Council battles to limit rates rise

Dave Cull.
Dave Cull.
The heat is on the Dunedin City Council's targeted 3% rates rise as councillors prepare to debate unexpected demands for extra funding, Mayor Dave Cull says.

Mr Cull told the Otago Daily Times yesterday he still hoped the council's stated aim - of limiting any rates rise for 2014-15 to no more than 3% - could be achieved.

But he acknowledged emerging demands for extra funding not yet included in the council's draft budget for the coming year were putting the council's books under pressure.

Councillors would have to decide whether to try to do everything, and risk a rates rise higher than 3%, or allow some projects to fall by the wayside, he indicated.

''We could meet the 3% target by just not doing some things. Clearly though, if we try and do a lot more than what we had anticipated, it would be harder to do it within the 3% limit.''

He was not in a position to judge the appetite for either around the council table, ahead of budget deliberations beginning this afternoon.

''I honestly don't know. I can only express my view.''

His comments came after he and councillors heard from more than 170 submitters, from the 1119 who made written submissions, over three days last week.

The result was a list of requests and decisions, big and small, which would be debated by councillors during the next four days.

That included a suggestion the amount paid to Dunedin Venues Management Ltd each year should rise by $715,000 a year, to offset losses by Forsyth Barr Stadium, on top of a one-off $2.271 million to repay DVML's debt.

The additional annual payment would come from savings the council made on interest payments this year, while repaying DVML's loans faster would achieve ongoing savings in future years.

The proposal was among 19 council staff reports to be considered by councillors this week, some of which could have significant implications for the coming year's budget.

Mr Cull said the call for extra stadium funding was not unexpected, having been signalled earlier this year, and needed to be addressed.

''Regardless of how you feel about the stadium and how it's operating, the fact is they can't run at a loss. It has to be found somewhere.''

Paying down DVML debt would, in turn, generate ongoing savings by eliminating debt servicing costs sooner, he said.

A report by council financial planner Carolyn Howard listed last-minute changes to the draft budget for 2014-15, resulting in a $23,000 saving.

It also listed four as-yet unfunded items to be considered for inclusion in the budget, including the expected $300,000 cost of transferring public transport governance from the Otago Regional Council to the DCC.

Work on a St Clair sea wall risk management plan - also unfunded - was expected to cost at least another $95,000, and an invest-to-save option - installing energy-efficient lighting in the Civic Centre - was expected to cost another $65,000 up front.

There was also the as-yet unknown cost of a South Dunedin Community Complex shopfront to be considered, Ms Howard said.

Savings identified within the council's carry-forward budget amounted to $445,000, while funding sources for public transport governance changes were still being explored, she said.

Mr Cull told the ODT the financial implications remained uncertain ahead of this week's deliberations, and emerging demands for funding had put ''a lot of pressure on''.

However, he hoped the council would stick to its 3% target.

''In principal, I'm keen to stick to that myself. That's obviously a council decision, but I think the community has taken considerable reassurance in the last couple of years, as we've managed to hit the targets we've set without going over.

''I would like to keep faith with that.''

 

Stadium

I have just listened to ALi Copeman speaking on RNZ (9mins in) about the stadium. Ali does present some facts to which we as ratepayers do not appear to be privy and then trots out the same line about making it work and using it. It has limited potential as a true public multi-use amenity and competes with the private sector in some respects.

The ususal unsubstantiated economic benefits are trotted out with no acknowledgement of the huge negative financial impact it currently has or it's future negative economic impact when further borrowing will be required for deferred maintenance.

Ali Copeman also compares the rates charge of the stadium and the library. Sorry Ali, the library is not just about books. It is also an information, tourist, event and social hub. It has been established for over a hundred years and continues to provide tangible benefits to the community.

Rugby as the primary beneficiary of the stadium needs to pay its fair share of the operating cost plus the $50 million in promised private sector funding. Then I will, like many others, will be satisfied.

Time to face facts, time for bold action Mr Cull

Plan to sell, shut down the staduim or have rugby and all its supporters pay what it costs to run, service its loans and maintain at the gate  asap.

A 1.5% rates increase should then be no problem what so ever and in line with current inflation.

This will provide far more affordable rates for Dunedin ratepayers who are on fixed and low to med incomes.

In the time it takes to achive this cut spending for all but core council services and pay down debt. "Stop spending"

As it is this Stadium disaster continues sucking this city dry at the expence of almost everything else.

Ratepayers will not support councils continued funding increases intended to prop up the current terminal condition that is the stadium.  

The demards for action on this matter will only grow louder over time act now.  

Mothballing the stadium is a money saver

It would not surprise me if agreements between various parties would make it very difficult for the DCC to mothball the stadium.

A 'back of the napkin' cost benefit analysis will clearly show that mothballing the stadium, ignoring the impacts of breach of contract, falls greatly in favour of the ratepayers.

It is breaching the contractual obligations that may make mothballing the stadium untenable. Without access to the 'commercially sensitive' information it will be hard to prove. 

Mayor's quote

I too wondered at this quote, but it seems that Mayor Cull was being directly quoted when the ODT prints (in quotation marks) the following: ''Regardless of how you feel about the stadium and how it's operating, the fact is they can't run at a loss. It has to be found somewhere.''

But they are running at a loss.  A huge operational loss each and every year, and every year this loss compounds the issue that may be addressed by the latest review announced by Dr Sue Bidrose.  But no matter what the review finds and what it might recommend, it is simple arithmetic that the stadium costs way more to run than it attracts in revenue.  That is a demonstrable fact. 
The only solution to this problem is to charge way, way more for the users - and this means professional rugby - or to cut the costs, and this includes the prospect of mothballing the stadium.  No-one has yet provided any financial evidence to show that keeping it open and generating millions of costs is better than simply mothballing it.
The only thing that would be really lost would be the loss of face by those few that rammed the decision through to build it. 

Protecting private enterprise

badkiwi: the stadium runs at a loss for the same reason that the ORFU ran Carisbrook at a loss - because it charges less to use it than it costs to run. This is an easy problem to fix - any kid running a lemonade stand figures this stuff out on the first day.

You're right that in no private company or private business this sort of bail out would happen - and in fact, as I allude to below, the Local Govt Act limits how a council can fund a council controlled trading organisation like DVML, so that it can't unfairly compete with the private sector - it states:

"A local authority must not lend money, or provide any other financial accommodation, to a council-controlled trading organisation on terms and conditions that are more favourable to the council-controlled trading organisation than those that would apply if the local authority were (without charging any rate or rate revenue as security) borrowing the money or obtaining the financial accommodation."

In other words if the council can't get its own bankers to bail it out for free, it's not allowed  to bail out DVML under the same terms.

If DVML is charging too little for renting out its space it has a simple solution, it should charge more - after all it now has a monopoly and owns the only stadium in town.

SOS our stadium

The stadium that runs at a loss because it is just under utilised. The city needs attractions a plenty to keep this afloat and regular at that. I do not see why if the stadium has management to run it why do the rate payers have to bail them out if they make a loss, in no other company or a private business would this be happening. Dunedin has not acted fast enough and with Christchurch hot the heels to build a great stadium our one will not stand a chance. This city needed to have the gateway made more approachable with a extended runway so to land the larger planes that need to land with the bigger attractions gear , this is a blockade to big acts in bands . This stadium now only good for rugby of which to there are not enough major games, the tests we get now will soon be disapearing to other major NZ  centres . Cmon Dunedin time's running out fast.

3% is too high

The Reserve Bank shows a NZ average inflation rate of 1.3% over the past 4 quarters - there's no reason why rates should go up by more than that unless someone's being too greedy and asking for more than their share of the pie.

Rates increases at the inflation rate are OK and expected. One would expect that DCC rates increases would average out at the inflation rate over the long term, sadly for those among us on fixed incomes rates have been going up at rates way above inflation compounding year on year for the past decade. It's time that our rates increases were below that of inflation for a number of years to help us get back to where we used to be.

So rather than raising rates yet again it's time the DCC started cutting some of the fat, let's start with DVML - the $2-3m that DCC wants to funnel to DVML to pay for the money it lost putting on rugby games is likely not legal in my opinion, so let's not do it, instead charge rugby enough for the use of the stadium to cover the actual costs of opening it.

Remember every million dollars we don't use to prop up rugby is 1% less on our rates, having rugby pay for their own fun would reduce the DCC's rates rise below inflation which would be good for all of us.

Red is red

''Regardless of how you feel about the stadium and how it's operating, the fact is they can't run at a loss."  But it does run at loss, a huge one every year, so that statement only makes sense in  Mayor speak.

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