Politics

Time to rein in the cash in local politics?

Money talks. And nowhere as effectively as in campaign donations for local government elections. Peter McKenzie asks if we need limits on the private cash flowing into local politics.

Four hundred days before the last local body election, in September 2015, Nicola Young’s bank account pinged. The conservative councillor was widely expected to run for the Wellington mayoralty. Ian Cassels, Wellington’s most prominent property developer, had taken notice. The $1408 donation was his way of saying good luck.

In April 2016, $2000 arrived for Justin Lester. It came from PL Property Management - a defunct company co-owned by Cassels. Lester had just announced he would be running as Labour’s mayoral candidate.

Later that month, Cassels flicked $20,000 to another mayoral candidate: Nick Leggett. He followed up with another $20,000 in July. Given those gargantuan sums, the $2000 Cassels gave centre-right candidate Jo Coughlan 14 days later seems like an afterthought.

It wasn’t. Over the course of a year, Cassels had donated a total of at least $50,000 to every serious mayoral candidate, of every ideological persuasion. The message was clear: Cassels was a man you had to listen to.

He wasn’t alone. By law, mayoral candidates have to declare all donations over $1500. In 2016, $211,362 in declared donations was given to Wellington mayoral candidates. The vast majority of that came from people like Chris Parkin, the influential property developer, who donated $40,000, and Mark Dunajtschik, Wellington property magnate, who donated $20,000.

The trend isn’t difficult to detect; altogether, property developers donated approximately 70 percent of all declared donations - a staggering $147,300.

The majority of that went to Leggett, who received almost $126,000 in declared donations from property developers when he contested the Wellington mayoralty. He doesn’t think it’s a problem. “Property developers are city-builders, who put their hearts and souls on the line to transform our city.” To Leggett, property developers are just like everyone else. “[They’re] really motivated to get candidates elected who they think will do a good job.”

But Leggett acknowledged that the reason he attracted such staggeringly large donations from property developers was because: “I worked in commercial property. I knew these people socially and professionally.” The dominance of developer donations disproportionately empowers candidates who are sympathetic to or drawn from the property development class. With a $126,000 war-chest to spend on advertising and get-out-the-vote, a candidate’s chance of electoral success is significantly increased (though it must be noted that Leggett was unable to overcome Wellington’s liberal lean, which favoured Labour’s Lester).

More importantly, according to Simon Chapple, the director of Victoria University’s Institute for Governance and Policy Studies, the claim that property developers are just amplifying the voices of people they agree with doesn’t stack up. “You can rule out ideology, because they’re donating to everyone.”

“When you are of modest or average means, especially as a young person without an asset base, getting donations is a way of competing on an equal footing ... the consequence [of not having donations] is that only wealthy people can run for office - and if it’s a wealthy person’s game, you can kiss diversity goodbye.”

Chapple isn’t overly worried about shady deals being negotiated in smoke-filled backrooms of the Wellington Club. Instead he believes that, “The money isn’t buying a specific decision. It’s building a relationship - one where your interests are mutually coinciding.”

When Chapple first heard the numbers, he laughed and launched into an anecdote. “It was 2004. The place next door was an old industrial site, and it was bought up by Craig Stewart [a major Wellington developer]. He decided to bowl over the building and build 20 townhouses.” Chapple reached out to the local community to try fight it. “I remember, my neighbour worked for the Council. And when I told her Stewart’s name, she lit up. ‘Oh, what a nice man! He brings us bottles of wine every Christmas’.” Chapple’s point is that donations and gifts serve the same purpose: to build sympathy and support from people with power.

Max Rashbrooke, a writer and journalist who focuses on wealth inequality and democratic reform, agreed. “The people who donate to politicians are the same people who are likely to bump into politicians in the Koru Lounge. And when they’ve made those donations, the politicians are more likely to stop and chat, to take their calls, and think more favourably of them.”

That’s particularly important in local government, according to Rashbrooke. “Local government is pretty weak in New Zealand. The one thing they have huge influence over is urban planning - what to build, and where, and with what restrictions.” It’s the kind of decision-making that can have a huge impact on a property developer, says Chapple. “It benefits the donors because the Wellington City Council is making decisions under the regional plan that greatly affect their bottom line.”

It’s the kind of decision-making which will have a huge impact on Cassells’ bottom line in particular. Cassels and his companies have been the driving force behind the controversial $500 million Shelly Bay development in southern Wellington. The Shelly Bay development has had to secure approval from Wellington City Council (WCC) at multiple points over the past five years, including to secure Special Housing Area status in 2015 and to purchase or lease WCC land in Shelly Bay in 2017. After a lengthy court battle, the Shelly Bay development is still trying to get approval to proceed.

Cassels made no identifiable donations to candidates in the 2013 WCC elections; he only began to do so after the Shelly Bay development started making its way through the council approval process.

Given local government’s immense control over urban planning and infrastructure projects, there is concern that donations from developers could result in councillors being more sympathetic to individual property developers when they come before council with existing projects or proposals. Cassels’ donations led Lester and Young to excuse themselves from the specific 2017 vote on the Shelly Bay development, but their wider involvement has still sparked concerns. Legget alleged that, “In some parts, though not others, it was clear that Justin Lester was pulling strings behind the scenes.” Sir Peter Jackson (who fervently opposes the Shelly Bay project) has alleged that Lester’s office was involved in spreading negative rumours about Jackson’s opposition to the development.

Lester dismissed any concerns of a conflict of interest. “At the time I received advice that there was no conflict of interest ... they said I should be taking the lead on a major issue for the city.” Lester doubled down on his role in the Shelly Bay. “There would have been bigger questions if I hadn’t been involved.”

Rashbrooke isn’t overly worried about specific conflicts of interest though. He is more worried developers’ donations could cause councillors to abstractly plan in a way more aligned with developers’ interests, which would be much harder to detect and prevent. “Even if donations by an individual don’t affect political decisions, then donations by a class will. Politicians will inevitably move their policies to better suit what the people who fund them need ... For example, if a councillor prefers building up instead of out, that’s probably contrary to a property developer’s interests, because that’s the harder type of building. Same with requiring stricter environmental planning and quality assurance.”

Most worryingly, it could result in councillors being slower to exercise oversight and intervene in potentially problematic developments which are already taking place. Chapple noted that, “You know, if I’d gotten money from a certain property developer, I’d not be overly enthusiastic about stopping him from bulldozing a heritage house before Christmas. It doesn’t look bad, just doing nothing.”

“$1500 is a high bar to set. There’ll be lots of stuff going on below that. If four developers give you $1499, that’s a wodge of cash that nobody knows about.”

The staggering sums of money which property developers funnelled into the 2016 Wellington mayoral race have underlined all these concerns. But the $147,300 in declared donations from property developers may just be the tip of the iceberg.

Local government candidates only have to declare donations over $1500. The information that comes with those declared donations can be scarce - at times just a few scrawled initials and an address. Determining a person’s identity from that is often quite difficult. Moreover, in the words of Chapple, “$1500 is a high bar to set. There’ll be lots of stuff going on below that. If four developers give you $1499, that’s a wodge of cash that nobody knows about.”

It’s not an unrealistic concern. One 2013 mayoral candidate, John Morrison, apparently chose to declare all the donations he received. The record shows three donations between $1300 and $1500, including one right on the limit at $1499. Because all three were under $1500, the donors’ names were hidden.

Similarly, in the same 2013 mayoralty race, Nicola Young (whose declared donations in both 2013 and 2016 were typically above $1000 and from property developers) raked in $20,050 in aggregated anonymous donations. Chapple practically gritted his teeth as he explained: “People value that privacy. They want to be under the threshold so that people don’t know. That tells us that it’s not an ideological exercise too, because if it was they wouldn’t care.”

Chapple and Rashbrooke both agree reform is needed. “Someone who can afford $1500 is pretty rare,” Chapple observed. “We require candidates [to detail all the money they spend], why not all donations? Or even just those over $50, if you want to avoid the odd $5 here, $10 there.”

Chapple also pointed out that candidates currently only declare their donations over $1,500 after an election is over. “I’m for transparency. We need to make this information all available. When people are choosing who to vote for, they ought to know who’s funding that candidate. It shouldn’t be something that comes out after the fact, as it currently does.”

Rashbrooke didn’t stop there. “I think we should be putting a very stringent limit on the amount individuals can give. I think we should be following Canada and putting a $1500 limit on the amount that an individual can give.”

It’s an approach Leggett disagreed with. “When you are of modest or average means, especially as a young person without an asset base, getting donations is a way of competing on an equal footing ... the consequence [of not having donations] is that only wealthy people can run for office - and if it’s a wealthy person’s game, you can kiss diversity goodbye.”

Rashbrooke agreed. “Obviously, if you [limit donations], you end up with a funding shortfall ... the traditional solution, and the one Canada employs, is just to dole out money.” But just doling out money to politicians through state funding has problems. “It doesn’t incentivise politicians to engage with the public.”

Instead, Rashbrooke recommends the implementation of ‘Democracy Vouchers’, a funding approach popularised by the American city of Seattle. In essence, every voter gets given a small amount of money in the form of vouchers, which they can donate to the candidates of their choice during an election or at the mid-point of an electoral cycle. It’s not without problems, but according to Rashbrooke: “It equalises the influence of average voters over politics, and creates a powerful incentive for politicians to engage with voters.”

Regardless of how radical New Zealand is willing to be, it is readily apparent that reform of some form is required. Without it, the status quo magnifies the influence of the wealthy, tempts elected and unelected officials to favour special interests and incentivises a type of urban planning which is aligned with property developers.

Chapple closed our conversation with a rueful sigh. “If there’s corruption in our country, it is most likely to be found at the local level. Oversight is less, the media is weaker, and there are large amounts of money just sloshing around ... I’d be very surprised if Wellington was rare in this. I think this is very common.”