Kangaroo Island, 2013.09.29
Interview of Kangaroo Island councillor Graham Walkom, by Dr Gabriel Bittar, KI resident and webmaster of KIpolis.net
KIpolis: Good morning Graham, thank you for answering a few questions for kangaroo-island.org, aka KIpolis.net. Your constituency as a councillor included many people worried with the poor state of Kangaroo Island Council’s finances and its growing debt. It’s now nearly three years you’ve been elected. Have you seen any improvement during your tenure?
GW: Unfortunately that is a definite NO! Council’s deficit continues to accumulate at an alarming rate. The total to the end of this last financial year was $22m and the current budget intends adding another $4.7m to that.
KIpolis: Hmmm. So council will have accumulated a deficit of almost $27m over what period?
GW: The last 10 years.
KIpolis: So has the deficit been increasing at an accelerating rate?
GW: The deficit has been noticeably increasing at an accelerating rate over the past 6 years.
KIpolis: Six years. That would be the period of the current mayor?
GW: Well yes! Interesting observation.
KIpolis: How much does council raise in rates these days?
GW: The taxes this year that council will raise from general rates will be $5.375 million.
KIpolis: Every year people notice their rates have gone up. They have doubled over the last 15 years. More than five million is a lot of taxes milked out for such a small council, and I presume rate payers could wonder what their taxes are used for and why such a deficit? Why are we so short of funds? This deficit of $27 million for the last 10 years — can you explain its origins in lay terms?
GW: Council looks after about $180 million worth of assets, mostly roads. When it does not spend (or cannot) repair those roads they do not fix themselves. Roughly the $27 million is the amount council has not spent on its roads but should have. They need that amount to be spent on them to bring them back to reasonable condition: drainage, surfaces, vegetation growth and generally making then serviceable and reliable all weather roads.
KIpolis: You said $4.7 million will be added this year to the deficit. So that means the roads will deteriorate by this amount this year?
GW: Without any likelihood of getting that sort of money from somewhere, yes it does. It is known as living off your assets. The roads continue to deteriorate in both condition and value.
KIpolis: So am I correct in figuring out that the current council has failed and will fail to do essential repairs to the tune of $4 million a year for the last three years and this year — and council will not be held to account? The next council will inherit the problem?
GW: That’s about it. This council started it’s term with a deficit of around $1.1 million and has run it up to $4.7 million – a 327% increase. It amounts to destroying those assets, or at least allowing them to become unserviceable.
KIpolis: OK, so the roads are a big part of the financial problems, but mainly as depreciation. What major expenses are contributing to council’s financial problems by drawing money away from roads?
GW: The really big mover is staff salaries: from $3 million in 2009/10 to $5.570 million this current year
KIpolis: Right — $5.6 million in salaries, $ 5.4 million in general rates received by council. So council’s salaries now exceed the general rates paid by all ratepayers?
GW: Quite obvious isn’t it. But the current council is not concerned.
KIpolis: I suppose this dire situation is is not only caused by increases in wages, but also by new staff and workers; these might be justified on a cost/benefit basis where the additional employees increase services to the community; is that the case?
GW: Unfortunately the increases are all administrative and although council required any new staff had to be justified on a cost/benefit basis, this was not done. The demand from the CEO was for 9.2 more full time (equivalent) admin staff during the budget sessions. Council said no, unless the staff were justified on a cost/benefit basis, but that directive was disregarded and we ended up with 2.6 more staff, regardless.
KIpolis: Hang on, are you saying that council resolved that additional staff could only be employed if they were justified; no justification was provided and they were employed anyway?
GW: That’s how it has gone so far. I believe the rest of the original 9.2 extra staff may be employed during this year.
KIpolis: That seems not only like bad management, but may be illegal. What are you doing to address this apparently corrupt process?
GW: I vote no to spending money every time the spend cannot be or is not justified. Unfortunately, I am often outvoted. But I am very disturbed of this apparent transgression by council and have a legal obligation to report it. I will carefully consider how this must be done.
KIpolis: Graham I want to ask you about the funds that council is getting for its roads each year from the State government (funds that other councils do not get), and about the award that council got for financial management just a couple of years ago. That seems to be at odds with the situation that you paint here. There are a few more management and financial aspects that come up to me. Would you mind answering more questions for KIpolis soon?
GW: This is a very disheartening topic but yes. I have to stress, as usual, that these are my personal views.
KIpolis: Well, obviously they are not the Pope’s, but I understand the need for the legalize blah of this qualification. Thank you Graham for your time and information.
Further interviews of Councillor Walkom:
How to undermine a conscientious councillor — Interview of Cr Walkom, 2014.07.04
Kangaroo Island Council dire financial situation, part 2 – Interview of Cr Walkom, 2014.07.07
Kangaroo Island Council not functioning properly — interview of Cr Walkom, 2014.07.11
Can someone confirm, when did the State Government require all councils to depreciate all assets?
It will be interesting to see whether this a contributing factor to the current financial situation.
As there were 5,433 rateable properties at budget time, and staff costs were $5.6 million, that equates to a bit over $1,000 per assessment being spent on salaries.
Then, again, the total population being about 4,600 resident/consumers, staff salaries equate to roughly $1,220 per resident. A household of 2 adults and 2 children = nearly $5,000 in council salaries. The mind boggles!
Any readers out there remember that little bell that would tinkle when you opened the door and made an annual visit into the office? A smiling young lad or lass would appear with the carbon copy book and do a handwritten receipt in a jiffy. Was there 2 or 3 office staff in those days? I can’t recall, but I do remember the hundreds and hundreds of miles of top quality rural roads.
Please Mr Ricketts GOOGLE the following link I think you might like to inform yourself about accounting depreciation and the necessity of accounting for it. A must read for those who believe not doing depreciation will get us out of all our troubles. If only!!!
‘LGA Depreciation and Related Issues’ information Paper, June 2008
If depreciation were not part of good accounting practice where would the money come from once the KI infrastructure wears out at the end of its expected life or needs maintenance along the way. It stops you from raiding the piggy bank every time you want to buy something you can’t afford. Without depreciation, how would you balance the books?
Shirley Knight, I fully understand what depreciation is and what it means to good accounting practices.
My point is that somehow it seems that the Council under Major Bates is being blamed for the escalation in the deficit as Cr Walkom and Gabriel Bittar highlighted in the above interview, and I quote:
“GW: The deficit has been noticeably increasing at an accelerating rate over the past 6 years.
KIpolis: Six years. That would be the period of the current mayor?
GW: Well yes! Interesting observation.”
The previous council did not have to contend with this issue for most of its term, as the State Government, up until a few years ago, didn’t require Councils to account for depreciation. In fact the State Government doesn’t have to account for its own depreciation but expects local councils to do so. Therefore to blame the current council for an escalation in deficit is erroneous.
that may indeed be so Graeme, but that just makes council’s current situation far worse (the previous years actual deficits are not included. And it does not justify or explain the 327% increase in the term of this current council – “This council started it’s term with a deficit of around $1.1 million and has run it up to $4.7 million “ Are you arguing that the situation is A ok?
Thank you for the straightforward questions & answers although there is little comfort for the K I ratepayer.
Living beyond one’s means always eventually catches up with the individual and should apply to local government – bring in the Administrator please.
Well Mr Ricketts, If you haven’t heard yet this council for the last three years has been dysfunctional under Mayor Bates and I put it to you that we have two extremely talented professional elected members who have, since day one of this council, as volunteers, given considerable time and expertise to the council/community. Amazingly they have endured the majority of Elected members and the Mayor treatment which can only be described as vindictive, childish and have cost the ratepayers of Kangaroo Island thousands of dollars. As I see it they have been more than the ratepayers could expect as councillors in asking obvious questions related to whatever subject arises be it CWMS for Penneshaw, Airport upgrade, cost benefit analysis for grants received and making sure that they provide adequate debate at meetings so that everything the CEO recommends is not rubber stamped without their input be it against a motion or not. Are you getting it Mr Ricketts. I go to many Council Meetings and I do not remember Mayor Bates showing any interest in anything these two councillors have put to council. I believe the Mayor, Chairperson is an equal among equals. Spoken by Terry Kilminster who is a Globally respected Governance expert.
Well I thought when salaries exceeded income that’s when the razor gang enters the room and starts slashing jobs (no offence to anyone working there) but reality should come into any good business practices. If egos get hurt that unfortunate. The ratepayers presumably go to work and have to justify their position and wage with their employer or they get retrenched. The business sector has to have its feet on the ground or face receivership, that’s how I think businesses operate on KI. There’s not too many fairy godmothers around who employ staff they can’t afford, but council obliviously does ?? Something’s way wrong here, seems like we need a complete overhaul and replace the chief sitting bulls.