The long-overdue second installment of the region’s Prosperity Study, conducted by consultant Peter Winder, has finally materialised. You can download ‘Winder 2’ here.
I say long-overdue, because Winder 2 — focused entirely on potential savings from various reorganisation options — was commissioned by our five councils back in November 2012, after the completion of ‘Winder 1’, which examined strategies, including reorganisation, for lifting Hawke’s Bay’s overall performance.
Sources say Winder had difficulties getting the financial information he needed from all councils, and then had to weave his way through the ‘massaging’ of the message by five overseeing councils, four of them not keen on being reorganised. This saga in itself underscores the need for consolidation of our five councils.
But better late than never.
Winder 2 calculates the transition costs and ongoing savings that might be expected from each of three possible reorganisation scenarios for Hawke’s Bay.
Scenario One assumes the ‘One Council’ plan proposed by A Better Hawke’s Bay, which consolidates all five of the region’s councils. Winder projects that this reorganisation would cost $18.4 million to implement, while returning net savings of $59.3 million by the end of fiscal 2021/22.
Full amalgamation as proposed by ABHB could deliver over $10 million per year in net savings once initial transition expenses were met (most of these would occur in the first two years in each reorganisation scenario).
Says ABHB Chairman Rebecca Turner: “The ongoing compound benefit of $10 million annually will be immense for our HB region. Up front transition costs will be recovered inside two years from the savings. And the other benefits coming from unified regional leadership, a regional vision and the simplification and consistency of policies for business and the community are unquantifiable!”
Scenario Two envisions consolidation of the four territorial authorities, while leaving the Regional Council as is. This approach would cost $14.2 million to implement, while delivering net savings of $48.2 million in the same time period.
Scenario Three envisions consolidating the Napier and Wairoa councils, and Hastings and CHB councils (using the Tutaekuri River as a boundary between north and south), and leaving the Regional Council as is. This approach would cost $13.6 million to implement, while delivering net savings of $16.1 million in the same time period.
This is the approach recommended to the Local Government Commission by Napier partisans, mainly so they didn’t look ridiculous by opposing all change. Barely recovering its cost … it is clearly the financial loser of the three, but apparently the best NCC Finance chairman Bill Dalton could come up with.
The Regional Council, in its zeal to protect its existence, is in full spin mode to minimise the savings from reorganisation, and indeed initially released incorrect figures to the media, for which it had to apologise.
The Regional Council will discuss Winder 2 at its June 26th meeting. You’ll be able to view the discussion online when HBRC provides its next-day webcast here.
You might be curious to see how many regional councillors publicly diss $10 million in annual savings as insignificant. Ultimately, of course, it is ratepayers who will decide whether saving $10 million per year in council spending is an appealing prospect. Hmmm … save $10 million or save the Regional Council?
The savings discussed in Winder 2 are those gained exclusively from operating efficiencies – such as consolidated procurement and implementing best business practices across all activities – and reducing personnel and “backroom overhead”. The report assumes that the existing Long Term Plans of the region’s five councils would be rolled out exactly as projected … but managed more efficiently.
Thus the savings do not reflect any potential programmatic changes to those plans, such as more strategically planned facilities and infrastructure development. Such changes – whether to capital expenditure, borrowing strategy or service levels – would be political decisions to be made by any new council.
Nor do these projected savings reflect the savings in time and resources that would benefit businesses, community organisations and individuals who must interact today with multiple councils in their day-to-day affairs.
Winder 2 also notes that the savings achieved might not translate directly into rate reductions. If, for example, full amalgamation began producing annual savings in excess of $10 million, new councillors would still need to decide how to use those savings – they could be allocated to curbing rates (or debt), or to enhancing services and infrastructure, or some combination. Again, a political decision to be made by any new council.
In any event, the analysis is very clear. Full amalgamation can deliver $10 million in savings per year over the status quo.
Indeed, Winder 2 deals a blow to shared services (as did Winder’s initial report), the darling of status quo advocates, commenting: “There is potential for savings in overheads and back office systems through shared services. However, to date there has been little progress on a scale that would be required to deliver the potential saving in overheads identified in some of the reform scenarios considered here.”
Achieving $10 million in savings per year is not the only benefit of reorganisation, but I for one can’t wait to hear the case against achieving them!
P.S. As well,