What can we learn from the Supercity draft proposal?

How was it that the 2014 proposed Unitary Authority was unafffordable but the proposed Wairarapa District Council is considered to be?

The draft proposal for a Wairarapa District Council that was released on 15 March 2017 was preceded by the draft proposal for a reorganisation of the Wellington region that was published in December 2014; this was commonly known as the "Supercity proposal".

The LGC had received a request from the three Wairarapa councils for a reorganisation to produce a Unitary Authority in Wairarapa and not long after that a request from Greater Wellington Regiona Council for the creation of the Supercity.

Two tables from that Supercity draft proposal are relevant to the current draft proposal that we have before us now. They lead to an important question.

 

The estimated IT costs

Table 38 of the Supercity draft proposal outlined the estimated IT costs of a number of the options considered by the LGC.

The first column is the one relevant to the Wairarapa; the estimated costs of integrating the three Wairarapa councils IT systems in creating a One Wairarapa Unitary Authority.

Low estimate $21m.

High estimate $30m.

The mid-point figure of $25.5m was used as the estimate.

Table 38 Supercity proposal showing IT costs for different options

Table 37: A treasure trove of information

This table included the estimated:

  • Annual savings
  • Total and breakdown of transition costs
  • Payback period (transition costs divided by annual savings)

The first column (in the red) is the relevant one.

Table 37 and extension - costs, returns and payback time for Supercity options

The key numbers from Table 37:

  • Annual savings $1.3m (at year 4/5)
  • IT costs $25.5m
  • Transition costs $32m
  • Transition costs excluding IT $6.5m ($32m less $25.5m)
  • Payback period 25 years

With a payback period of 25 years it was easy to exclude the Wairarapa Unitary Authority as it just wasn't affordable. Transition costs of $32m and annual savings of just $1.3m.

Question: If the UA was so unaffordable, how is the current proposed amalgamation affordable?

The Table 37 extension

The table on the right is a replica of the one on the left but with a few of the numbers replaced.

  • The first column is a copy of the one on the left but also showing "Transition Costs less IT" - showing the $6.5m amount.
  • The second column replaces the IT Costs with the figure from the February 2017 report "Update to combined Wairarapa District Council costs - Local Government Commission - February 2017" $2.3m. At that cost, the UA was affordable with a payback period of 7 years, the same as the Supercity without community boards.
  • The third column shows the estimates from the 2017 draft proposal.
    Savings $1m from $1.3m in 2014.
    IT Costs now $2.3m from $25.5m in 2014.
    Transition costs less IT now $18.7m from $6.5m in 2014.
    The payback period for the current proposal is 21 years.

Are these changes in the estimates credible?

In 2014 the case was made that the UA was unafffordable.

In 2017, the case is being made that a TA (WDC) is affordable.

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