A 10-year, $6.7m Rotorua council investment into a sewage sludge technology that provided no return reinforces councils should not try to act as businesses, a local government expert says.
A ratepayer representative says, in her opinion, the venture was "hugely ill-advised" and raises questions about how the project continued solong, cost so much and had "no benefit at all".
However, others say councillors were doing their best by ratepayers with the information they had at the time, and they can't be judged in hindsight.
On top of the council's $6.7m, the previous National government contributed about $3m and Crown Research Institute Scion contributed about $1.85m.
The council and Scion set up a company to commercialise the technology, and in 2011 it was estimated Terax could have a cost reduction and value creation of about $4m a year.
The project began as a way to deal with a sewage sludge disposal problem that was resolved in 2012 but the council continued to fund it until 2017.
The council abandoned the project when it failed to secure further government funding due to the Ministry for the Environment's concerns about the technology and its financial viability.
On Monday, Curtin University local government expert Dr Andy Asquith said Terax's failure reinforced his view that councils were not businesses and were accountable to citizens, not shareholders.
"Their job is not to make money, it's to provide services to all the citizens."
Curtin University local government expert Dr Andy Asquith. Photo / Supplied
He said, in his opinion, it also showed the skills required in a commercial environment were different to those in the public service, and council officers were "making decisions they're not really qualified to make".
Elected members should also take responsibility, he said.
"It would appear no one was really asking the 'why' question."
The risk with Terax was "clearly" inappropriate, he said, in his opinion.
He believed due diligence wasn't done adequately and he believed council officers had too much influence over councillors – something he called "bureaucratic capture".
"Councillors need to stand up and need to have a far better calibre, and better training and development, and chief executives need to understand the democratic process and their role."
He believed the council had not been transparent enough about the full story of Terax, and a lack of openness on issues like it led to disengagement from voters.
Reporoa Residents and Ratepayers Association committee secretary Karen Barker said Terax was, in her opinion, a "hugely ill-advised project" that successive councils had "endorsed".
In her opinion: "Ratepayers should be concerned about how this project continued for so long, cost so much and for no benefit at all."
Reporoa Residents and Ratepayers Association committee secretary Karen Barker. Photo / File
Rotorua District councillor Raj Kumar, who was first elected to the council at the tail end of the project in 2016, said the council had "wasted a lot of money on Terax".
Kumar, who will stand for Rotorua mayor next year, said there had to be lessons from the "mistakes" made.
"Ratepayers are not an open cheque book."
Local Government NZ president Stuart Crosby said projects like Terax had a "degree of risk" and the question was if this was an "acceptable risk" or a good investment.
Councillors had to "have the courage to say stop" and accept sunk cost at the right time, he said.
It was not unusual for councils to get involved in projects like Terax, but it "can be unusual to commercialise it".
Rotorua District councillor Raj Kumar. Photo / File
Crosby believed elected members had done their best with the information provided by council officers, and he said the viability of the project was ultimately down to its directors.
He said the council could have partnered with other local authorities to spread the financial risk, but it wasn't fair to judge in hindsight.
Mayoral hopeful Fletcher Tabuteau said the same decisions likely wouldn't have been made today with council debt levels what they were.
"It was probably a good idea at the time. Sometimes you've got to be brave.
"Looking at alternative solutions [for sewage sludge] was important.
"If it had worked out, it would have ... been great."
Tabuteau, a former MP and NZ First deputy leader, said he would have likely tried to get commercial partners involved to help fund the project or seek more government funding.
Comments in this article were supplied to the council and Rotorua mayor Steve Chadwick for the right of reply.
Rotorua Lakes Council infrastructure and environmental solutions deputy chief executive Stavros Michael. Photo / File
Council infrastructure and environmental solutions deputy chief executive Stavros Michael said a technological solution to deal with sewage sludge "was investigated and attempts were made to also realise some commercial benefit".
"Ultimately, Terax did not deliver what the council of 2008 had anticipated."
Michael was one of the last of six directors of the Terax company.
He said he could not comment about thinking or decisions before his time but the council decided to wind up the company in July 2018 on recommendation from the directors.
Chadwick was not available for comment on Tuesday.
What was Terax?
Terax was a sewage sludge disposal technology that Crown Research Institute Scion developed as part of a project originally known as "Waste 2 Gold", beginning in 2005.
In 2012 Rotorua District Council partnered with Scion to create Terax 2013 Ltd to commercialise the technology, which reduces the bulk of the solids and produces nutrient-rich byproducts such as phosphorus and ammonia.
The council voted to wind the company up in 2018. It transferred the intellectual property to Scion, with a contract ensuring a 50/50 share of any future commercialisation return.
