By Jonathan Milne

Copyright newsroom

Analysis: Visiting the Chatham Islands this year, I could see the small community’s economic circumstances were straitened. The pocked roads, the rusting infrastructure. Only now, it emerges the extent of the difficulties faced by the 600-odd residents.

The Chathams are unique. Their council is 95 percent funded through a Crown appropriation, paid in a lump sum every July. It’s capped at $4.2 million a year until 2027; it’s not being adjusted for inflation. Council chief executive Paul Eagle says Internal Affairs, which manages the appropriation, has now raised concerns about the islands’ operating deficit and cash flow.

Monique Croon, who’s running for a third term as mayor, met with council on Wednesday morning. In the triennial Newsroom Survey of Local Candidates, she confirms that if re-elected, she’ll look to urgently cut services, borrow more and increase rates at or above inflation – but even that won’t be enough.

The cash ran out this year, and the council was forced to scrape the furthest corners of its $500,000 bank overdraft to get through the final months. It’s now looking to extend that overdraft. Croon says they can’t even afford to get rid of the dead and derelict cars that are lying about, or tidy up the rubbish.

Next year may be worse; auditors have raised concerns about whether the council can meet its financial obligations … there are “significant doubts” whether it can even continue as a going concern.

I’ve written here previously about risks of council insolvency, but until now, it’s always been hypothetical. To be clear, no New Zealand council has ever been allowed to go bust. Central government has always intervened whenever a council dug itself into too deep a hole.

But the Chathams council hasn’t dug its own hole. It’s been dug by successive governments that require it to provide more and more services, like reticulated drinking water, but deny it new revenue tools to pay the costs.

It’s really little wonder that such a small council regularly fails to meet standards for services like timely building consent decisions, or clean drinking water.

And although they are different, other councils’ financial woes are almost as severe. I report today that Ruapehu and other councils are breaching their own debt caps, or close to it.

It highlights the conversation we need to have as we cast our votes in the local government elections: how can we make our cities and districts financially sustainable? Because right now, they’re not.

This is starkly detailed in the Chatham Islands annual plan and annual report, which was delayed by auditors scouring it – and in particular assessing its constrained cashflow. “There is material uncertainty related to these conditions that may cast significant doubt on Chatham Islands Council’s ability to continue as a going concern,” the Audit NZ report says.

Visiting with Shane Jones in April, I asked the regional development minister whether a point would come where outposts like the Chathams could no longer be sustained. “No, I’d never accept that,” he replied. “I do not accept that the New Zealand Government should turn its back on isolated areas, or we will find great bouts of dysfunctionalism rising to the fore in those areas.”

But that will require a greater commitment than a mobile abattoir – the minister’s proposed contribution to sustaining the island economy.“We have heard the Government’s message to get back to basics,” Croon says. “Our key message is, we need to get up to basics. We cannot enable economic growth, housing and reduce the cost of living without providing a platform for our community to be able to live and grow on the island.

“Without change we could be losing many of our families, who want to live on their island, to the mainland.”

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