Part 3: Our comments and views on the Council’s management of the lease

3.1
In carrying out our inquiry, we noted that the Council did not have a formally documented lease agreement for the Sherriff Block with the original owner and vendor of the block, nor the subsequent owner (Cr Sieling) until earlier this year (2009). It was the Council’s intention that the land be leased for grazing purposes. The terms and conditions of the arrangement were documented in the letter of 7 April 2003.

3.2
Our expectation, and the expectation of any ratepayer, would be for the lease of land to be formally documented as soon as possible after any agreement was negotiated. A formally documented lease agreement would define and protect the interests of the Council and the lessee.

3.3
We have not formed a view about whether it was appropriate for Cr Sieling to sub-let or benefit from a sub-letting agreement. If the Council had had a documented lease arrangement in place at the start of its lease with Cr Sieling, his ability to sub-let the land or not would have been clear.

3.4
In our view, it is clear that the lack of a formally documented lease resulted in confusion by Council staff about the status of any lease of the Sherriff Block and any negotiated terms and conditions. As a result, Council staff provided incorrect advice to the Council’s Service Delivery Committee on 14 May 2008 and to Mr Echave about the status of the lease with Cr Sieling.

3.5
We expect Council staff to be in a position to provide Councillors with factual information to support Councillors in making fully informed decisions.

3.6
In reviewing the information provided to us, there was correspondence between Cr Sieling and a number of Council staff members about the status of the drafting of the lease. It was not clear if any one person was responsible for finalising the lease. The Council told us that during this time, many of the Council’s functions were carried out by Community Boards and at Council service centres.

3.7
After the Council conducted a service delivery review in 2002, the administration and management functions of the Council were brought back to its centralised office in Thames. The lack of a formal lease, the Council restructure, and the resulting change in responsibilities are likely to have contributed to the confusion about the agreed terms and conditions and the status of the drafting of the lease.

3.8
We note that it was only because of Cr Sieling’s intervention at the Service Delivery Committee meeting of 14 May 2008 that the Council sought legal advice to determine the status of its leasing arrangements for the Sherriff Block.

3.9
Further, as a result of there being no formal record of the agreed leasing arrangements, the Council was not in a position to regularly monitor arrangements and compliance with the agreed terms and conditions. We conclude that the Council did not adequately manage the Council’s interest in the land as lessor. For example, one condition of the agreement for the lease of the Sherriff Block was the payment of rates and water charges on the land. These payments were not made until 2009.

3.10
We would also have expected that, before the end of the “rent free” period, Council staff would have had the systems in place to identify this, and to have considered future leasing arrangements for the land.

3.11
We have concluded that the Council and Cr Sieling have settled, or are in the process of settling, the rental and outstanding rates for the Sherriff Block, as outlined in the letter of 28 January 2009. The settlement is consistent with the original intent of the 7 April 2003 letter between the Council and Cr Sieling.

3.12
During our inquiry, we have not assessed whether the Council has lost money as a result of not taking up the economic opportunity to hold music festivals on the Sherriff Block, as proposed by Mr Echave. It is problematic to suggest that economic opportunity could only be gained by holding the music festivals on the Sherriff Block.

3.13
From discussions with the Council, we understand that there is a basic register of Council-owned land. However, the Council is continuing to work on improving the register. The Council is also looking at implementing a property strategy. We encourage the Council to prioritise such a register and implement processes to monitor such a register.

3.14
Furthermore, the Council should look to establish formal lease documentation for all Council-owned land.

3.15
We understand that the Whitianga bike park land and the dog pound land grazed by Cr Sieling are not subject to a formal written agreement. We recommend that a more formal agreement between the two parties be entered into.

3.16
We will follow these matters up with the Council in future audit engagements.