By: Mike Hosking | Wednesday, May 16, 2012 7:51 AM

A couple of councils, a couple of problems.

Up north in Kaipara, they’re having rate rises that would make your eyes water. In some cases over 200 percent by the time you take the rise and an annual fee into account. It was a sewerage scheme that had a cost blowout and now they’re all paying the price. I am receiving upset mail on this. And then you have Auckland Council and their youth job scheme. They argue it’s council’s business to be involved in jobs.

What they both show is the Government’s broad plan to rein in councils and their powers can’t come soon enough. In one case you have a council that clearly has little or no idea of budgets, loans and pay backs. In the other you have a highly activist council that sees its core business as basically everything.

In terms of the former, councils remain pretty much the only operation these days that have what’s loosely called cost plus accounting. They can get themselves into any sort of financial trouble they like because they can simply pass the bill onto the punter.

They can borrow because of this as well. The bank asks where the money is coming from to pay the loan back, the answer is in the increased rates. There are very few operations that can argue such a thing to a bank – “oh, I know the payments are huge but don’t worry, I’ll just increase the price of the items I sell to make the up the difference”. Kaipara might have reached the point where that argument actually can’t work because the rate rise is so high they’ll literally bankrupt people by forcing them to pay.

And then good old Auckland – it’s partly why the Government’s argument came unstuck a bit when they launched their plan to work out what core business was and wasn't. Remember Nick Smith did it and then ran into the Bronwyn Pullar problem and it’s vanished since. But what’s a core business for a council? Len Brown says jobs are. They run programmes to help people get work so they don't want to leave Auckland which superficially sounds almost reasonable. But if you apply the same logic you could stick it to just about any activity, so councils could end up running anything.

Len’s an interventionist and most of the rest of us know what councils are for or should be. Parks, rubbish, sewers, the basics. Not jobs, not housing, not health services - those are for central government. The rules can be simple. A list of things councils can do and a list they can’t. Link all activity to the cost of living and the rates can’t go any higher.

Major projects have a formula for funding. There are lots of ways you can do it but borrowing money you can’t afford and watching the cost blowout isn’t one of them. Councils have blown their credibility. Not all of them, but enough of them. Certainly enough of them to be locked into a contract with central government so the surprise intervention and madness is brought to a halt.

Photo: Len Brown (NZ Herald)