The Dunedin City Council will underwrite Otago Rugby Football
Union debt for the next three years as part of a deal which
includes the purchase of Carisbrook for $7 million.
The council confirmed the cost yesterday, and that the Otago
Rugby Football Union had repaid a $2 million loan to the
council.
As for the future of the facility, deputy mayor Syd Brown
last night said any decision would have to take into account
the ground was not debt-free, and overheads had to be
covered.
Individuals and groups like the New Zealand Historic Places
Trust had said Carisbrook could make "a lovely park", he
said.
"I'm sure it would make a lovely park, but it would be a
bloody expensive one."
Mayor Peter Chin said last night he was comfortable with the
Carisbrook deal, because it was based on an independent
valuation.
Asked if the ORFU had a moral responsibility to ask only for
a nominal sum because it would benefit from the new stadium,
he said it did not.
The union would pay market rental there, and would not have
exclusive use of the multipurpose venue.
"They're not getting anything for nothing."
Cr Brown said negotiations were finished last week.
The ORFU had been paying 4% interest on its loan, something
that was "a huge advantage" when the loan was taken, but was
now closer to average interest rates.
Ownership of the ground would not cost the council for the
next three years, because the ORFU would pay rental equal to
the interest the council would pay on loans it took to buy
the ground, and the union would maintain, operate and insure
the facility.
In return, the council would guarantee the interest on the
ORFU's "seasonal debt" for three years, up to a figure of
$1.2 million.
Cr Brown said the union had credit in its bank in winter, but
that changed in summer.
The bank had, in the past, offered finance during that
period, using Carisbrook as security.
"As of today, all they own is a few tractors," Cr Brown said,
so the council was stepping in as guarantor.
The council recognised the importance of the site, and
decisions on its future would only be made after analysis,
and discussions with the community and stakeholders.
Details of how much each of the three packages of land were
worth - Carisbrook, the car park and housing on Burns St -
would not be made public because the council deemed they were
commercially sensitive.
$7 million - and counting...
We have today, in the D-Scene (page 6), from ORFU chief executive Richard Reid, confirmation that, not only was the deal between the CST and the ORFU to purchase Carisbrook in place 'prior to me arriving'. ie 2007, but that the stated price of $7M 'hasn't cleared the complete debt but it does potentially, make things easier.' Sure, easier for the ORFU - not Dunedin ratepayers. We are sinking silently into a bottomless morass. Much like many of the 'rock-solid' pilings.
Imagination running away
Richard, my imagination may well be running away. That can happen at our age, as I think you will agree. However, cast your mind back to when I asked you to explain (just this afternoon, remember) why the $95m raised by DCHL before December 2008 could, or should not have been part of the $97.928m. shown in the 2009/10 column in the LTCCP. It seemed a reasonable request seeing as chairman Paul Hudson explained that DCHL had borrowed the sum in anticipation of DCC's requirement. It is an important point as the overall debt position could be plus or minus $95m.
Richard wherefore art thou?
I am waiting for your confirmation, or otherwise, as to whether a component of the $97.928m funding shown in the LTCCP for 2009/10 is the $95m as raised by DCHL in 2008, "in anticipation of DCC requirements," as stated by DCHL chairman Paul Hudson.
Some mail has obviously not "got through" ....
The answer is no.
The mail has arrived
So Richard, the answer to my question, "was the DCHL's $95m part of the $97.28m shown in the LTCCP for 2009/10", is no.Can I ask therefore for what purpose, and when will the $95m be drawn down from DCHL by the DCC? As DCHL chairman Paul Hudson clearly stated in the six monthly report ending 31Dec/2008 this sum was "borrowed for anticipated DCC requirements." As the Finance & Strategy committee chairman you must surely know this. It is simply not believable that you can't answer this, unless it is that you won't.
No, I do not agree
You can speak for yourself. What you are suggesting - that DCHL would borrow to lend to the DCC - is well beyond the realm of "imagination".
You do not agree?
Then why did DCHL chairman Paul Hudson, when announcing the raising of the $95m by DCHL, state that it was for "anticipated DCC requirements"? It is there in black and white in his statement to the half yearly accounts, ending 31/12/08. Is that beyond the realm of imagination?
Thank you for finally referencing your source
I can only suggest you carefully re-read the report and the section you are quoting from.
With reference to that source
Richard, As you suggested I have reread the report. Page 2 under Highlights; "City Treasury Ltd. raises $95m. in term debt over the last three months to meet anticipated Council requirements. Page 7 in Directors Report, signed off by Paul Hudson it states under Outlook: The economic woes of the world have appeared constantly in the news over the last six months. It is no surprise that most of the economies are in recession and the national economy is well advanced into a recessionary phase. For most New Zealanders the impact on exchange rates, interest rates, property development, tourism flows and employment is very visible. The Dunedin City Holdings Ltd. group does not operate in a vacuum and is being affected by the current economic environment. We do have an advantage in that the investments of the group are spread over a number of activities. But on the other hand the impact of this economic downturn is so wide-spread that few business activities are immune. Page 12, Consolidated Balance Sheet. Non-Current Liabilities: Term Borrowings: $399.465m. as at 31/12/08. An increase since 30/6/008 of $95.31m. So there we are Richard. What say you now?
I thought for a minute you had found the answer yourself, Mr O!
My initial impression on reading your last post was that we had reached the end of this long and winding ‘tiki tour'. That you had found your own answer and there would be no need for further response from me. Sadly that has not proved to be. In your posting on 21/8/09, you diverted from the funding of the Carisbrook and how this was accounted for, by widening the exchange to "Cash flow from Financing Activities, Loans raised $97,928,".
You then said, this "wouldn't have anything to do with the $95M raised by DCHL before last December for "anticipated Council requirements" would it? Seven days and several variable exchanges later, you finally got around to identifying the source of your continued references to "DCHL" and "a statement attributed to Paul Hudson, as Chair of that company. You stated that source as the Six Monthly Report of DCHL for the six months ending 30/12/2008.
I suggested that you carefully re-read the report. Your response says you have. Nevertheless you completely miss - or ignore - the section on Page 5 sub-headed Dunedin City Treasury Limited. I quote: "Dunedin City Treasury Limited continues to act as the central banker for the Dunedin City Holdings group and as financial adviser to the city. It has maintained the extremely strong credit rating assigned from ‘Standard & Poors' of AA- long term and A1+ short term.
The New Zealand money markets have been very difficult over the last six months but due to an outstanding marketing effort from the company the group has been able to increase its term debt to match the expected expenditure of Council. This has been completed at rates which are highly competitive." It is your continued reference to DCHL instead of DCTL that has led you astray. So, let's start from there. The $95m was raised late last year from several parties by DCTL at what you know was a very difficult period in the financial markets and at very favourable rates. The $95m was then advanced by DCTL to the DCC. The advance shows in DCTL's "books" as an asset but offsetting that is, of course, the liability on the other side of "the ledger".
Because DCTL is a subsidiary of DCHL, it also shows in the Consolidated Accounts of that company but that is all. The company/client relationship is directly between Dunedin City Treasury Limited (DCTL) and the Dunedin City Council. (Note: the DCC group is wider than DCHL). The $95m is drawn down by Council as required. This ‘tiki tour' has taken us from a wager that you lost in regard to the purchase of Carisbrook into tenuously related threads which, in chronological order, make interesting if rather boring reading despite the wee detour on ‘Route 66'. We have probably lost the audience.
Mr O has received his answer
Richard, thank you so much for the perambulating lecture on the ways and means of the financial dealings of the DCC and DCHL via the services of DCTL. I think from what you say, that DCTL raised the $95m. on behalf of DCHL as showed in its six monthly report. This was then advanced by DCTL to the DCC. So, getting right back to my original question. Does the $95m. -as advanced to the DCC by DCTL - form part of the $97.928m. shown as capital provision in the LTCCP? If, as it would seem it does, this begs the question; why on earth couldn't you have said so at the beginning?. Despite your manner of superiority in all things civic, it may surprise you to know that there are people -citizens- who do take an interest in these things and they deserve some respect regardless of how foolish they may seem from your exalted -own view- position. And at the end of the day, the $95m. is an extension of the overall indebtedness of this city. And by the way, I don't concede that I lost the bet.
Yes, Mr. O has
Mr Oaten: DCTL did not “raise the $95m. on behalf of DCHL as showed 9Sic)in its six monthly report.” DCTL (as the banker) raised the $95m on behalf of the Dunedin City Council (as its client).not DCHL. The figure simply shows up in the DCHL Consolidated Account because DCTL is a subsidiary. May I remind you that in your very first post on 20/8/09 it was you who talked of ‘smoke and mirrors’ and said: “I doubt very much if the mayor and his councillors have an inkling of just how the money go rounds work in that place. I doubt also, that Jim Harland understands. Shocking really.” You also said in a more recent post that as "Chair of Finance & Strategy, I must know these things", or words to that effect. I am sorry, the tone of those comments say more about you than me and my council colleagues.
Mr O has indeed
Mr Walls: So I ask again, does the $95m. raised by DCTL reside as a debt in DCHL's books or the DCC? lf DCTL (as the banker) did as you say, raise the $95m. on behalf of the DCC, then why should it appear as an addition to DCHL's term borrowings, other than it being a loan to the DCC thus not showing in its debt schedule? Still looks like smoke and mirrors to me. As it seems impossible to get a straight answer from you on this matter I will just draw my own conclusions, as indeed I suspect a good many others will as well. Richard, I can't help feeling that the obfuscation on these many matters are what has eroded the citizens' confidence in this council and administration.
The question has been answered Mr Oaten
Twice.
Answered?
"Twice?" Well thank you Richard, for your prescience and intransigence.
Carisbrook is not debt free
Cr Brown is correct in saying that Carisbrook is not debt free. No, it belongs to the DCC at a purchase price of $7 million. From the purchase price the ORFU has purportedly paid back the $2 million it owed to the DCC. Where that money went is an interesting point. It hasn't been used to amortise the purchase because if you go to page 170 in the new LTCCP you will see under Property-Investment New Capital, in the 2009/10 year the sum of $7 million for new investment. This, I was recently told by Richard Walls, is the Carisbrook purchase money. New additional debt incidentally.
So, if the ORFU debt was to be a contra payment against the purchase then the borrowed amount would surely only have been $5 million. Bet you no-one will volunteer the answer to that one. Like everything else about both this and the stadium there is an awful lot of smoke and mirrors activity. I doubt very much if the mayor and his councillors have an inkling of just how the money go rounds work in that place. I doubt also, that Jim Harland understands. Shocking really.
You just lost your bet, Mr. Oaten
The reference on page 170 of the LTCCP (Community Plan) does not stand alone. That simply denotes the budgeted provision, not how the transaction is accounted for. You say "where that money went to is an interesting point". I assume you meant, "where it goes". If you had cared to look, you would find the answer on page 150 of the same document in Council's Cashflow statement. Under "Cashflow from Investing Activities" are the lines; "Cash is provided from: Reduction in loans and advances $2,413m". The repayment of the ORFU's loan of $2m (which is not ‘a contra’) is included in the $2,413m. Further down the page under "Cash was applied to" is the line "Capital Expenditure $(190,781m)". The $7m is included in that number. Then under "Cashflow from Financing Activities" is the line: "Loans raised $97,928m". The nett $5m borrowed is included in that figure. To summarise: Invest $7m; Loan repaid ($2m); Nett new debt: $5m. I suggest that it is a bit rich for Mr Oaten to once again “trot out” his mantra about “smoke and mirrors” and “shocking behaviour” when clearly he ignores the information available to him or chooses to misrepresent it.
Mr Oaten just lost his bet
Thanks for all that Richard, but if it's all the same to you, I will stick to the smoke and mirrors theory. Your net borrowed $5m is as you state after deducting the ORFU's $2m. loan. Surely that is simply a cash flow book entry. Buy for $7m, receive back $2m owed, pay that back from where it was borrowed, net debt remaining $7m. The fact that these monies may go for extended tiki tours within the system before the above process is completed doesn't change a thing. By the way, the "Cash flow from Financing Activities, Loans raised $97,928," wouldn't have anything to do with the $95M raised by DCHL before last December for "anticipated Council requirements" would it?
Realities
Two audits; two court cases; financials and cashflows etc detailed in the Community Plan.
A comprehensive summary within the affidavits filed with the Courts by Council CEO Jim Harland and Finance and Corporate General Manager, Athol Stephens.
I simply observe that facts are what is left after we run out of opinions.
Not your "smoke and mirrors".
What realities?
The subject on which the bet was on is the purchase of Carisbrook. Your realities are all to do with the stadium. In this discussion there is no connection. Although, in the grander scheme of things both are all part of the grand deception.
Yes, you are correct, Mr Oaten
But, 'Tiki Tour' or not, you lost the bet. That council would buy Carisbrook was first announced in the ODT on 6 February and discussed at the special meeting of Council the following Monday, 9 February. It was then included in the draft LTCCP with all the financials you reflect on. The draft LTCCP was audited by Audit NZ. It was consulted on. It has since been adopted. The figures are plain enough.
You may not understand them but to misrepresent them and label them “as deception” using as your only excuse “that you will stick to the smoke and mirrors theory” is, I suggest, a step too far, reflecting as it does on the professional and personal integrity of those who prepare and audit them. Even although in this post, you refrain from naming individuals, please do not again use your previous excuse that such a comment is “generic” and not “personal”. It wears thin.
I will now answer the question in your own wee “tiki tour”. I quote: “By the way, the "Cash flow from Financing Activities, Loans raised $97,928," wouldn't have anything to do with the $95M raised by DCHL before last December for "anticipated Council requirements" would it? “ No it wouldn’t. Anything that DCHL raises is reflected in their accounts, not council’s. They are completely separate as required by law. In any case, the line item you refer to: says “Loans Raised (2008-09) $41,328(m). This, of course, refers to the financial year that ended on 30 June last.
I am astonished the arithmetical difference of some $56,600(m) seems to have escaped you! As for “Loans Raised (2009-10) $97,928(m), this, of course, falls in the 2009-10 year, which commenced on 1 July. I appreciate none of this will change your opinions.
I do not intend to pointlessly argue those with you. As I have said previously, that does not make them facts. And that is what we are left with after we run out of opinions.
Richard the Astonished
Cr Walls is having eye-trouble again. Mr Oaten mentioned the $97,928 of Loans Raised (LTCCP page 150, Financing Cashflow) without bothering to say which year. Let me tell Cr Walls that $97,928 is for Y2009/10, right next to the figure of $41,328 (Y2008/9) that he latched onto. Picking a different year and then being "astonished" at the arithmetical difference is a very primitive way to try and discredit Mr Oaten.
I still don't know the purchase price of Carisbrook by itself, because the deal is "commercially sensitive"; we will only know for sure when the DCC releases the contract. Cr Walls speculates that it was $5 million. Even if this was true, it would be a very sweet deal for the ORFU. I think the DCC earlier estimated the price to be about $1 million, (from memory). I believe that the deal was tied into the venue hire agreement and the ORFU had the better negotiating position. The DCC was so desperate to build the Awatea Rugby Stadium that they failed to sign the deal with the ORFU before committing themselves to the construction. Another big mistake.
It's in the book
Mr. Oaten's comment was "By the way, the "Cash flow from Financing Activities, Loans raised $97,928," wouldn't have anything to do with the $95M raised by DCHL before last December for "anticipated Council requirements" would it? The answer is "no" as stated in my response.
The line item runs : "Loans to be Raised: (2008-09) $41,328M (2009-10)$97,928M and so on through to 2018-19. Mr Oaten's comment referred to "$95M raised before last December", i.e. in the 2008-09 Financial Year that finished on 30 June last. He then related that comment to the $91,928M which falls within the CURRENT 2009-10 Financial year that commenced on 1 July last.
Any comparison to the actual 2008-09 column would have quickly given Mr Oaten the answer to his question. You seem to have made the same error. As for the purchase by council of Carisbrook, as reported to council and in the media, the price is $7M. I assume the reference by Mr Jones is to the nett funding that the DCC had to find to complete the purchase following repayment of the DCC loan on on the property. I am not aware of any price being estimated by council at "$1M". I can only assume that Mr Jones is mixing that up with the original offer of the ORFU to sell Carisbrook negotiated in 2004 by the then Carisbrook WP of "10 cents plus repayment of all loans etc". I trust this is helpful.
Helpful - Yes
I accept Cr Walls' point that the $97m and the $95m are for different years and so my criticism was unjustified.
I think that there is some value in discussing DCHL's finances because of the unsustainable dividends (asset stripping) and the forthcoming need to replenish the shareholder advance. I expect this will be paid for with a DCC loan, with the interest adding to the ratepayer burden. This looks like a sneaky way of making $5m per year DCHL Stadium loan payments look like they have no cost to the ratepayers. In this way the DCC has claimed that the Stadium Tax will be $66 per year each ($5m total), whereas the actual ratepayer loan payments will be $10m ($5m direct + $5m indirectly through DCHL). Additionally we will pay for operating losses and depreciation/amortization.
Richard; one point
Richard; one point. You say $97.928m. falls in the 2009-10 year but the "$95m. I refer to was raised before last December." Actually, that money was not raised for the LTCCP but rather by DCHL, a different account altogether. My comment was, that DCHL chairman Paul Hudson said at the time that the "$95m. was raised in anticipation of DCC requirements." It is therefore not an unreasonable assumption to think that perhaps it has since been directed to the DCC, hence turning up in the LTCCP in year 2009-10. No doubt you can explain this away, therefore leaving that sum to come to charge at a later date. Which would make the overall position even worse.
Really, Mr Oaten
Your original comment as posted:
By the way, the "Cash flow from Financing Activities, Loans raised $97,928," wouldn't have anything to do with the $95M raised by DCHL before last December for "anticipated Council requirements" would it?
My answer - No.
Now you say, you said:
"My comment was, that DCHL chairman Paul Hudson said at the time that the "$95m. was raised in anticipation of DCC requirements."
I also said in response that "Anything that DCHL raises is reflected in their accounts, not council's. They are completely separate as required by law."
You now say: "Actually, that money was not raised for the LTCCP but rather by DCHL, a different account altogether."
Correct.
You then go on to say" "It is therefore not an unreasonable assumption to think that perhaps it has since been directed to the DCC, hence turning up in the LTCCP in year 2009-10."
Really?
Really Mr Walls
Really? Well, come on what is the answer. Did the DCHL $95m make up the LTCCP $97.928m. or not?
Mr Oaten correct?
Richard; you have just roundly chastised me for questioning the methods and motives of the Carisbrook money go round. Of course the LTCCP will seem all correct and proper, it couldn't do otherwise. It's the philosophy behind the reasoning, behind the manipulations, behind the "smoke and mirrors" that offend me. For what it is worth, like the ever increasing costs, it wears thin with me too. It all has that too familiar look of the runaway "let's have it now, beggar the costs" mentality so prevalent today. It is a universal disease afflicting the world, which is unravelling as we speak. Don't believe me? Have a look at the USA deficit and try to visualise $1.8 trillion. Predicted to reach maybe $14 trillion within two years, and continuing. They, and the rest of the developed world -including us- have spent the next several generations incomes on housing, baubles and monuments -such as stadiums and conference centres - with reckless abandon. We are not immune to this, and the inflationary ramifications are frightening to contemplate. Not a good time to be deep in debt. So watch this develop over the next few years, by which time you and I may be able to compare notes.
Opinions OK
As I have stated many times before, I have no problems with your opinions or your philosophy. We can agree to disagree on them or not. I do have an issue, however, with "own facts". I have just spent a few weeks in the US getting to better know two grandchildren who live there. That also gave me the opportunity of reading and hearing indepth comment on the economic challenges that face that country in turning things around. There seem to be more solutions than there are problems.
Some can indeed be said to finding solutions for problems that do not exist. It is a huge and diverse country. One thing is clear though. New Zealand and Australia are handling things very well. Our comparative small size and "isolation" may have helped. The key is debt management. Not the rightwing or leftwing philosophy that colours so much of what passes for 'informed' debate on the US news channels and radiowaves.
Opinions OK but?
Richard, because you have just been in the USA for a few weeks does not, I suggest, make you an authority on the world economic morass. I also, thanks to technology, have sampled in depth, comment on the challenges facing the world today. There are, of course, the two schools which as Malcolm Farry frequently refers to, as those who see the glass half full and those who see it as half empty.
It is, as you say, a huge and diverse country the USA, but there is no gainsaying the fact that it is in serious financial trouble. You only need to look at the statistics relative to the housing market having dropped over 27% in value overall. California's government is reduced to issuing IOUs in lieu of cash to its creditors. The unemployment figures growing daily.
You say Australia and New Zealand are handling things very well. You say the key is debt management. Well, you couldn't honestly say that here in little old Dunedin that our governance is managing its debt in a prudent way. No, in just the last few years it has lifted it from some $50m. to over $300m, and at the same time encouraged its council-owned trading companies to increase their indebtedness up to $400m.
Richard, you dismiss the right wing or left wing philosophy that passes for 'informed' debate on the news channels and airways. But seriously, how are you in a position to pass judgement, with yours and your fellow councillors and executives' track record as a guideline?
Sorry Richard, but your take on the financial workings of the world just doesn't cut the mustard.