What happens if a City Council goes bankrupt?

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Forums › Finance and wealth management › What happens if a City Council goes bankrupt?

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Benoire

2753 posts

Uber Geek

#1553279 15-May-2016 19:18

Nope, not really. Its all about what is reasonable and what can be charged for, especially under that contract. Basically, shutting down an entire road didn't consider the economic impacts of doing so, we where not allowed to add it even though I wanted to; all we could add was the cost for the engineers to try and sort it out and it came to $700. Government procurement rules are quite conservative.

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Geektastic

17927 posts

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#1553353 15-May-2016 22:26

Quite astonishingly lax.

cf for info how we used to have to cope in the UK when I worked for a water company. If we closed a road for work we had daily fines running to thousands of dollars per day if we over-ran. Also, we had to compensate every business on the road (if it was urban) for any loss of trade caused by the work - even if the work lasted months!

Unattended works (i.e. where the cones are out etc but no one on site) now attract fines of NZ$10,000 per day equivalent.

Benoire

2753 posts

Uber Geek

#1553354 15-May-2016 22:33

New Roads and Street Works Act in the UK is very powerful with respect to the public, Council has complete control over how and when works occur, although they can no longer collect money for the owkrs as they used to in the PUGWA days.

PhantomNVD

2619 posts

Uber Geek
Inactive user

#1553356 15-May-2016 22:41

Geektastic:
Quite astonishingly lax.

cf for info how we used to have to cope in the UK when I worked for a water company. If we closed a road for work we had daily fines running to thousands of dollars per day if we over-ran. Also, we had to compensate every business on the road (if it was urban) for any loss of trade caused by the work - even if the work lasted months!

Unattended works (i.e. where the cones are out etc but no one on site) now attract fines of NZ$10,000 per day equivalent.

But I bet Chorus never have that to pay!

I've had cones outside my house for over 3 months since the local power company put them up to upgrade a transformer 100m away, and Chorus cones went up last Friday for a new copper pipe down the main road adjacent... The job was complete the same day (all holes covered up etc) but the cones and sign remain...

(FWIW the power company sign blew over after about a week and was soon pillaged for metal recycling, since the frame took two weeks longer than the sign itself to 'walk' away...)

Fred99

13684 posts

Uber Geek

#1553391 16-May-2016 08:45

Complaining that rates are a "wealth tax" because they're levied with a component of cost based on property valuation doesn't really wash with me. The "per-head" charge system was tried and proved to be a final act of political suicide by Thatcher in the UK. The "wealth tax" effect of property value based rating has been diluted by separating out charging for services, so less than 50% of Auckland Council revenue is from rates, the larger part of the revenue stream is based on collection of either user-pays fixed charges, fees based on use (ie water), or return on investment (ie airport). So funding of all council activities is less "wealth based" and more "user pays" based than it might superficially appear to be based on looking at rate bills alone. In any case, NZ is a social democracy, long established that progressive taxation systems based on those who can afford to pay should pay more. With increasing wealth disparity being the trend in recent decades, taxing the poor more heavily and targeting what little wealth they have doesn't seem like a smart move. I'm sick to death of reading complaints on WWW forums about how unfair it is that the wealthy pay an "unfair" burden of tax. The wealthy in NZ seem to be doing quite nicely, the privileges of wealth extended way beyond having just the ability to buy more crap, and they managed to accumulate that wealth regardless of there always being a progressive tax system in place (income and property taxes). "Commie" rant finished.

Auckland Council comment that borrowing is needed to fund infrastructure projects for "the future" and that it would be unfair to levy the ratepayer today for projects that won't benefit them. To quote them: "This is because it is fairer to spread the cost over the generations who will use the assets". I'd argue that much of the borrowing is for projects now critical because of lack of investment in the past, those living in Auckland have enjoyed low rates due to under-investment in infrastructure while also enjoying large increases in wealth due to increase in property values, that driven by increase in demand from growth - which has never been adequately planned for. Throwing responsibility for paying for that onto future generations is a copout. It's also going to be a compounding problem if growth continues, as down the track more and more infrastructural investment will be needed. The recently announced rate rises for Auckland are a joke - 2.4%. That may be above the inflation rate, but it's below the average rate of increase in personal income. It's in stark contrast to Christchurch - also with a considerable debt burden, much of that due to cost of restoring earthquake damaged infrastructure. My rates are rising at 5% per annum for the forseeable future. A counter argument to that was that Chch deserves the pain because Council assets were uninsured or underinsured. In most cases yes they were, because those assets are uninsurable, when natural disaster strikes elsewhere other councils will be in the same strife. This is for basic core services, sewerage, water, roading. Even with significant rate rises and accumulating debt, it's going to take 20 years to fix. I will go postal if Auckland ratepayers get handouts from consolidated revenue (the taxpayer) for infrastructural investment when that's "catch up" for past under-investment.

Geektastic

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#1553431 16-May-2016 09:33

Benoire:

New Roads and Street Works Act in the UK is very powerful with respect to the public, Council has complete control over how and when works occur, although they can no longer collect money for the owkrs as they used to in the PUGWA days.

They'd be too busy spying on who put the wrong rubbish in the wrong bin to collect it anyway...!

Geektastic

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#1553433 16-May-2016 09:36

Fred99:

Complaining that rates are a "wealth tax" because they're levied with a component of cost based on property valuation doesn't really wash with me. The "per-head" charge system was tried and proved to be a final act of political suicide by Thatcher in the UK. The "wealth tax" effect of property value based rating has been diluted by separating out charging for services, so less than 50% of Auckland Council revenue is from rates, the larger part of the revenue stream is based on collection of either user-pays fixed charges, fees based on use (ie water), or return on investment (ie airport). So funding of all council activities is less "wealth based" and more "user pays" based than it might superficially appear to be based on looking at rate bills alone. In any case, NZ is a social democracy, long established that progressive taxation systems based on those who can afford to pay should pay more. With increasing wealth disparity being the trend in recent decades, taxing the poor more heavily and targeting what little wealth they have doesn't seem like a smart move. I'm sick to death of reading complaints on WWW forums about how unfair it is that the wealthy pay an "unfair" burden of tax. The wealthy in NZ seem to be doing quite nicely, the privileges of wealth extended way beyond having just the ability to buy more crap, and they managed to accumulate that wealth regardless of there always being a progressive tax system in place (income and property taxes). "Commie" rant finished.

Auckland Council comment that borrowing is needed to fund infrastructure projects for "the future" and that it would be unfair to levy the ratepayer today for projects that won't benefit them. To quote them: "This is because it is fairer to spread the cost over the generations who will use the assets". I'd argue that much of the borrowing is for projects now critical because of lack of investment in the past, those living in Auckland have enjoyed low rates due to under-investment in infrastructure while also enjoying large increases in wealth due to increase in property values, that driven by increase in demand from growth - which has never been adequately planned for. Throwing responsibility for paying for that onto future generations is a copout. It's also going to be a compounding problem if growth continues, as down the track more and more infrastructural investment will be needed. The recently announced rate rises for Auckland are a joke - 2.4%. That may be above the inflation rate, but it's below the average rate of increase in personal income. It's in stark contrast to Christchurch - also with a considerable debt burden, much of that due to cost of restoring earthquake damaged infrastructure. My rates are rising at 5% per annum for the forseeable future. A counter argument to that was that Chch deserves the pain because Council assets were uninsured or underinsured. In most cases yes they were, because those assets are uninsurable, when natural disaster strikes elsewhere other councils will be in the same strife. This is for basic core services, sewerage, water, roading. Even with significant rate rises and accumulating debt, it's going to take 20 years to fix. I will go postal if Auckland ratepayers get handouts from consolidated revenue (the taxpayer) for infrastructural investment when that's "catch up" for past under-investment.

Does not alter the fact that

1) People use the services not the property they live in which never goes to the library etc

2) The value of your house has nothing to do with how wealthy you are per se - you could inherit your parent's house and be on minimum wage, for example

If 10 people live in a house they pay the same rates as 1 person living in an identical house, which strikes me as fundamentally unfair.

MikeAqua

7767 posts

Uber Geek

#1553627 16-May-2016 16:09

Couldn't run Xero at a profit ...

jmh:

Vicki Crone is running for Mayor, so this is just political sniping. She's presented as a high-flying business woman (which apparently means by definition she knows how to run a council better than anyone with actual experience) but imo she's all mouth and no trousers.

Mike

Fred99

13684 posts

Uber Geek

#1553658 16-May-2016 17:38

Geektastic:

Fred99:

Complaining that rates are a "wealth tax" because they're levied with a component of cost based on property valuation doesn't really wash with me. The "per-head" charge system was tried and proved to be a final act of political suicide by Thatcher in the UK. The "wealth tax" effect of property value based rating has been diluted by separating out charging for services, so less than 50% of Auckland Council revenue is from rates, the larger part of the revenue stream is based on collection of either user-pays fixed charges, fees based on use (ie water), or return on investment (ie airport). So funding of all council activities is less "wealth based" and more "user pays" based than it might superficially appear to be based on looking at rate bills alone. In any case, NZ is a social democracy, long established that progressive taxation systems based on those who can afford to pay should pay more. With increasing wealth disparity being the trend in recent decades, taxing the poor more heavily and targeting what little wealth they have doesn't seem like a smart move. I'm sick to death of reading complaints on WWW forums about how unfair it is that the wealthy pay an "unfair" burden of tax. The wealthy in NZ seem to be doing quite nicely, the privileges of wealth extended way beyond having just the ability to buy more crap, and they managed to accumulate that wealth regardless of there always being a progressive tax system in place (income and property taxes). "Commie" rant finished.

Auckland Council comment that borrowing is needed to fund infrastructure projects for "the future" and that it would be unfair to levy the ratepayer today for projects that won't benefit them. To quote them: "This is because it is fairer to spread the cost over the generations who will use the assets". I'd argue that much of the borrowing is for projects now critical because of lack of investment in the past, those living in Auckland have enjoyed low rates due to under-investment in infrastructure while also enjoying large increases in wealth due to increase in property values, that driven by increase in demand from growth - which has never been adequately planned for. Throwing responsibility for paying for that onto future generations is a copout. It's also going to be a compounding problem if growth continues, as down the track more and more infrastructural investment will be needed. The recently announced rate rises for Auckland are a joke - 2.4%. That may be above the inflation rate, but it's below the average rate of increase in personal income. It's in stark contrast to Christchurch - also with a considerable debt burden, much of that due to cost of restoring earthquake damaged infrastructure. My rates are rising at 5% per annum for the forseeable future. A counter argument to that was that Chch deserves the pain because Council assets were uninsured or underinsured. In most cases yes they were, because those assets are uninsurable, when natural disaster strikes elsewhere other councils will be in the same strife. This is for basic core services, sewerage, water, roading. Even with significant rate rises and accumulating debt, it's going to take 20 years to fix. I will go postal if Auckland ratepayers get handouts from consolidated revenue (the taxpayer) for infrastructural investment when that's "catch up" for past under-investment.

Does not alter the fact that

1) People use the services not the property they live in which never goes to the library etc

2) The value of your house has nothing to do with how wealthy you are per se - you could inherit your parent's house and be on minimum wage, for example

If 10 people live in a house they pay the same rates as 1 person living in an identical house, which strikes me as fundamentally unfair.

They pay the same rates, but the amount that that be levied from user charges etc would be higher if they use more. I'm not convinced it's unfair. I doubt that the folks living 17 up in three bedroom dives in South Auckland do it to avoid rates, and if they were levied a "poll tax" set at the required level to fund council operations, then you'd be paying for them anyway by way of further top-up via WFF, accommodation subsidy, dole etc. Course we could go whole hog "laissez-faire" and we'd end up with an Auckland like Rio de Janiero.

I acknowledge the issue with people in houses with high valuation/rates and low fixed income. My father in law is in this position, aged 81 and just retired, living on pension alone is impossible, insurance and rates are $100/week, we give him a top-up on AP of a few hundred $ a month - or he'd possibly need to sell or survive on saveloy soup. Selling doesn't solve the problem either - as he'd be damned lucky to not be spending double that in rent - more likely triple - for something far less comfortable than where he is. He could "reverse mortgage" - that's the only other option. Chch council does give a small rates discount to pensioners.

nathan

5695 posts

Uber Geek
Inactive user

#1553659 16-May-2016 17:46

MikeAqua:
Couldn't run Xero at a profit ...

jmh:

Vicki Crone is running for Mayor, so this is just political sniping. She's presented as a high-flying business woman (which apparently means by definition she knows how to run a council better than anyone with actual experience) but imo she's all mouth and no trousers.

Hardly fair comparison. Cloud services companies generally invest to capture a user base, and investors seem pretty comfortable with that strategy

mattwnz

20006 posts

Uber Geek

#1553660 16-May-2016 17:54

Fred99:

Geektastic:

Fred99:

Complaining that rates are a "wealth tax" because they're levied with a component of cost based on property valuation doesn't really wash with me. The "per-head" charge system was tried and proved to be a final act of political suicide by Thatcher in the UK. The "wealth tax" effect of property value based rating has been diluted by separating out charging for services, so less than 50% of Auckland Council revenue is from rates, the larger part of the revenue stream is based on collection of either user-pays fixed charges, fees based on use (ie water), or return on investment (ie airport). So funding of all council activities is less "wealth based" and more "user pays" based than it might superficially appear to be based on looking at rate bills alone. In any case, NZ is a social democracy, long established that progressive taxation systems based on those who can afford to pay should pay more. With increasing wealth disparity being the trend in recent decades, taxing the poor more heavily and targeting what little wealth they have doesn't seem like a smart move. I'm sick to death of reading complaints on WWW forums about how unfair it is that the wealthy pay an "unfair" burden of tax. The wealthy in NZ seem to be doing quite nicely, the privileges of wealth extended way beyond having just the ability to buy more crap, and they managed to accumulate that wealth regardless of there always being a progressive tax system in place (income and property taxes). "Commie" rant finished.

Auckland Council comment that borrowing is needed to fund infrastructure projects for "the future" and that it would be unfair to levy the ratepayer today for projects that won't benefit them. To quote them: "This is because it is fairer to spread the cost over the generations who will use the assets". I'd argue that much of the borrowing is for projects now critical because of lack of investment in the past, those living in Auckland have enjoyed low rates due to under-investment in infrastructure while also enjoying large increases in wealth due to increase in property values, that driven by increase in demand from growth - which has never been adequately planned for. Throwing responsibility for paying for that onto future generations is a copout. It's also going to be a compounding problem if growth continues, as down the track more and more infrastructural investment will be needed. The recently announced rate rises for Auckland are a joke - 2.4%. That may be above the inflation rate, but it's below the average rate of increase in personal income. It's in stark contrast to Christchurch - also with a considerable debt burden, much of that due to cost of restoring earthquake damaged infrastructure. My rates are rising at 5% per annum for the forseeable future. A counter argument to that was that Chch deserves the pain because Council assets were uninsured or underinsured. In most cases yes they were, because those assets are uninsurable, when natural disaster strikes elsewhere other councils will be in the same strife. This is for basic core services, sewerage, water, roading. Even with significant rate rises and accumulating debt, it's going to take 20 years to fix. I will go postal if Auckland ratepayers get handouts from consolidated revenue (the taxpayer) for infrastructural investment when that's "catch up" for past under-investment.

Does not alter the fact that

1) People use the services not the property they live in which never goes to the library etc

2) The value of your house has nothing to do with how wealthy you are per se - you could inherit your parent's house and be on minimum wage, for example

If 10 people live in a house they pay the same rates as 1 person living in an identical house, which strikes me as fundamentally unfair.

They pay the same rates, but the amount that that be levied from user charges etc would be higher if they use more. I'm not convinced it's unfair. I doubt that the folks living 17 up in three bedroom dives in South Auckland do it to avoid rates, and if they were levied a "poll tax" set at the required level to fund council operations, then you'd be paying for them anyway by way of further top-up via WFF, accommodation subsidy, dole etc. Course we could go whole hog "laissez-faire" and we'd end up with an Auckland like Rio de Janiero.

I acknowledge the issue with people in houses with high valuation/rates and low fixed income. My father in law is in this position, aged 81 and just retired, living on pension alone is impossible, insurance and rates are $100/week, we give him a top-up on AP of a few hundred $ a month - or he'd possibly need to sell or survive on saveloy soup. Selling doesn't solve the problem either - as he'd be damned lucky to not be spending double that in rent - more likely triple - for something far less comfortable than where he is. He could "reverse mortgage" - that's the only other option. Chch council does give a small rates discount to pensioners.

If you look at rentals, where houses have had the number of bedrooms increased to get more people in them. There are a heap of them, where the landlord is paying around the same amount in rates, as they would with the same house with less bedrooms. It however creates more demand on council services. To be honest I think Aucklands rates are fairly low compared to much of NZ. But the bulk of voteres are in Auckland, and the bulk of National voters are likely to be property / multi property owners, so they don't want to rock the boat, and do anythoing to put their voters offside. I agree, a poll tax is very unpopular, as most people would probably end up paying more. But I think it is the fairest way. It is just not a popular way to tax, and I doubt anyone would bring it in. Maybe if our media did some stories on it as an option, to see what the public think of it, like they have with other unpopular moves (eg raising super, income testing super etc), but I can't see that happening.

MikeAqua

7767 posts

Uber Geek

#1553925 17-May-2016 09:18

Wasn't a comparison, just a statement. She hasn't run Xero at a profit. Investors (I am one) aren't that happy - the share price dropped significantly after the last loss announcement. Hoping the new MD will be able to crack the whip and get stuff done.

nathan:
MikeAqua:

Couldn't run Xero at a profit ...

jmh:

Vicki Crone is running for Mayor, so this is just political sniping. She's presented as a high-flying business woman (which apparently means by definition she knows how to run a council better than anyone with actual experience) but imo she's all mouth and no trousers.

Hardly fair comparison. Cloud services companies generally invest to capture a user base, and investors seem pretty comfortable with that strategy

Mike

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