As debt peaks, Cull talks of asset sales

It is a bit unfair to blame Cull for being unable to influence the stadium's operations.  He inherited the stadium and it now looks like we will be forced to assist the Otago and Highlanders teams to play there because the seat packages were sold on the basis that those teams would be there.  And unfortunately the seat packages money is already accounted for in the build price. 

It was well known at the time of planning the stadium that the Highlanders franchise was struggling and is playing off a small population base which is probably not sustainable without subsidisation.  So here we are with a big empty stadium needing the rugby teams. It is a catch 22 for the mayor and council.  

I want to know how much it is all going to cost the ratepayer,  i.e. the final build price, the operating  and finance costs and any extra money or assistance which will go to Otago Rugby and the Highlanders franchise. It would be good to get it all in the open, but I won't hold my breath.  Likely to be "commercially sensitive".

dunners: The mayor gets a lot more of a vote than I do - but he's one of my representatives on the council. He also has more power than just a casting vote, he gets to appoint committees, he gets to be paid to be there every day while other councillors are more part time, he has a bully pulpit, the ear of the media - Mr Cull also leads Greater Dunedin, the largest voting block in the council - almost all of whom have disappointed us. They seem to forget why the people they replaced were ousted.

Of course someone can stand up alone, it takes some cojones, something the Mayor and a couple of other councillors had when they fought against the financial disaster that is the stadium - it's why we elected them - apparently after the election the ORFU sent the guy with the big knife around and ever since they've sung soprano to the ORFU's tune. Since he was elected Mr Cull hasn't seem to have seen a stadium or rugby funding he didn't like.

MikeStk complains that instead of saying enough, Mayor Cull "hasn't, he's folded at every turn giving in time and time
again".   Perhaps it's a nod to our Japanese sister city Otaru : "The origin of "Hina-Marsuri" ascend to about 1,000 years ago. Making dolls by Origami  (the Japanese art of folding paper into attractive shapes.) was popular among peeress and children in those days" http://otarustyle.blogspot.com/2011/03/dolls-festival.html. Cultural sensitivity may explain why, as MikeStk points out, here in Dunedin we've seen more folds than an origami master-class.

Once again we see the same misunderstanding being demonstrated about the real power of the mayor today as we saw when Peter Chin was mayor. Dave Cull, like Peter Chin before him, is only one of fourteen people sitting around the table making decisions.  Unless the mayor can get support for a cause it ain't going to happen. 

The only time the mayor gets to demonstrate some real power at the council table is when there is a voting tie and he gets to use his casting vote.  This rarely happens.  Mayor Cull cannot "stand up to the ORFU and its mates" alone, just as no other individual councillor could.  This would require a majority of councillors. Yes, there will be claims of backroom deals between councillors, etc. etc. to get the numbers for pet projects and the like, but that is a political reality in any organisation. 

The mayor is a figurehead, a spokeperson, a chairman of the board, if you like.  He has no greater voting power than any other councillor sitting around that table.

It is recorded in the council minutes that in the final vote on the stadium, at the full council meeting, only two councillors voted against it proceeding: Crs Butcher and Stevenson. Let us not try to change history.

Rick: I agree - I actively supported Cull at the last election because I thought he was what the city needed to stand up to the ORFU and its mates - I expected him to draw a line in the sand and say "enough" and hold that line. But he hasn't, he's folded at every turn giving in time and time again, throwing millions of our dollars at an organisation that seems incapable of raising a cent of its own.

Well fool me once - unless we see a big change on Cull's part  in the coming year I'm going to spend a lot of time and money the following year getting him voted out - if we can get rid of Chin for doing this sort of stuff we can get rid of Cull too.

Rat 1512: Yes he did vote against it, then voted them more money, instead of placing it squarely on Rugby and Farry's shoulders. Rugby got the main benefit and now with the last deal seems to have been completely bailed out at our expense. He promoted the bail-out, the separate company should be completely under Council control and not allowed to do these deals without approval. He inherited a big mess but has only made it worse for us, instead of standing up to them

Rick, to be fair, Cull did inherit an impossible situation. There is no quick fix. Selling productive assets is a short-term solution, the return from the city's assets have been contributing to the city's income and we would lose that income stream once the assets have been sold.

If we could only sell the stadium, but of course, no-one would buy it as it's never going to return a dividend.

Cull was one of three councillors who voted against the stadium. It's those who did vote for it that I want to see at least take responsibility for the situation we're in now.

Rat1512, You are so right, they have been so lax in assesing the information given them they must believe in Fairy Tales. Anyone who manages on a limited income knows they can't saddle themselves with more debt than they can pay for. Try raising a large family and you learn economy quick smart.

This lot seem to think they are entitled to be bailed out all the time. There must be a penalty for gross mismanagement of public money, otherwise they will do it again and again. Mayor Cull went in on a ticket of sorting things out. So far he has made it far worse. If he can't fix it pronto, call a new election now.

Given that the obvious cause of the debt is the stadium and everyone except the councillors who voted for it could see this coming, how about the ODT running an online poll:  "Should the DCC councillors who voted for the stadium resign?"

So Mr. Cull is thinking about selling assets.  Well knock me down with a feather.  But wait a minute, in order to sell an asset you need to actually own it.  While most people say that they 'own' their own home, a sizeable proportion actually only own part of it.  The rest belongs to the bank, and it is usually impossible to sell the house without their creditor's permission.

Mr. Cull is likely to find himself in the same position with his proposed flog-off.  Many of us have tried to acquire an understanding of the exact status of DCHL's assets, but we have been actively frustrated in these efforts.  We are not even allowed to know who DCHL is borrowing money off - and as to the exact terms of such borrowings....Well deary me, that’s just too commercially sensitive.

• Read the rest of Rob Hamlin's comment here 

I think that to sell of the water supply and swerage would be galling. We'll be left with a city council that simply runs a rugby stadium for the benefit of a few old people who lack the passion to stand up in the rain for a ball game. If the DCC can't run the core infrastructure then what is the point in its existence?

russandbev says "the first thing that we ratepayers should have is the results of a full forensic independent financial investigation and report into all the city's entities including DCC, DVL, DVML, DCHL and of course the Carisbrook Stadium Trust".

I understand that to initiate an investigation of this kind, the council must vote to allow it. Oh dear.

russanbev: I agree - one of the problems with the sidebar graph on this article is that it gives a lot of information and almost none at the same time - it contains a table labelled "Council debt" that contains a list of projected expenditures (not debt) and doesn't even include the expenditures in recent years that are responsible for the bulk of the debt - projected expenditures are largely unrelated to the debt problem except that we can't expect to spend much because of the debt, it's not surprising the numbers are small.

The green graph of the total debt, as you say, doesn't include the stadium debt that's been shuffled off into the DCC companies. Moving the stadium debt to the council companies was a smart move, it allows the council to write it off as tax losses against the profits of the council companies, but we shouldn't pretend it's not there and the council has been less than honest with its ratepayers: with the loss of these debt rates should have gone down by the amount the DCC doesn't have to pay on the stadium debt (about $15m a year), while the DCC company's rates rebate should have gone down by the same amount less the tax advantage (about $10m a year). The ratepayers should have been better off - we're not - our rates have not gone down while the rebate has.

What is really scary though is that blue line at the bottom. That's what it's going to cost us each and every year to service the debt. At the moment the council is actually borrowing money to pay those interest debts - if you want to see the real cost of the debt that blue line should be cumulative, not just a yearly cost - at $40m a year over 20 years it will grow to almost a billion dollars - and probably should be in red rather than blue.

I am not surprised that Mr Loughrey doesn't mention the total consolidated debt that the ratepayers of Dunedin are currently exposed to.  In my experience there is an unwillingness to acknowledge this vital piece of knowledge, and an unequal unwillingness to acknowledge that a significant part of the city's debt is due to the lack of any unencumbered private funding for the stadium.  It is also not surprising that Mr Loughrey does not report that our level of debt per ratepayer - which is a much more sensible way of measuring whether it is affordable or not - is currently running at something like six times the national average.

This is why the first thing that we ratepayers should have is the results of a full forensic independent financial investigation and report into all the city's entities including DCC, DVL, DVML, DCHL and of course the Carisbrook Stadium Trust.  Only then will we be happy that nothing is being hidden.

I know 2012 is a leap year, but normally the extra day is restricted to February, not June as well.

MikeStk, your observation regarding 'abridgement' struck a raw nerve. A few days ago I submitted a letter to 'Ed.ODT'. It was long, rambling, and I didn't think it had a show of ever being published, but sufficient of merit was seen in it to have warranted its publication on the 'op-ed' page, as an article. For that purpose, it was condensed from 1400 words to 900, something for which I gave my OK on the basis that it be truncated competently, which, by and large, it was.

'Letters', as something of a public safety-valve doesn't encourage the witless ranters of talkback radio; it encourages people who have taken the trouble to sit down, and express their thoughts in written form. Unfortunately, the 150-word limit of the ODT tends to encourage only the trite and trivial, and that is what we tend to get.

Sadly, a 150-word limit usually requires herculean efforts to fit a cogent argument into a very confined space, and having taken that trouble, or put valiant efforts into the attempt, it is galling to have the red pencil put through what remains by someone incapable of even recognising the crux of the argument.

So, do what I do MikeStk; if as much as one word has been altered without your OK, or an acknowledgement of 'abridgment', disclaim any responsibility whatever for its content on the basis that it is no longer an expression of what you think, but partly that of someone else. Emasculation of my arguments, I can sometimes tolerate, but never, their mutilation beyond recognition.  [abridged - correspondents are reminded of the following from our rules and guidelines: Comments may be edited for length and clarity - Ed]

My word, but those flapping wings of the chickens coming home to roost are deafening. My guess is that most of them will home in on the stadium to roost. Be a plesant enough place to squat, and the 'guano' will work wonders on the turf. 

Oh so predictable, oh so catastrophic for the citizens, oh so embarrassing for the councillors who facilitated this debacle.

Let's start with the stadium with its high valuation. That should get rid of the majority of council debt. All those wannabes who have been singing the praises of the stadium should club together and buy this great asset. The only covered stadium for rugby in the country. I am sure the NZRFU would jump at the oppourtunity, especially after all the great build-up they gave it during the world cup.

I wrote something titled "It's all about the water" below and then didn't actually say anything about water - that bit was abridged out.

What's not being said here is that the council can't sell any of the council companies - they're where the money to pay the DVL debt is coming from; the result is that that money goes to the stadiumand doesn't go to ratepayer rebates. We all pay that much more. The DCC can't directly take ratepayer money and give it to DVL (for tax reasons, the whole purpose of creating DVL in the first place) so the council companies can't go away.

Really the only choice the council has is to sell off the city's water supply. The city has a long-term problem - as reported in the ODT the city is looking at a billion or so dollars of work over the next few decades to repair our aging water and sewerage infrastructure - look at how long it's taken to build Tahuna, we don't exactly have a good track record in long term planning for critical infrastructure.

What does it mean for the ratepayers? Well, we'll all get water meters and start getting water and sewerage bills from a private company, they'll add in a profit of course, and enough extra to pay for the cost of the capital to buy the water system and to finance their resulting debt. The city will (hopefully) use some of that money to pay off the city's debt.

So instead of our rates paying off city debt the ratepayers are now paying off private debt (plus a profit) - nothing's changed, the city's just moved their debt elsewhere but still stuck the ratepayers with it - our rates will go down for a while, the councillors will crow about what a great job they are doing, but we'll all be paying more than we were before.

We have been telling our dear councillors for years that they have been wasting our money. Yes, our money, not theirs to play with. We have to foot the bill for every one of their spending sprees. Their choice now is easy - sharply cut expenditure, put most of their proposed projects on hold , except the most urgent and raise the rates. Keep our assets and give the councillors lessons on business management skills.

One last thing - make the councillors responsible for their bad decisions by a pay cut; they might think twice then 

Shouldn't we be looking at total consolidated debt across the 100% ratepayer-owned entities?  Transferring the Stadium debt to DVL (which will require significant ongoing ratepayer support just to operate, in addition to servicing the debt) does not mean that the debt disappears.  Such obfuscation won't get rid of the problem.  

I would prefer that the Council is totally transparent with the debt costings and other predicted operating expenses.  Waiting for inflation to erode the debt bubble as suggested by Mr Stephens is a stategy which surprises me. It hasn't been a roaring success for debt-laden nations in the Eurozone or the US. 

What if interest rates go up? What if there is deflation of assets and the loans end up being greater than the assets?  Luckily for the DCC, the ratepayer can be tapped for ever-increasing rates increases and amenity charges to pay for the past council's grandiose projects . Can't wait.

Before considering asset sales, the council should cut its spending.   There is a large amount of unnecessary spending which could be trimmed and the bloated bureaucracy could  be put on a diet.

Good heavens, does not even the mayor understand? - just because you hid the debt behind a curtain when you transfered the debt to DVL doesn't mean it doesn't still have to be paid off - it doesn't mean you can think about spending up big  again.

Who's paying for that DVL debt, or the interest on that debt? The ratepayers are through their rates - the citizens' rates rebate from the DCC companies is being soaked up servicing the stadium debt - if the city starts spending again our rates will both go up at the same time as the rebate goes away - we'll all be stuck with the bill - sure it looks good on the council's

The council decided to build the stadium,  perhaps it should be the council that doesn't get to do any other big spending for a decade or two - deciding to sell of council assets just so that they can start spending again is a mistake.

If the mayor and the council want to  start spending money again they're going to have to find a way to pay down all the debt to a level where little old ladies on fixed incomes can continue to afford to pay their rates and for their water into the future. [abridged]