? A single thought will do...

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You wouldn't credit it

Occasionally a commenter will make a point which not only has us nodding our heads in agreement at their wisdom, but which results in a round of forehead slapping and "Why didn't we think of that?!"

But a comment on our last post actually had Watchers slapping one another's foreheads. It's an obvious question, and one we'd overlooked. But it deserves to be asked, and answered:

It might be interesting for the council to join other local bodies in getting a Standard and Poor's credit rating about now ... to see what effect Mad Mickey's Big Spendup is having on Whanganui's credit worthiness. No doubt the news would not be good.

- Anonymous @ 11.25am, January 11

Christchurch City Council, for instance, not only has Standard and Poors assess its own credit rating - and thus financial performance - but also that of Christchurch City Holdings Ltd. It was recently reconfirmed as AA+.

Wanganui "does not have a recognised credit rating" as it admits in the LTCCP (pdf file, see p 76).

A credit rating isn't just about measuring performance (though that's obviously why we'd like to see the WDC's rating published) but assists in raising capital at lower rates of interest. A sturdy credit gives investors confidence, which means that they're more likely to lend to you at a lower rate since they have an independent assessment of risk and likely performance.

The Local Government Association of South Australia lists the benefits (pdf file,see p 12) of a credit rating as:

• Improved borrowing terms (Treasury estimates that councils pay .3% over the bb (base bond)rate because they use the local banks that they know and they are then captive markets and cannot shop around)
• Ability to tap a wider source of finance
• Financial discipline

They quote the cost of obtaining a corporate credit rating at AU$33,000 +GST - so around NZ$37,000 but that cost would probably be recouped in interest savings in the first few months.

So by not allowing Standard and Poors (or another respected agency) to rate them, the WDC are not only denying the Wanganui public a benchmark of their financial performance, but quite possibly subjecting ratepayers to higher interest on borrowings for, as Anonymous puts it so well, "Mad Mickey's Big Spendup" on swimming pools, carparks, libraries etc.

Ratepayers are perfectly entitled to demand that the Council subject itself to external scrutiny from Standard and Poors or a similar ratings agency. If you'd like to see just how Mickey is performing, contact the Council and tell them so. We'd love a copy of any response you may receive.

Meanwhile, to assist the finance gurus at Council to keep up with Mickey's ever-increasing expenditure demands whilst obfuscating the public about the city's level of indebtedness, we'd recommend the Official Calculator of the Zlotnian Space Program (pictured at right).

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