Councillor criticises $100k deal
October 22, 2018
Councillor Campbell Barry has criticised Hutt City Council for giving an $100,000 grant to commercial landlord Augusta Capital Limited to subsidise a deal with Kiwibank.
In November 2016, the council approved an economic development grant of $97, 000 (excluding GST) to Augusta to help secure a six year lease with Kiwibank at its property at 531 High Street, in Lower Hutt.
Kiwibank was proposing to relocate 260 full-time workers to the site for its contact centre.
At the time, consideration of the grant was classified as a public excluded item on the council’s agenda, and was confidential.
Barry said Augusta had previously approached council officers who told the company that, as the grant did not fall within current council policy, the request needed to be considered by elected members.
Barry said when the officers’ proposal for the grant came before the council, Augusta had already decided to sign the lease, and the agreement with Kiwibank had been secured.
In the meeting on November 24, 2016, the majority of the council voted for giving the grant, with councillors Barry, Joshua Briggs and Tui Lewis opposing it.
Barry said the reason given by officers to grant the loan was that Augusta had approached the council in good faith and that it would hurt the council’s reputation to back down on Augusta’s request.
He disagreed with granting the loan after the deal was secured, arguing it was “effectively giving the company a subsidy for nothing”.
While he acknowledged bringing 260 jobs to Lower Hutt was beneficial, he questioned whether Augusta had really needed the grant if the lease with Kiwibank had already been secured.
“If Augusta did genuinely need Council’s assistance then that’s a discussion we would have.”
The $100,000 was a “significant sum of ratepayers money”, and the council should always be looking at the “best possible return” for ratepayers, he said.
Barry said the deal sets “an unfair playing field” for businesses as it could appear they were playing favourites with one particular party.
He queried why the information had been kept confidential for so long.
Hutt City Council chief executive Tony Stallinger said awarding the grant was a “prudent decision”.
“In this case, council invested $37,000 a year for three years of the six-year-tenancy, which has resulted in 260 new jobs and an injection of about $28 million into Lower Hutt’s economy each year.”
He confirmed that council staff had been in prior discussion with Augusta, but that council had not made any previous arrangement with Augusta that the lease would be signed.
They had committed to put the proposal before council, he said.
“Augusta had to move quickly to secure the tenancy, ahead of the council meeting where the issue would be discussed.
“Council had committed to consider the grant. Not doing so would have been an act of bad faith, affecting the reputation of council with other organisations it works with.
“At the time the economic development grant was made to Augusta Capital, there were a worrying number of commercial vacancies in this area of the High Street and the council was, and continues to, work hard to encourage growth in the CBD.”
Stallinger said that while the Kiwibank grant fell outside of council policy at the time, it aligned closely with the council’s strategies and its economic development goals.
“Many councils throughout New Zealand have similar policies to attract jobs and investments into their cities.”
The decision did not show any favouritism, as no other companies or organisations on Kiwibank’s scale were considering a tenancy in the CBD, he said.
Stallinger said the grant was classified as a public excluded item because there were commercially sensitive elements to it.
The recent request to make the information public had been agreed upon by both the council and Augusta, he said.