AUCKLAND CITY COUNCIL

MEDIA RELEASE

30 May 2007

Auckland City Council’s General Manager Finance requests a meeting with the New Zealand Herald

This afternoon Andrew McKenzie, Auckland City Council’s General Manager Finance requested a meeting with the New Zealand Herald’s Editor-in-Chief Tim Murphy.

The meeting is to discuss the newspapers recent coverage of Metrowater’s retail water price increase.

Mr McKenzie said “The issues I wish to discuss with the New Zealand Herald arise from articles by journalist Bernard Orsman which have made a number of claims suggesting that Auckland City Council has misled ratepayers in its planning documents. Specifically, these claims are over likely future water price increases made by Metro Water Limited, the council’s 100 per cent owned water supply and wastewater company.

“Mr Orsman’s claims are not true. The letter sets out the facts and their context, but we are sufficiently concerned at both the tone and inaccuracies of the claims to date to request a meeting to work through the issues. We must ensure objectivity and accuracy is achieved in future reporting.

“Auckland City Council has always used the latest information it has on price increases in public documents. The draft 2006-16 Long Term Council Community Plan (LTCCP) published in April 2006 included references to projected price increases for water arising from:

i. the council increasing its return on public investment requirement
ii.
iii. potential costs changes arising from a review of the city’s water and sanitary services assessment (WASSA).
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v.
vi.
“Collectively these were referred to as small price increases in the draft LTCCP documents. This was based on Metrowater’s projections at that time of 1.2 per cent per annum real increases.

“The council set out clearly that it was planning to fund stormwater works through higher charitable payments from Metrowater, which would require modest increases in charges. It also provided four scenarios for its WASSA and set out the one per cent increase required for each scenario for 2006 – 2014.

“Metrowater subsequently became aware of other cost increases that would affect its business, including proposed price increases from Watercare Services Limited, its supplier of potable water and treatment of wastewater. Metrowater shared its cost changes and the consequential changes required in price increases with the council in June 2006. Officers informed councillors during the June deliberations on the 2006-16 LTCCP, that the indicative price increase for 2006 would be around nine per cent in real terms (12 per cent nominal), and the reasons for this change.

“Council determined that the level of budgeted charitable payment was still appropriate and agreed to amend Metrowater’s Statement of Intent so that it reflected this expectation.

“Metrowater then determined the precise increase required, and in July 2006 informed its customers of the increase required. Metrowater also listed the reasons for the increase, including:

• the council had asked Metrowater to deliver an increased return on public investment to fund stormwater enhancements for the city
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• the impact of inflation, and
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• the need for future investment in water and wastewater networks.
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“Auckland City Council’s final LTCCP, which was published after Metrowater’s announcements, also referred to the price increases.

“In an article on 28 May 2007, Mr Orsman made new claims about the size of the increase in water bills, for example from $717 to $1711 over the next 10 years, a percentage increase of 140 per cent. These figures are much higher than any projections contained in information held by the council. He has also on a number of occasions published average increase figures between years and for larger users that have been incorrect and, once pointed out, have not been corrected.

“In the front page article of today’s New Zealand Herald (30 May) the paper has further compounded the misinformation, with a story in which charitable payment levels are linked to sewage overflows into harbours. That is quite incorrect, and Mr Orsman was told this repeatedly on 29 May.

“Auckland City Council has always acknowledged that its charitable payment requirements have caused prices to rise for residents. It has endeavoured to ensure the rationale and benefits are understood by Aucklanders, but this work has been eroded by the careless misinformation the New Zealand Herald has been printing. An article for the Perspectives page of the New Zealand Herald was provided on 24 May. This corrected some of the misleading stories in previous editions but to date, this has not been published.”

Mr Murphy this afternoon replied to Mr McKenzie’s letter saying that he wished to take up the matter with his newsroom. Mr Murphy said he would be in touch once he had considered the matters raised.

Ends

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