Kaipara
District Council has failed to block legal action by Mangawhai ratepayers
incensed by a cost blowout for the construction of a sewage treatment
plant. The High Court ruled that
ratepayers are entitled to their day in court.
Ratepayers in the
seaside resort of Mangawhai are challenging the validity of a special levy set
by Kaipara District for sewage reticulation.
Initial borrowings of $35.6 million for the project ballooned out to
$57.9 million after modifications to the initial contract. Ratepayers allege the special levy is illegal
and invalid. They say Council did not
follow the correct statutory procedure for setting a special levy. Some have gone on a rate strike, refusing to
pay. With just over one thousand
members, the Mangawhai Ratepayers’ and Residents’ Association funded High Court
action seeking a judicial ruling that the levy is illegal.
In 2005, Council
committed to sewage reticulation for Mangawhai after it became apparent waste
from septic tanks was polluting the harbour and estuary. Twelve months later, Council agreed to
project amendments which were to have the effect of increasing financing costs by
$22 million above its previously authorised limit. Funding has been provided by ABN Amro.
Kaipara District asked
the High Court to strike out key parts of the ratepayers’ claim, saying the
financing transaction with ABN Amro is a “protected transaction” under the
Local Government Act: lenders can enforce their loans against councils even if
there are procedural mistakes by a Council in setting up the loan contract.
Justice Heath ruled
ratepayers could still proceed with legal arguments over the legality of the
Council’s special levy even though ABN Amro’s right to enforce its $57.9
million loan could not be challenged.
These legal arguments have yet to be heard.
Meanwhile, the
Auditor-General is investigating the Council’s activities in relation to the
Mangawhai contract, and draft legislation is currently before parliament which
will retrospectively validate any irregularities in setting the levy.
Mangawhai
Ratepayers v. Kaipara District – High Court (29.08.13)
13.025