Property expertise to be sought

The Dunedin City Council wants to recruit a panel of experts from around New Zealand as part of a push to increase returns from its $95 million investment property portfolio.

The move was signalled at yesterday's council 2013-14 pre-draft annual plan meeting and would lead to a report detailing the change being prepared within months.

Council governance manager Sandy Graham, in a report to yesterday's meeting, said the investment portfolio was governed by a subcommittee of four councillors, which had the power to approve sale, purchase and developments of up to $5 million.

It was expected the move to an independent subcommittee and the recruitment of additional property expertise could increase returns to the council.

The change was also in line with recommendations contained in the Larsen report last year, which recommended a list of changes to the council and its group of companies.

That report warned property investment could be ''high risk'' without a carefully prepared strategy, and recommended the council's arrangements be replaced by a new board structure with additional expertise.

A review by consultant Mark Petersen, of D. H. Flinders NZ Ltd, also presented yesterday, recommended an independent subcommittee to remove any ''potential for political influence'' over the fund.

Council chief executive Paul Orders said the cost of recruiting and paying members of the new subcommittee could be absorbed into existing city property budgets, without affecting its dividend to the council.

Cr Neil Collins worried it would be difficult to recruit truly independent members for the subcommittee, but Mayor Dave Cull said that was why recruitment efforts would stretch across New Zealand.

Cr Syd Brown, chairman of the council's finance, strategy and development committee, said the portfolio was too heavily weighted towards investments in Dunedin, and needed to diversify beyond the city's borders.

That needed to be considered when the council recruited new talent for the subcommittee, he said.

Ms Graham's report canvassed options including the creation of a new council-controlled organisation for manage the portfolio, headed by an independent board of directors.

Her report made no recommendation, but councillors opted to pursue plans for the subcommittee and a report is to be prepared by May.

Yes it does

Correct ej. It does clarify my position - not that I have to clarify it or indeed justify it.  I am one of the silent majority in this city who has had enough of the negativity of the DAPL. Those of us on the positive side of the fence are also allowed to have our say.

Fish fining

That certainly clarifies the field on Claret Kiwi.

Silence speaks volumes

Well I've waited nearly a week for Farsighted to tell us how he (or she) gets his (or her) information on how City Property works.  But the silence is deafening.

Perhaps it is a case like all the vitriol and mis-information which comes out of the DAPL - supposition, hearsay, guesswork, and taking incorrect information from the internet and the paper as gospel.

I know for certain that what Farsighted was spouting in this thread was wrong.

How do I know? Because I was a Senior Manager in City Property.  I therefore know exactly what went on.

So people, don't believe everything that you hear. And certainly take what you hear from the DAPL crowd with a massive pinch of salt.

Unidexter

Put it this way. The Council is down to one leg. It is a good one, we have nothing against the remaining leg. The problem is, neither does the Council.

Not a leg to stand on

EJK: not only councillors may have ' not a leg to stand on'.

Neglect of underground water infrastructure can result in holes opening in the ground beneath you!

There are occasions where this has already happened in Dunedin. If it's on public land, the immediate failing portion just gets patched up.

If it's on private land, the property owner gets the bill. And neither EQC nor home insurance cover what ends up getting called  'subsidence'. 

 

Surveillance

We need greater numbers of intelligent querulous individuals, like farsighted, prepared to study and monitor the splendour that is our Dunedin City Council - rigorously, ethically and forensically, for the good of this community.

The citizens of Dunedin - and the rest of New Zealand - are now fully aware the council is "heavily indebted". However, accountability is creeping in, at long last. The cupboard doors aren't staying shut, the sums are too large. Some of the flavour: The council is on notice to Standard and Poors, of a credit rating downgrade if the Auditor-general's investigation proves the existence of serious conflicts of interest associated with (Delta) property deals and service contracts at Jacks Point and Luggate. The council has been in court over its handling of the realignment of SH88 (around the stadium), adversely affecting the business of Doug Hall and his companies. There's massive cost associated with council having to re-notify the notice of requirement (NOR) for the highway and settling all affected property owners. Oh, the accumulating losses of the stadium project; things were bad enough but now we find councillors lurching into multimillion-dollar face-saving spends for the associated council-owned companies.

Then, the matter of the lack of insurance cover for a great many of the council's under and above ground infrastructure assets. The list (items acknowledged by independent journalists and the news media) goes on - with more outages in the wind for cracker stories. All the result of extremely poor and inadequate decision making and financial management - on the part of councillors, council staff, company directors, agents and consultants of the council. It's surprising the DCC has a leg to stand on.[abridged]

Insider knowledge?

Farsighted - you seem to have a lot of knowledge of the inner workings of the Council.  It would be interesting to know where you got this from.

Double standards

It makes me laugh how people say that the Council's investment portfolio should be sold to pay down debt, but you can guarantee that they will be the exact same people who are so vociferous and against the government's asset sales for  exactly the same reason. 

Not correct

1. If the investment portfolio was liquidated, rates would rise.  The portfolio makes a profit every year, and that profit reduces the rates bill in perpetuity.

The profit made by City Property has to be offset against the interest costs of the current debt across the Council group.  The most recently reported profit figure was $7.1 million.  The stadium costs $9.1 million per annum and this does not take into account interest costs.  The true cost is closer to $20 million.

2. However, the investment portfolio cannot be sold.  It is an endowment fund.  The proceeds of any property sold by the endowment fund have to be reinvested into the fund.  If you don’t believe me, I suggest you do some research.

This applied to the original leasehold endowment land and only to property owned within Dunedin City with those funds.  It does not apply to the overall portfolio.  There is also no reason why the nature of the portfolio cannot be changed.  Council would be reluctant to do so, as currently they pay no tax on the endowment portion of the fund.

3. City Property had nothing to do with the SH88 realignment.

I refer you to this 

4. City Property had nothing to do with the stadium transaction negotiations.

Again, not correct.  City Property was involved in these transactions as the land transfers were improperly handled by
Roading and Transportation.

[Abridged] 

get rid of debt first

Spot on, Farsighted.

Let's put a few things right

Dunners – I am not anti-Council, far from it.  I just cannot understand though how a City Property Investment Property Manager could be made redundant 3 years ago and now it is being proposed that external advisers with exactly the same skills are brought in.  It just doesn’t make sense.

Farsighted – I think I need to educate you on a few things:

1. If the investment portfolio was liquidated, rates would rise.  The portfolio makes a profit every year, and that profit reduces the rates bill in perpetuity.

2. However, the investment portfolio cannot be sold.  It is an endowment fund.  The proceeds of any property sold by the endowment fund have to be reinvested into the fund.  If you don’t believe me, I suggest you do some research.

3. City Property had nothing to do with the SH88 realignment.

4. City Property had nothing to do with the stadium transaction negotiations.

5. If City Property was dissolved, as you suggest, who would manage the Council’s operational property portfolio – the Civic Centre, the public toilets, the community halls etc etc? They would not manage themselves.

So no, I don’t think you can help here.

Not so fast

farsighted, we both know any cash jangling around is fodder for council politicians and their own agendas (or those of their friends). How many more times do people want to be done over by DCC? Thinking about where we've been to date, having investment property outside the council's own geographical area still makes sense - tempered by what latest amendments to the Local Government Act actually require. That's not totally clear, I suspect, until legally tested. Council's problem has always been where it goes to seek advice, but strong advice it surely needs.

Free advice

I can help here.

Liquidate the property portfolio.  Dissolve the office of City Property.

The manner in which transactions relating to the stadium, SH88 realignment and others have been conducted strongly indicates that City Property does not have the expertise required.  However, instead of continuing to manage the portfolio, the best outcome is to liquidate it and use the proceeds to pay down debt immediately.

You're welcome. 

Classic situation

It's a classic example of the DCC being damned if they do and damned if they don't.

Don't get expert help (because it isn't necessary) and half the population are up in arms because council staff are incompetant (I don't actually believe this).

Call in some extra expertise and the other half criticise them for wasting money.

Why the need for experts?

Isn't that what the City Property department is there for?

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