DCC expects $6m dividends drop

The Dunedin City Council could be facing more multimillion-dollar holes in its budget, with Mayor Dave Cull warning the city's financial fortunes will get worse before they get better.

The blunt assessment came as a $6 million drop in annual dividend payments from the council's group of companies was forecast for the next few years.

Statements of intent for six companies under the umbrella of Dunedin City Holdings Ltd - the council's holdings company - were presented to the council's finance, strategy and development committee last week.

The statements included details of any dividend forecasts from the companies to DCHL, which used the income for dividend payments to the council.

The statements forecast Aurora Energy Ltd's annual dividend to DCHL would drop by $5.3 million a year in two years, from $12.5 million in 2013 to $7.2 million in 2015.

Delta Utility Services' dividend would also decline by $1.7 million, from $4.5 million in 2014 to $2.8 million the following year.

City Forests Ltd's dividend would buck the trend, growing by $400,000 over two years, from $2.4 million in 2013 to $2.8 million in 2015, its forecast showed.

Dunedin International Airport Ltd's dividend would rise from $396,000 in 2013 to $1.3 million in 2015, but DCHL's 50% stake meant it would only get half, and Taieri Gorge Railway Ltd was not expecting to pay dividends "in the near future".

DCHL chief executive Bevan Dodds told the ODT whether the holding company could maintain its annual dividend payments to the council was "an unknown".

"You're talking about the future. We don't know what's going to happen out in the future.

"By the time we get out to year two or three, I think we will be in a different world."

However, Mr Cull said further reductions in DCHL dividends to the council were "a possibility" and something the council was already conscious of.

"The positive thing to take out of that is we can see that coming.

"It's not completely clear, but you've seen it and we've seen it.

"We are conscious of this, quite clearly - that things are going to be tougher for a while before they get better."

His comments came after Mr Dodds in May confirmed tough market conditions had forced a $2.5 million reduction in DCHL's annual dividend to the council, from $18.2 million to $15.7 million, beginning in 2012-13.

That contributed to a $4.1 million hole in the council's 2012-13 budget, revealed just as budget hearings began, and came after the holding company last year reduced dividend payments to the council and DVML by $8 million.

Those holes had been plugged, but Mr Cull said the council still had further work to do to find the savings needed to meet its self-imposed rates caps of 4% in 2013-14 and 3% the following year.

Asked if the council would now also have further DCHL shortfalls to deal with in future years, Mr Cull said, "Put it this way, it won't surprise me."

Just how those savings would be found was still being considered, but the council was continuing its push for internal efficiencies that did not reduce service levels, he said.

Mr Dodds agreed a reduction in companies' dividends to DCHL meant the holding company would have to find more money elsewhere to sustain council dividends, but would not be drawn on "the future".

"What happens out there, I really don't know."