Dunedin Mayor Dave Cull lays out what he sees as the
challenges facing the city council next year.
This year has been a time of challenge and achievement for
the Dunedin City Council. Costs and rate rises were
substantially contained despite significantly reduced
Information flow and public transparency have been enhanced,
council confirmed a visionary spatial plan and council
company governance has been substantially overhauled and
However, we are not out of the woods by any means. Now our
attention must turn to 2013. The first item on the year's
agenda, in the last week of January, is a councillor workshop
on next financial year's annual plan budget. Staff have been
working for a month or two, examining, rationalising,
economising and planning, to bring any rate rise down to
below the 4% target set by the council more than a year ago.
No easy task, as costs have risen, and the range of
responsibilities imposed by central government has increased
with no extra funding.
However, despite the truth of the old adage: "Mind the
pennies and the pounds will take care of themselves" it is
not the small decisions that will determine success or
Two headline issues confront the council and nearly
everything else follows from those.
The first is the council's debt burden, especially the debt
on the stadium. In order to give ourselves some choices in
other areas we must create some headroom there. That will
involve a rearrangement of council assets vis-a-vis debts.
Second is the direction of our economic development effort.
We clearly need to plan long term - sustainable development
is essential. But we also need runs (and jobs) on the board
Essential to both debt management and economic development is
a far more rigorous, businesslike approach to weighing
options and making decisions than has been displayed in
previous years by either the council or its companies. We can
no longer afford to "spend and hope", blithely ignore clear
economic signals or believe our city can buck the trends, and
evidence, commanding the attention of the rest of the world.
The stadium's recently reported financial challenges focus on
operational profitability. The real challenge however is
debt, because debt has to be serviced and repaid regardless
of operational profit.
The council borrowed $146.6 million to build the stadium. The
project's promoters projected various funding streams to
service that debt.
Profits from the council-owned companies.
Payments over 10 years for corporate boxes and seats
Stadium operating profits.
Ratepayer contributions (the famous $66 per annum).
Without exception, those cash streams were planned on a
"best-case-scenario basis": not sound business practice in
any environment and plainly rash in the face of an impending
global financial crisis.
None of the funding streams has performed as planned.
Council-owned company dividends are some 30% lower than
promised and while stadium debt servicing has been
maintained, the shortfall is at the expense of ratepayers who
would otherwise be the beneficiaries of company profits. The
so-called "private sector funding" treats operational revenue
as capital. It is not guaranteed and is dependent on Super 15
and ITM cup rugby games continuing at the stadium. These
difficulties were predicted less than four years ago, showing
that those projected funding streams were wishful and lacking
rigorous business analysis.
Where are we now?
About $12 million a year is required to service and repay the
debt over a 23-year period. That has to be found at a time
when the council is determined to limit rate increases in the
next two years to 4% and 3% respectively.
It is clear while the city has to service that amount of
debt, there will be little room for further development
expenditure in the city. Yet we know there are projects that
must go ahead if the city is not to slip backwards and
stagnate in a challenging global environment: challenging
both financially and environmentally.
They include implementing the economic development strategy
to create more jobs, development of the warehouse district to
save and enhance the inner-city environment, addressing
Dunedin's housing issues, and grasping the tourist
opportunities of connected cycleways.
Our economic development strategy must take account of recent
experience and research around the world. Climate change and
energy depletion are confronting every nation, some
horrendously. Simultaneously, they are providing
unprecedented economic opportunities in the renewable energy
and "smart technology" fields. While other economic
possibilities like oil and gas exploitation support are
clearly on offer in the future, these opportunities, and the
jobs they could create, are within a year or two's reach.
So in the context of our upcoming annual plan budget, what
imperatives does the council face now if it is to meet these
challenges and grasp the opportunities?
First, the amount of dead weight debt on the stadium must be
The council's operations must be made as cost-efficient as
possible. That process is already successfully under way,
with more than $12 million saved last year.
The council must be able to say "no" to non-essential
spending demands. The opportunities and imperatives that a
rapidly changing global environment present us must be
The council must leave behind the former "borrow and hope"
and "spend up, the surplus will cover it" attitudes. Finally,
and most importantly, the council must rigorously analyse
long-term implications in a businesslike manner before making
long-term decisions. Ill-conceived spending based on wishful
thinking has a habit of coming back to bite us, and future