NRC staff hide' $1m windfall

A million-dollar tax refund has been welcomed by Northland Regional Council staff last week as "very pleasing," but Cr Joe Carr said he was devastated.

The windfall came in the form of a tax refund of $1,018,623.12, which according to Lisa Aubrey, general manager finance and IT, had been signalled by Inland Revenue in March last year, but which Cr Carr said elected members were not made aware of.

"If we had known the refund was coming we would not have had to increase rates for this financial year," he said.

"I'm absolutely devastated. In my 12 years in local government I have never encountered a situation like this."

He was equally aghast at the council's response last week, which he said was to accept, on chairman Cr Craig Brown's casting vote, Ms Aubrey's recommendation that the money be used to reduce the council's Northland Events Centre debt, a use which he said would have significant benefits for ratepayers in Whangarei and very little for those in the Far North and the Kaipara.

It had been agreed to delay the decision until all councillors were present, but he was not confident that the recommendation would be rejected.

He now wanted to know if it would be legal for the council to levy rates that were lower than those officially struck last month. And he was wondering if he could continue to serve as an elected member.

"I have to be able to live with myself, and I don't know if I want to be part of an authority that puts its rates up when it has a cheque this size in the mail."

Ms Aubrey's report to last week's meeting noted that the refund had arisen from a $3 million donation the council made to the construction of the Northland Events Centre in Whangarei in 2008/09. Confirmation that the donation would be tax deductible was sought from Inland Revenue, but in the interim it was decided to pay the tax to avoid possible penalties.

The IRD confirmed tax deductibility in March last year.

The report went on to say the that the council had three options for using the money - to apply it to the internal loan for the council's $13m contribution to the events centre, to make it available for re-investment in income-producing assets, or to transfer it to the council's investment and growth reserve.

Ms Aubrey favoured the first of those, saying that option would reduce ratepayer debt and funding required by $1.6m (including more than $600,000 in interest that would not have to be paid). That would benefit every ratepayer in Northland in "tough economic times."

It would also recognise that the refund would not have been received had it not been for the events centre donation.

The debt was currently serviced by an annual recreational facilities rate of $28.75 in the Whangarei district and $5.75 in the Far North and the Kaipara. As of June 30 the internal loan stood at $6.9 million. Northland Regional Council CEO Malcolm Nicolson said the council deliberated over its long-term plan on May 22. The IRD cheque was receipted on June 15, and was listed on the agenda of the next council meeting, on June 26.