Dunedin Mayor Dave Cull
The Dunedin City Council must share the blame for
multimillion-dollar losses incurred by Delta from its failed
property investments at Jacks Point and Luggate, Mayor Dave
Mr Cull was commenting on the findings of the Office of the
Auditor-general, which yesterday released its report into
Delta's property investments, after more than a year's work.
Delta spent $14.17 million on the properties in 2008 and
2009. It now expected a loss of between $6.4 million and $8.7
million, with the amount to be confirmed by the end of the
year, the report said.
Auditor-general Lyn Provost gave Delta credit for approaching
the investments cautiously and carefully, and for avoiding
conflicts of interest, but detailed a list of failings that
contributed to the losses.
That included Delta's failure to adequately assess risks
associated with the investments, or take appropriate advice,
even when asked to, and breaches of the Local Government Act
and Companies Act.
It was also criticised for its involvement in creating a new
company designed to thwart proper public scrutiny of its
Delta's parent company Dunedin City Holdings Ltd failed to
provide proper oversight, due to the shared membership of
both companies' boards at the time.
The council's inadequate governance role was criticised for
pushing its companies to maximise dividends to help pay for
Forsyth Barr Stadium, which led to riskier investment
The investment in Luggate had proven to be ''a mistake'',
while that in Jacks Point was flawed in hindsight, and both
proved to be ''expensive lessons'', Ms Provost said.
''We consider that there are lessons to be learned for all
involved,'' Ms Provost said.
The report cleared Delta and its directors of any impropriety
or conflicts of interest, and made no recommendations for
changes to any party.
That was largely due to the work already undertaken by the
council to restructure the governance arrangements of its
companies since the completion of an independent review by
Warren Larsen in 2011.
That included separating the membership of the DCHL board
from its subsidiary companies, and appointing a new council
group chief financial officer, Grant McKenzie, to improve
Mr Cull, addressing media yesterday, said the
Auditor-general's report - and lack of recommendations -
showed the changes had been effective.
However, the council ''clearly'' had to share the blame for
what had transpired, which was ''a very unsatisfactory state
''The council demanded dividends but wasn't prepared to take
responsibility for the risk entailed in achieving them,'' Mr
Council chief executive Dr Sue Bidrose insisted the council
had turned a corner since then, but Delta's losses had
nevertheless fuelled the need for cost-cutting within the
''It has contributed to our requirement for belt-tightening
which has gone on over the last three years. It's certainly
not made it any easier,'' Dr Bidrose said.
DCHL chairman Graham Crombie said it was ''pleasing'' many of
Delta's processes had been deemed appropriate ''and some of
the rumours out there were not true''.
Those steps included removing director Mike Coburn from the
investment process because of a perceived conflict of
interest, which robbed the company of much-needed experience
in property investment, Ms Provost's report said.
Mr Crombie said Delta now had a better understanding of the
need to focus on less risky business that did not tie up
cash, as property investments did.
''The delightful thing for me is it's very rare for an
Auditor-general's report to have no recommendations, and this
one has no recommendations.''
It had been made clear to the company the days of creating
new companies to avoid transparency were over, Mr Crombie
Dr Bidrose said she had attended DCHL's last board meeting,
and reiterated a need for transparency and clear
communication with the council and ratepayers.
''We are making stern efforts, right across the board, to be
open and transparent with the people that pay the bills.''
The report was welcomed by Delta chairman Dr Ian Parton, who
said in a statement he was ''pleased'' the findings included
that directors approached the investments ''cautiously'' and
made ''careful, well-supported decisions with appropriate
governance and oversight''.
Cr Lee Vandervis - who, separately from Mr Cull, also
complained to the Auditor-general about the investments -
criticised the report.
He said it identified those responsible for the flawed
investments, and some of their questionable practices, ''but
then fails to deliver the necessary basket of rolled heads''.
Auditor-general's key points
- Delta cleared of impropriety or conflicts, but failed to
adequately assess risks, or take appropriate advice, in some
- Also breached Local Government Act and Companies Act.
- Dunedin City Holdings Ltd failed to provide proper
- Dunedin City Council pushed companies for more dividends;
failed in governance on investment risks.
- Deals to cost Delta between $6.4 million and $8.7
- No recommendations made, but ''lessons to be learned for