Part 6: Managing the expression of interest evaluation process

Queenstown Lakes District Council: Managing a conflict of interest in a proposed special housing area.

6.1
In this Part, we set out:

6.2
This Part covers the period from December 2014 (after the chief executive submitted his expression of interest) to June 2015 (when the Council made decisions about the expressions of interest).

Response to the chief executive’s expression of interest

6.3
The General Manager, Planning and Development took steps to manage the chief executive’s conflict of interest and to ensure the integrity of the expression of interest process.

6.4
On 8 December 2014, the General Manager, Planning and Development emailed the General Manager, Corporate Services to advise her that Mitchell Partnerships had submitted an expression of interest on behalf of the chief executive’s family. The General Manager, Planning and Development said that:

  • he and the chief executive had agreed that they would not discuss the expression of interest process, either about the chief executive’s property or more generally;
  • he was comfortable dealing directly with Mitchell Partnerships on the matter; and
  • if he needed to discuss anything to do with the chief executive’s application, he would speak with the General Manager, Corporate Services.

6.5
The General Manager, Planning and Development told us that, as it turned out, he discussed special housing area matters with the Mayor rather than the General Manager, Corporate Services.

6.6
The General Manager, Planning and Development forwarded that email message of 8 December to two staff members in the planning team asking them to be mindful of it. He also limited access to the submitted expressions of interest to members of the planning team.

6.7
The District Plan Manager asked how any media questions about the chief executive’s expression of interest should be handled. The General Manager, Planning and Development said that all expressions of interest were commercially sensitive, so no comments should be made to the media. The two managers agreed that they would tell enquirers that there had been considerable interest and leave it at that for the time being.

How the Council considered expressions of interest for special housing areas

The Bridesdale expression of interest

6.8
At its meeting on 18 December 2014, the Council considered an expression of interest for a special housing area at Bridesdale farm. This was the last item considered that day, during the part of the meeting from which the public was excluded. The notes of the meeting record that the chief executive left the meeting before that item was discussed, but not the reason for his leaving. The official minutes do not record what happened in the part of the meeting from which the public was excluded, so do not record that the chief executive left the meeting when the Bridesdale expression of interest was considered.

The evaluation process

6.9
The District Plan Manager and an independent evaluator evaluated the expressions of interest after a contractor did a preliminary analysis of each expression of interest against the assessment criteria.

6.10
The General Manager, Planning and Development told us that the reason for using an independent evaluator was partly because the chief executive had submitted one of the expressions of interest and to help the District Plan Manager.

6.11
The planning team had legal advice to guide its approach to assessing the expressions of interest, including advice about the Act and the relevance of the Arrowtown Urban Growth Boundary. To help analysis, the planning team commissioned work about housing demand in Arrowtown.

6.12
At its meeting on 24 March 2015, the Council considered a proposed amendment to delegations to its Resource Consent Commissioner Appointment Committee to allow it to appoint an Accord Territorial Authority Panel (a body required by the Act). The chief executive did not attend that meeting.

The Council amends the lead policy and District Plan

6.13
At its meeting in April 2015, the Council agreed to amend the lead policy to state explicitly that proponents of special housing areas need to commit to retaining allotments for community housing.

6.14
At the same meeting, the Council agreed to make fully operative two District Plan changes related to Arrowtown – Plan Change 29 (Arrowtown Urban Growth Boundary) and Plan Change 39 (Arrowtown South Special Zone). Plan Change 29 draws an urban growth boundary around Arrowtown. Plan Change 39 provides for residential development in an area south of Arrowtown.

6.15
The minutes record that the chief executive left the meeting for that item, but not the reason for his leaving.

6.16
After the April 2015 meeting, those who had submitted expressions of interest were invited to amend them if they wished to reflect the change to the lead policy.

6.17

The Council was to have considered the expressions of interest for special housing areas at its May 2015 meeting. However, the Council decided to delay this until its June 2015 meeting to allow a new Arrowtown ward councillor who took office at the end of May 2015 to take part.

6.18
The expressions of interest were made available on the Council’s website on 30 April 2015. Councillors were advised that they would be sent all comments from members of the public about the expressions of interest for information.

The chief executive’s monthly reports to the Council continue to refer to special housing areas

6.19
As we mentioned in Part 2, the chief executive’s monthly reports to the Council covered matters on the Council’s work programme, including the housing accord and special housing areas.

6.20
These updates began in September 2014 and continued until June 2015, which was after the chief executive put in an expression of interest in December 2014.

6.21
We have confirmed that the General Manager, Planning and Development provided the updates on special housing areas for the chief executive’s monthly reports and that other general managers provided similar input for their areas of responsibility.

6.22
The updates on special housing areas focused on process rather than substance.

General Manager, Planning and Development’s reports to the chief executive

6.23
At fortnightly meetings, the General Manager, Planning and Development reported to the chief executive on special housing area matters. He gave us copies of his reports to the chief executive from December 2014 to May 2015. These reports used a reporting template prepared in November 2014 that had special housing areas as a heading. The reports using the template had a few words on matters of process, such as the timing of the evaluation of expressions of interest and on how the work on special housing areas affected the planning team’s workload.

Managing the chief executive’s conflict in communications about special housing areas

6.24
From January 2015, the Council began to get questions from members of the public about special housing areas and the expression of interest process. Some of these questions were sent directly to the chief executive. For example, on 22 January 2015, the chief executive received a complaint from a ratepayer about a Council officer’s answer to a question about Bridesdale farm.

6.25
At first, the chief executive asked a staff member for a few words to use for a response. He said later that it would be better for another staff member to reply because of his conflict of interest. The staff member did so, then sent the ratepayer’s further comment on the matter to the chief executive for his information.

6.26
On 29 January 2015, the chief executive and several other staff received an email message from another ratepayer expressing concern about the proposed special housing area at Bridesdale Farm. One of the staff offered to respond, and the chief executive said he would discuss this with the staff member.

6.27
Later that day, the chief executive emailed the main planning staff involved and his executive assistant to say that, because of his conflict, his assistant should forward any email messages to relevant staff for action, with support from the Mayor as needed. He added a few words of guidance on how they should respond. A staff member drafted a reply and sent it to his manager and the chief executive for comment. The chief executive repeated that, because of his conflict, he would not comment directly on the matter.

6.28
The chief executive also received an email message sent to all councillors from a councillor expressing concern on behalf of Arrowtown ratepayers about infrastructure capacity for the Arrowtown expressions of interest. The chief executive also received the District Plan Manager’s response, and then commented to the General Manager, Planning and Development:

For the record, I discussed this as a private citizen with [the Council’s chief engineer]. He was adamant that there would be no issues with the location of the infrastructure on McDonnell Rd and the volumes that I was talking.

If I can put my official hat on, we should ensure that we have appropriately qualified people [two Council staff named] at the meeting to ensure Crs do not make decisions on erroneous information.

6.29
A few other times, despite his conflict, the chief executive received copies of email messages from ratepayers. Sometimes, this was because the chief executive was on a global email address list used within the Council for sending information to councillors. In other instances, staff forwarded email messages to the chief executive. In one instance, a councillor sent the chief executive and the Mayor an email message about a special housing area.20 In some of these instances, the chief executive contributed a few words or a suggested approach to how staff should respond.

6.30
Also, despite the chief executive saying he would not be involved, he was sometimes sent a copy of the response. The chief executive also had access to all comments from members of the public on the expressions of interest after they had been published on the Council’s website, because staff used the email address for all councillors.

The chief executive’s expression of interest becomes public

6.31
On 25 February 2015, in response to a media enquiry, the Mayor confirmed that the chief executive had put in an expression of interest and the steps the Council had taken to manage the conflict. At first, the chief executive suggested that the Council should treat the request as it would any other expression of interest and say all expressions of interest were confidential until the Council was ready to make them public.

6.32
The General Manager, Corporate Services helped to prepare the Mayor’s statement confirming the chief executive’s expression of interest. She described the expression of interest as “Arrowtown’s worst-kept secret”, but said the chief executive was “relaxed about it”.

Requests under the Local Government Official Information and Meetings Act 1987

6.33
After the expressions of interest were made public on 30 April 2015, the Council received some requests for comment from media and for information under the Local Government Official Information and Meetings Act 1987.

6.34
In response to media requests, the chief executive released the correspondence with us from November and December 2014 about his conflict of interest and confirmed the mitigation steps that had been taken to manage his conflict of interest. The Council gave the same information to the Arrowtown Village Association.

6.35
In May 2015, we received several requests to inquire into the matter.

6.36
As we noted in Part 1, some of those who contacted us hoped that we would intervene in the process and prevent the Council from considering the chief executive’s expression of interest. The Mayor got legal advice that the Council could proceed to consider the expressions of interest, including that from the chief executive’s family.

Deciding on the expressions of interest

6.37
At its meeting on 3 June 2015, the Council considered the outcome of the evaluation panel’s assessment of the 13 expressions of interest for proposed special housing areas. The Council also considered further information provided by some of the expressions of interest about allocating residential sections for community housing, in the light of the change to the lead policy in April 2015 (see paragraph 6.16). The minutes note that the chief executive had previously declared a conflict of interest and would not attend the relevant part of the meeting.

6.38
The officers’ report recommended that the Council consider the advantages and disadvantages of the proposed special housing areas in Arrowtown before deciding whether to recommend one or more to the Minister for Building and Housing. The officers’ report discussed the Arrowtown Urban Growth Boundary and related planning matters. Two of the Arrowtown proposals, including the chief executive’s, were located immediately beside the Urban Growth Boundary. Another was inside it, and one (Ayrburn Farm) was about two kilometres away.

6.39
The officers’ report for the meeting recommended four of the 13 proposed special housing areas for further consideration. The four proposals were:

  • Shotover Country;
  • Arthurs Point North;
  • Onslow Road; and
  • Highview Terrace.

6.40
The Council instructed officers to do more work on the four proposals so that councillors could be comfortable recommending them to the Minister for Building and Housing.

6.41
The Council did not recommend any further consideration or work on the remaining proposals. This meant that none of the Arrowtown proposals, including for the chief executive’s family land, were recommended for further consideration.

6.42
Because the Council did not recommend the chief executive’s expression of interest for further consideration, we did not need to consider how the Council should manage matters if the chief executive’s expression of interest had been considered further.21 In Part 5, we comment briefly on this when discussing development contributions.

Our comments about managing the expression of interest evaluation process

6.43
The chief executive appropriately removed himself from the relevant parts of meetings when the expressions of interest for special housing areas arose. The reason for doing so was not recorded in the December 2014 or April 2015 meetings, but was for the June 2015 meeting.

6.44
In the interests of transparency, the Local Authorities (Members’ Interests) Act 1968 requires a councillor with a financial interest in a matter to declare the interest at relevant meetings and for the minutes to record the declaration. There is no similar statutory requirement for council officers, but a Council policy on conflicts of interest could require it.

6.45
We asked whether it was common practice for a conflicted staff member to declare the conflict at a council meeting. We were told that, usually, the agreed mitigation step is that the officer is not present for the meeting, so a declaration is not needed. However, this practice would be less easily managed where the officer concerned is the chief executive. The Council’s policy on staff conflicts of interest does not cover the situation.

6.46
In the chief executive’s case, because he was present for other parts of the December 2014 and April 2015 meetings, it would have been better for him to have declared his conflict before leaving the relevant parts of the meeting and for this to be recorded in the minutes – as he did for the June 2015 meeting. This would be more transparent and provide a clearer record. Some people who complained to us did not know that the chief executive did not attend or had not taken part in relevant meetings, and this contributed to the perception that the conflict was not managed properly.

6.47
The chief executive was not involved in the evaluation process or in the report that the officers prepared for Council on the expressions of interest that was considered at the Council meeting on 3 June 2015.

The chief executive should have changed some reporting systems after his expression of interest

6.48
After the chief executive disclosed in November 2014 that he had put in an expression of interest, he should have changed the method of reporting to the Council on special housing areas. Although the updates were merely progress reports, an alternative method of reporting should have been put in place after the chief executive disclosed his interest. Not doing so has also contributed to the perception that the conflict was not managed properly.

6.49
Similarly, the reporting template for the catch-up meetings between the chief executive and General Manager, Planning and Development should have been amended to remove the reference to special housing areas after the chief executive submitted an expression of interest. This would have helped to keep the topic in which the chief executive was conflicted off the agenda, but not prevented them discussing staff resourcing matters more broadly.

No clear procedure to restrict access to all correspondence about expressions of interest

6.50
The chief executive received information about the expression of interest process from within the Council and, sometimes, directly from members of the public. We refer to these instances not because the chief executive had any significant involvement, but because the Council had no clear rule or procedure to prevent him seeing this correspondence.

6.51
The instance noted in paragraph 6.28 is an example of the chief executive receiving information not available to other submitters of expressions of interest and making a comment to the General Manager, Planning and Development that appears to support his application.

6.52
This is one aspect where a more formal process for managing the conflict of interest, for use by all relevant staff, would have helped. This could have set clear requirements or protocols to ensure that the chief executive received no information about the expression of interest process.

6.53
The chief executive’s receiving information and commenting on a matter relevant to his own expression of interest is not good practice. The chief executive could have done more to set up a better system for restricting his access to information after disclosing his interest.

6.54
It might also have been appropriate for the Council’s Audit and Risk Committee to receive a report on the chief executive’s conflict and to discuss any potential organisational risks arising from the conflict. Strategic risk management is a core role of an Audit and Risk Committee, and a conflict of interest for the chief executive is a significant organisational risk. The committee might have helped to review and agree the proposed mitigation approach and set formal parameters.

Did the chief executive have any unfair advantage in process?

6.55
We asked the chief executive whether he thought he had an advantage in submitting an expression of interest because of his knowledge of Council systems or of councillors’ likely views and preferences, and how they respond to submissions and information.

6.56
The chief executive said that it was more likely he was disadvantaged in the process because of his role and the controversy.

6.57
The chief executive used an agent to prepare his expression of interest after giving a preliminary outline, reducing any advantage from “inside knowledge”.

6.58
The chief executive was not substantially involved in preparing the housing accord or lead policy in a way that could benefit his expression of interest. His seeing another expression of interest before submitting his own did not give him any advantage or create any disadvantage for the other expression of interest.

Our conclusion about how the expression of interest evaluation process was managed

6.59
We consider that the chief executive and the Council managed the chief executive’s conflict adequately after his expression of interest. The chief executive did the right thing by taking no part in the Council’s evaluation process or the officers’ recommendations to the Council on the proposed special housing areas.

6.60
The General Manager, Planning and Development took appropriate steps to ensure the integrity of the evaluation process, including restricting access to the expressions of interest within the Council, and was comfortable working directly with the Mayor.

6.61
We do not consider that the chief executive’s role gave him any particular “inside advantage” in the process. However, some aspects could have been handled better, including clearer requirements to keep all special housing area correspondence from the chief executive and some changes to reporting systems. However, these aspects were minor. In our assessment, they did not affect the evaluation process.

20: The chief executive asked to be excluded from any further email correspondence on the matter.

21: We included this in our terms of reference in case the chief executive’s proposal proceeded to the next stages.