Danyl McLauchlan’s cover story in the latest Listener (“How to absolutely, positively kill a well-resourced capital city”) is one of the most important things written about Wellington in years.
Most media coverage of the capital’s crisis has fixated on the symptoms: burst pipes, sinkholes, raw sewage in the sea, councillor infighting, etc. McLauchlan goes deeper. What he documents is not a city that ran out of money. It’s a city that had the money, collected the money for infrastructure through rates, and then spent it on other things.
The article traces Wellington’s decline from the optimistic 1990s to the present catastrophe. His argument is simple, and damning. Successive councils, left and right, built infrastructure charges into rates, then diverted the revenue to flashier projects. They outsourced core engineering capacity to arm’s-length organisations that became unaccountable fiefdoms. They allowed a bureaucracy to gradually sideline elected officials until, as new mayor Andrew Little puts it, “in a lot of respects, elected members are a bit of an afterthought to the process.”
It’s an outstanding piece. But I still think he leaves something out.
The Order of the Rabbit
The most striking revelation in McLauchlan’s article is one most readers will not have heard of. In 1992, The Dominion newspaper exposed a secret society operating within the senior management of Wellington City Council. It was called the Order of the Rabbit. Members swore an initiation oath declaring all elected councillors were “a pack of bastards.” Strangely, they pledged loyalty to the Chief Rabbit – believed to be the town clerk (a position now called the Chief Executive).
The Order itself was disbanded, under mayor Jim Belich. But reading McLauchlan, you keep getting the sense that the Rabbit never really died. It just modernised. For example, when streetlights started falling off their poles in 2019, staff chose not to tell the councillors. During the town hall’s decade of cost blowouts, vital legal and financial information was withheld until immediately before votes.
Tamatha Paul, a former councillor now a Green MP, told McLauchlan: “I felt that while I was on council, we were given information that always pointed to the option that the officers preferred. And it was sometimes difficult to work out when to not listen to it and when to listen to it.”
As I noted in a column last year, sitting Labour councillor Nureddin Abdurahman was even blunter: “The mayor is not leading, the bureaucracy is governing us.”
Where did the money go?
If you pay rates in Wellington, this should make your blood boil. The council charged residents for infrastructure maintenance through their rates. Then it consistently spent the money on something else.
McLauchlan introduces the concept of the “renewals gap”, which is the difference between what the council needed to spend simply to keep its water infrastructure from getting worse and what it actually spent. In 2005, renewals were at 102% of depreciation. Barely adequate, but at least keeping pace. By the next year they had fallen to 76%. They never recovered. Under Tory Whanau, the Green Party-endorsed mayor, they hit 30% – the worst on record.
This wasn’t because the city was broke. McLauchlan points out that from 2006 to 2018, the council ran surpluses totalling $271 million. The three waters renewals gap over that period was $85 million. The council could have closed the gap three times over and still had money left. Rates went up year after year, often well above inflation. The council also borrowed nearly half a billion dollars.
So, where did it all go? From McLauchlan’s account, it was spent on “new things, interesting things, visible things”.
For example, the town hall earthquake-proofing blew out from $43 million to $329 million. The council chose to repair the central library for $180 million rather than replace it for $90 million; the final cost was $217 million. Takina, the convention centre, cost $180 million. Let’s Get Wellington Moving burned through $181 million over four years and achieved little more than a pedestrian crossing.
And then there’s Moa Point. A sludge minimisation plant connected to the sewage facility was budgeted at $200 million but has blown out to roughly half a billion dollars – even as the actual Moa Point sewage treatment plant it feeds was not maintained properly. As councillor Diane Calvert puts it in the Listener article: “We do a brand-new sludge treatment plant without making sure Moa Point, which feeds the sludge treatment plant, is actually fit for purpose.”
By 2025, the council’s spending on governance, engagement and its “communications ecosystem” had reached $39 million a year, which McLauchlan points out is actually more than the $30 million spent on Three Waters renewals.
A 2019 taskforce found that depreciation revenue collected through rates had been “diverted to other projects” and that renewals were running at 50–60% of what was required to stand still. The taskforce made 48 specific recommendations, none of which were implemented.
The Outsourcing disaster
McLauchlan’s strongest thread is the outsourcing story. In 2003, Wellington’s water services were handed to a council-controlled organisation (CCO) that eventually became Wellington Water. The theory was that specialisation would bring efficiency, but it produced the opposite.
When the CCO was formed, in-house engineering knowledge walked out the door. What stayed behind were the governance people, the stakeholder engagement people, the PR and marketing people. Wellington Water then subcontracted its own work to private firms, who hired additional subcontractors. According to McLauchlan, at every stage, another intermediary took a cut, making it progressively harder for the council to track where the money was going. Annual payments to Wellington Water and its predecessors rose from $1 million in 2004 to $114 million by 2025, and nobody could account for where it all went.
When the numbers finally came out, they were ugly. Deloitte found cosy relationships between Wellington Water and its contractors: competitive tendering replaced by long-standing deals with preferred suppliers. Project managers were managing projects in which they had a financial stake. Police confirmed receiving a report of suspected fraud. Infrastructure consultants Aecom found Wellington Water was paying three times what comparable councils paid for pipe maintenance. “The council was getting fleeced for money,” Tamatha Paul told McLauchlan.
McLauchlan’s framework comes from economist Mariana Mazzucato. Her book The Big Con argues that when government outsources core services to the private sector, it loses the ability to understand what it’s buying. It becomes, in Mazzucato’s phrase, a “dumb client.” The public still carries the costs and the risks. But the institution has hollowed itself out. If Mazzucato wanted a New Zealand example, this is it.
The paywall now starts at halfway through all Democracy Project newsletters. Please take out a paid sub if you want to support this service and access the full content, including the following sections: “A Building by the officers, for the officers”, “The Blob pushes back”, and “Who benefited?”