Comment by Phil
February 6, 2012 at 9:08 pm
Hopefully the new policy of doing away with the DCC “Money Go Round” game will apply throughout the entire organisation. The IT department charges each DCC employee $1,500 per month for the lease of a standard PC. That’s nearly $20k a year, for a standard office computer. Can you even buy a computer today for $20k?
Building Control charges DCC departments for processing internal building consents. Those departments in turn pay Building Control from ratepayer income.
City Property charges other DCC departments for work in preparing leases and the buying or selling of property on behalf.
Citifleet bills each department every month for the use of their vehicles.
The staff involved in looking after Community Housing (there’s about 6 in total, including maintenance staff) are funded entirely by rental revenue gathered from the city’s pensioners. The level of costs determines the cost of the rent. Remember the $20k annual charge per PC from the IT department and the charging for bathroom renovation building consents from Building Control ?
The Civic Centre building is rented by the DCC, to DCC departments, at standard CBD rental rates. Where does the money for that rental profit come from ?
The list goes on.
[ends]
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Posted by Elizabeth Kerr
What if? Dunedin... 
To put a reality face on the nonsense of an internal service provider running at a “profit”, consider the case of Community Housing. Community Housing, which is primarily pensioner housing, is self funding. That’s long been the case, and I personally think it stinks. But that’s a whine for another day. The fact is that all costs associated with operating and maintaining the housing must come from rent. Those costs include all costs associated with the employment of the DCC staff whose role is the operation and maintenance of the housing complexes. At a quick count up, that’s 7 staff, including the “landlord” staff, their manager, and the staff charged with ensuring maintenance and upgrades etc. The current internal DCC fixed IT costs mean that the average rental paid by a pensioner is $3 a week higher than it would be without those costs. If the Housing staff were free to purchase their own IT equipment, and to pay for support on an “as needed” basis, then the average rent paid by a pensioner would drop by more than $2 a week.
Alternatively, the cost saved (or rather the money lost) would build one brand new modern pensioner flat every year.
It’s all play money flying around between DCC departments but at some point, someone from outside of the DCC eventually has to come up with that money.
Phil and others, the problem is one of total cost recovery. This flawed model of financial control always neglects the real costs of operating an internal economy. To understand what I mean, there is a real and ignored cost of taking money out of one pocket in a pair of pants and putting it in another. The only thing we should be concerned about is how much money is coming from outside the pants into the pockets and how much is going from the pockets to the outside world.
Of course it is prudent for everyone to know what the costs of running a business unit are, but the oft-quoted example of IT within the DCC is a perfect example of how this thing goes mad. How crazy is it for the IT Department of the DCC to allow anyone to purchase a PC but then not allow it to be connected to their network? And how crazy is it for DCC management to allow the rabid ripping off of the internal economy of the self-created monopoly? We used to have the same sort of mentality from Telecom whereby customers weren’t allowed to connect a non-Telecom supplied phone to their lines. Once that crap was stopped, the costs dropped like rockets.
There are many many examples of outfits that run this rampant internal total cost recovery model, but I think you will find that they are mainly outfits that tolerate internal dictatorial cost accountants. The DCC should, at a stroke, get rid of any practices that result in higher costs for ratepayers. They won’t because they don’t have enough drivers to change.
Even if it were limited to Cost Recovery, that would be an improvement. But to have an internal service provider (and that’s all that they are) running at a profit, is inexcusable in a local government organisation. A few years ago I had a discussion with one of the IT department managers about the possibility of them fitting out an external facility away from the Civic Centre for use as a backup server site. When the issue of costs came up, we were told not to worry about it, as the department had a bundle of money to get rid of before the end of the current financial year. Their worry was that, if the surplus income wasn’t spent, then they couldn’t apply for a budget increase for the following year. An internal service provider with surplus income is operating way beyond the boundary of cost recovery.
Russell, let’s extrapolate your hypotheses to that good old chestnut, the Stadium. We hear that it is to be forgiven rates costs of some $93,000, presumably because it can’t afford them. Oh well, that’s a piddling amount in the grand scheme of things isn’t it? Is it?
But what is ignored is the rates revenue that used to come from all of the conglomerate properties absorbed by the CST, in order to make way for the stadium. Then there is the property occupied now by the University adjacent. No rates now from there. Oh, and I nearly forgot, what of the rateable properties taken out to make way for Highway 88 diversion? All told, how much revenue has been lost? Well, not lost actually, just re-assigned to, guess who? Anybody care to put a figure on it?
Interesting you mention the off-site backup. A while back fibreoptic cable was run up from the DCC building to Moana Pool. It tooks weeks to carve up the roads, run the cabling and backfill. Must have been a good payday for the contractor. All media services ignored questions as though a media black-out was in place. At best one suggestion was maybe to monitor high-performance swimming. From the council chambers? Or maybe they’re replicating some systems up to the pool. But here’s the clencher, my money’s on them placing the off-site data centre in an area lower than the pool. Either that or there is some expensive monkey business going on in there.