Council debt to peak at $600m

Cr Neil Collins said he had "skimmed through" the reports, but was reluctant to comment.

"There's nothing that can be done, really. I guess wiser minds than mine know what they are doing."

Some hope!

He was elected on behalf of the community to be that wiser mind - maybe this explains the mess.

The new CEO is on the right track, all we need do now is replace the remaining councillors that made the mess in the first place. 

Mike,

I'm dedicated to having your concerns eased.

With that in mind I couldn't see why you were saying I was planning on saving rugby rather than the City until I re-read my post. Which of course was somewhat garbled. I am planning on saving first the City and secondly rugby.

What I meant to say was that my strategic plan which I offered the City free of charge, would set Otago/Southland rugby up in a self sustaining way for the forseeable future; AND would provide immediate funds to the City in the amount of approximately $150 million, thereby enabling it to significantly reduce its debt. Thereafter it would provide on an annual basis permanent positive cash flow in the form of dividends to be received.

Now that the Stadium issue has been shown to be capable of resolution we need to find another financial challenge in Dunedin to resolve. I'm sure that others will exist.

Colvin: I agree the cash flow is the important thing, that's why I included an estimate of the 20 year real cost - $24,000 per ratepayer, the $12,000 number is just a step along that path.

Since the stadium loses us money every time it opens it's not an asset that helps with our cash flow, it doesn't contribute one red cent to paying off its own debt, instead we have to subsidise its every opening - the incoming cash flow we're using to pay for the stadium is not from ticket sales, nor is it from the council companies (they're borrowing it, digging a deeper hole), at the moment it is solely from our rates.

I'm glad you have a plan to save rugby - but frankly that's not what we need here, what we need is a plan to stop corporate rugby from taking more from stadium ticket sales than it costs to put on game - at the very minimum operating the stadium should break even.

I hope the Highlanders will go too, the fewer rugby games in the stadium the less money we will lose and lower will be my rates.

Mike,

While it's an interesting statistic that each ratepayer is on the hook for $12,000, in reality it only has relevance if it is likely to be called in anything like the short-term, which it isn't.

Of more relevance is the cash flow. Is enough revenue coming in to meet the debt repayments and interest as it falls due? It seems from the above article there is.

Debt isn't necessarily such a bad thing. It can ensure you have facilities and assets that you would not otherwise have, therefore, hopefully, enhancing lifestyle. But you need to be able to pay it off from incoming cash flow.

In any event your biggest beef is with the Stadium. Since I've provided the city with the formula to refinance the whole structure of rugby in the bottom half of the South Island to its benefit it seems you will be able to put your concerns to rest.

Go Highlanders.

Of course council debt doesn't go away by itself. With the council companies borrowing more money in order to pay their dividends to the council, $23m this past year alone, it will fall on the long suffering ratepayers to pay off all of this debt - $600m spread across 50,000 ratepayers means that on average we're each on the hook for $12,000 - plus probably another $12,000 in interest on the debt - heaven help us if something important happens, like an earthquake, or a breach of the St Kilda dunes.

By the way,  it's very disingenuous to claim you saved $100m in interest by reducing the stadium debt payment term from 40 years to 23 years if, just a couple of months before, you had increased it from 20 years to 40 - in reality what you did was increase it from 20 years to 23 and actually increased the total amount of interest you would pay - want to really reduce the stadium interest payments? pay it off in 10 years instead, that way you aren't soaking the next generation with your follies.

Based upon the $616m debt figure, which is not necessarily the correct level of debt, each ratepayer owes $10,807.  Compare this to Kaipara where a debt level of $4,395 per ratepayer was considered to be unsustainable and a commissioner was appointed by Government.  This Council is out of control and does not yet recognise that the decision to build the stadium based on the PWC proven falsehoods was wrong, and by the continued pouring of money into keeping it open makes no sense whatsoever.