4: Compliance with the Local Government Act 2002

Inquiry into Christchurch City Council's five property purchases.

If an action is contemplated in a local authority’s properly prepared planning documents and a budget has been approved for the action in the LTCCP or annual plan, we would ordinarily have no concerns with the authority deciding to proceed on that basis.

Here, the Council was of the view that purchasing the properties was consistent with its existing strategies and plans. The Council’s decision was based primarily on the Council wanting to ensure that the properties would remain available to support central city revitalisation and urban intensification, in keeping with the Central City Revitalisation and Greater Christchurch Urban Development Strategies. The Council has said that all the sites purchased are extremely desirable in the context of the Council’s plans for urban intensification.11

One of the properties acquired, Sydenham Square, is outside the planning area for the central city revitalisation, but fits within the Council’s general urban intensification aspirations. The Council considers that the purchase of this site was consistent with the Sydenham Town Enhancement Strategy, prepared in 2001, that described attracting people to the area to shop, live, play, and work.

While these strategies did not specifically identify the purchase of these particular properties in these circumstances, we consider that it is reasonable to view this decision as being broadly consistent with the intent of the strategies.

The Chief Executive’s report stated that there was no budget allowance in the LTCCP for the property purchases. There was a budget of $20.5 million in the LTCCP for strategic property purchases, although this budget had already been spent by the Council on other acquisitions. There was also an allowance for loan funding for purchases of this nature that had not been used, although this was not highlighted in the Chief Executive’s report.

It is arguable, in our view, that the LTCCP included budget allowances that would broadly encompass purchases of this kind, although the Council did not take this view. Instead, it took what could be regarded as a “worst-case” view.

In a situation where proposed expenditure is unbudgeted, we would generally expect extra consideration to be given by the Council. We would also generally expect extra consideration to be given as to whether the proposed expenditure being considered was, or was anticipated to have consequences that would be, significantly inconsistent with the Council’s policies and plans, and, if so, to take the steps required by section 80 of the Act.

The extent of such extra consideration and how this is balanced in practice with the other factors relevant to the decision (for example, the perceived urgency, importance, and confidentiality of the proposed decision) are matters for the discretion of the Council.

One of the issues that this Office stresses in situations such as this, is whether the Council focused on the “right question”. In our view, the questions before the Council were whether to purchase properties (with a combined purchase price of about $17 million), whether these were the right properties, and whether to borrow funds to purchase them. (The Council also considered whether to enter into a conditional option agreement with the developer). However, focusing on these questions would not have meant that the matter was necessarily significant under the terms of the Council’s policy, because it involved a balancing act of the various factors involved. It is not the case, for example, that any decision costing $5 million is automatically significant under the Council’s policy, and it was within the judgement of the Council to find that the matter was not significant. The division of the Para site did not materially change this position.

We also note that, in the context of a specific decision of this nature, being taken at short notice and relating to a commercially-sensitive transaction, it is more likely that a council’s judgement and discretion will favour an approach that does not involve specific, lengthy, and additional formal consultation. The view expressed to us by some Councillors was that the Council already had sufficient knowledge of the community’s views in this area. Many of the Council’s existing strategies and plans had already been consulted on and had been the subject of other forms of engagement in the preceding years. The knowledge acquired from this, coupled with an understanding of the current environment and the decision in question, may have given the Council a basis for gauging current community views at the time of making this decision.

As provided by the Act, the Council has discretion to appropriately determine the significance of a decision, and exercised that discretion in this instance. The Council’s basis for complying with its policy for determining significance, as documented in the Chief Executive’s report, emphasised just one of the financial limits reflected in that policy (specifically the one referring to $5 million of capital expenditure), but did not clearly address the other factors reflected in the policy that the Council has to consider. Other factors to be considered under the Council’s policy (beyond an additional financial limit of $1 million for operating costs, which is exceeded by the combined debt servicing costs relating to the properties acquired) include, for example, whether the matter was likely to be controversial within the community, and its reversibility and practicality.

This emphasis on one of the financial limits in the policy for determining significance was also reflected in the Council’s press release announcing the decision. The public was told that the Council did not consult on the decision because the individual properties were valued at less than $5 million and the significance threshold was not reached.

In our view, neither the documented basis of the Council’s decision (the Chief Executive’s report and the Council resolution) nor the Council’s press release adequately represent the assessment made by the Council – that it already had knowledge of community views, that further consultation was not required, and that the Council would not usually consult on a confidential matter such as a proposed property purchase. These matters were not explicitly dealt with in the Council’s communication of its decision, nor in the Chief Executive’s report or the record of decision.

We were told that the Council was aware, at the time of making the decision, that it would prove controversial. Without affecting our overall view of the decision made, we would have expected the Council, given that knowledge, to have gone to additional lengths to explain and justify its decision to its ratepayers. We did not find this to be so. A number of comments have been made to us that the Council’s communication of the decision was not handled as well as it could have been, nor as planned.

The Chief Executive’s report that went to the Council on this decision was less detailed than some of the Council’s other staff reports about property purchases that we have seen. Some of the sections appearing in other reports were not used, and the report included only limited information about, for example, purchase options. We acknowledge that the report was prepared in a short time frame (in a two-day period after the initial Council workshop).

The Act does not specify how a council’s judgement and compliance with Part 6 should be documented and explained. These are matters within the discretion of a council under section 79 of the Act. In our view, decisions should be documented as fully as possible, even where decisions are being considered within short time frames.

Our overall conclusion is that the process followed by the Council in making its decision to purchase the five properties was sound and consistent with the principles set out in the Act, including the discretionary powers available to the Council under the Act.

We consider that the crucial factors relevant to the Council were considered in making this decision. However, it would have been better for the Council to have recorded the process more thoroughly, in order to more clearly demonstrate that it had addressed all of the Act’s requirements for decision-making, although we also note the urgency under which the Council was acting.

11: Council's press release, 8 August 2008.

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