End to profligate spending

Lyndon Weggery
Lyndon Weggery
City councillors can avoid Dunedin's own fiscal cliff in 2013 if they show discipline and seek more savings, writes Lyndon Weggery.

While it is good news the US Government has seemingly avoided its ''fiscal cliff'', can the same be said for Dunedin? In November 2012, the international credit agency Standard and Poors formally put the Dunedin City Council on a negative credit watch, warning that the council must address its debt or be downgraded. Such a move will lead to interest rate rises on new loans and, what is worse, any existing loan that needs to be refinanced will attract extra costs.

This is an added worry to ratepayers, as our interest bill is already $19 million for the current year, thereby breaching the council's self-imposed limit of no more than 8% of total revenue for the next three years. Did the council see this coming? You wouldn't think so, given its premature boasting in the Long Term Plan (released just four months before) that S and P's grading was a ''remarkable vote of confidence''.

The facts are ratepayers now provide sole guarantee for a debt mountain of $616 million as at June 2012, which includes $146 million for the stadium. While the council's stated target is to reduce its core debt of $273 million to $200 million by 2018, it is hard to believe that in 1999 it was just $32 million.

What this means now is for the next five years at least we cannot afford to spend any more on new projects, including the Logan Park redevelopment.

The good news for all suffering ratepayers is, at long last, we have in Paul Orders a DCC chief executive who is prepared to draw a line in the sand and demand a halt to profligate spending. What he has effectively done is persuade the mayor and councillors to signal in the Long Term Plan that this year's rates increase will be no more than 4% and 3% per annum in following years. This is no easy task, as already the Long Term Plan is signalling a projected increase for 2013 of 7.6%.

The Forsyth Barr Stadium Sunday market.
The Forsyth Barr Stadium Sunday market.
Therefore, if the council is to keep its promise, further savings of $4.2 million will need to be found. Unlike some councillors, I believe the chief executive has quickly realised, in terms of affordability, Dunedin is not that wealthy, with an ageing and relatively static population. A significant number of the 53,000 ratepayers, and just 47,000 households, are on limited incomes, and with our fair share of ''baby boomers'', this number will grow in the next five years.

It is cold comfort the Ratepayers and Householders Association has been pointing out these realities to past councils who (until now) were not prepared to listen. On the other hand, it is encouraging to note top of the list in the council's 2012 residents opinion survey was a need to reduce spending and tackle the debt. In terms of the budget cycle, the first chance councillors have to restore faith with ratepayers is the workshops at the end of this month.

A lot of the work will have been done for them by staff to reduce the $4.2 million. Ratepayers will expect councillors not to weaken and pull back these savings. But there are many activities which have the potential to use up precious funds (let alone waste them) and need to be curtailed with very tight operating budgets imposed. These include. -

• Forsyth Barr Stadium: Even though the council has resolved to subsidise community use of the stadium by $750,000 a year, the operating costs of DMVL should be tightly monitored. Given the $3.2 million loss already signalled in its first year of operation, ratepayers have the right to expect revenue to rise and costs reduce within a tight framework so that a ''break-even'' environment is achieved by the end of the 2015 year. Why 2015? Because that is when the Highlanders and the Otago ITM Cup team's tenure as anchor tenants of the stadium legally expires. Any suggestion of spending more rates money to create an events fund should be strongly resisted. That is definitely the responsibility of the local hospitality sector.

• Dunedin City Holdings Ltd: Because the council's governance of its companies has been poor, it is no surprise ratepayers have been hit with a reduction of $7.63 million in dividend income. What's more worrying is until recently DCHL has been borrowing to pay the expected dividend to council and this was unknown to councillors. Furthermore, the controversy of Delta's involvement with the Jacks Point/Luggate subdivisions raises serious questions about how far councillors have let the companies stray from their original purpose. This is a relevant question and more so now the Government has passed the Local Government Amendment Act 2012 to bring local authorities back to traditional core business.

• Otago Museum: The controversy over the salary of the out-going director has highlighted the amount Dunedin ratepayers have contributed to the museum each year with little accountability. Many were surprised to learn that this is $3.76 million, and Long Term Plan proposals to increase this by another $120,000 in both 2013 and 2014 should be firmly resisted. The Museum Trust Board Act may prevent the council from reducing its levy but at least we can still freeze it at the present level.

• Chinese Garden: Despite the 2007 hype that these gardens would earn $200,000 annually, it is now public knowledge this facility is failing badly as a business enterprise and losing council funds to the tune of $548,000 a year. It is now two years since council staff were asked to urgently address the need for savings and look at ways and means of effectively incorporating the gardens into the adjoining Toitu Otago Settlers Museum. Recently, councillors admitted to the association it was a major oversight the gardens were excluded in the redevelopment of Toitu. Now we have the crazy situation where two council facilities stand side by side (but not physically linked), one free and the other charging admission.

• Toitu Otago Settlers Museum: Now it has reopened to record numbers (with free admission), councillors should note the Long Term Plan shows a planned operating budget for 2013 of $7 million. This is a $2.4 million increase on 2012 and should be the subject of a careful activity review first, as was done with the library. Although more modest increases to the budget are signalled in the Long Term Plan for future years, there is a worry costs will increase beyond the annual rate of inflation. If the hard lessons of the Chinese Garden are to be learned, it is that facilities like these have very limited opportunities to earn additional revenue and will always take the easy option to ask council for more money.

• Municipal Chambers/Dunedin Centre: If the councillors see sense and defer Logan Park redevelopment, then upgrading the Town Hall complex will be the last of the big projects. However transferring this facility to the control of DVML is risky and raises the possibility of competing use. In choosing a suitable conference venue, will the Town Hall suffer at the expense of the stadium?

So as long as councillors keep in mind the Long Term Plan commitment to 4% rates increase and work back from there, we can step back from our own fiscal cliff. It's that simple.


- Lyndon Weggery is chairman of the Dunedin Householders and Ratepayers Association.

Heated reply

Moreover, it is necessary to be so personal about someone you don't know?

Asking the questions, getting the answers

Stevesone57 you are criticising the wrong person when you say to Mike Stk "Pull you head out of the sand and start questioning your councillors about the true position of the stadium and why it's not making money."  He has been asking questions and posting whatever information he has been able to glean from what is available and by doing the sums himself, and if he ever got them wrong it is not for lack of trying.  I am sure if he had been able to get straight answers from councillors and staff he would not be raising these matters here except to share the correct information.[abridged]

 

Nonsense!

Which part of Dunedin are you living in MikeStk? You've got to be kidding, surely? Pull you head out of the sand and start questioning your councillors about the true position of the stadium and why it's not making money. Dunedin occupancy rates are declining -3.5% year to date (check with statistics NZ as this is a fact) You only have to look around Dunedin to see that "owners of local establishments" are not raking in "millions"; seemingly stealing this good fortune from the companies that have been entrusted to make a profit for this community. Having owned the motel for a year I can tell you we have been full 3 times due to events at the stadium. We get more business from schools and sports teams. Your ignorance of the situation regarding the stadium's ability to return revenue to local business is not based on any facts and helps to explain why the ratepayers of Dunedin have let this council drive it towards the fiscal cliff of bankruptcy.

Nonsense!

Nonsense! We've been told time and time again that stadium events bring millions and millions of dollars to Dunedin - the stadium is losing money (more millions) so that money must be being spent in accommodation, bars and restaurants used by visitors coming to games. So, either we're being lied to, or those millions are being raked in hand over fist by owners of local establishments - a targeted tax for reclaiming some of the supposed stadium windfalls from hotels, motels, B&Bs, bars and restaurants is an obvious thing to do - it won't hurt them because they were making money before the stadium was built, they'll still end out ahead. It's only fair that they help pay for the capital improvements to the city's infrastructure that's allowing them to make all this extra money.

Entry fees

The problem might be that debt-funded capital projects, such as the stadium and the settlers museum (granted the settlers association and central government have generously donated to the museum project), should not become an impost on ratepayers and residents two or three times over because city councillors (I would argue) have failed to exercise due diligence and monetary restraint.

There is a case, amongst other revenue gathering initiatives, for the museum to charge for special exhibitions in the time ahead - for which many would gladly pay, the precedent is well established regionally and nationally. I don't doubt the pros and cons are being carefully weighed as the redeveloped venue moves through its introductory phase for the community.

User pays

In order to contribute to the $ 4.2 million shortfall there must be a charge to visit the Settlers museum. There could even be a day pass which could give access to the Chinese Gardens. As a motel owner I am sure tourists would have no problem in paying up to $15.00 admission to visit these venues.

Ratepayers cannot continue to pick up the tab for what should be a user pays day out. Whilst I agree with much of what Mr Weggery has said I do take issue with the hospitality sector paying for an events fund for the stadium. The last event in November (rodeo) failed to draw the expected crowds and did not provide any real benefit to the accommodation sector. This business already pays one month's turnover in local and regional rates.

Targeted taxes to pay for the supposed windfall accommodation providers get from the stadium are nothing more than a cynical tax gouge. I do not expect a free ride and am happy to contribute my fair share to this community. What has to be understood is that annual rate rises now in the thousands of dollars impact on businesses' abilty to hire staff and pay for the capital improvements needed to keep up the standard visitors expect.

Charge admission for the settlers museum, increase parking ticket fees, do whatever it takes to keep the City moving forward and out of debt. Simply taking the easy way out and gouging yet more rate revenue from the community and business is the kiss of death for investment, employment opportunities, and the future of Dunedin.

Council resolutions should be clear

Lyndon Weggery says : Even though the council has resolved to subsidise community use of the stadium by $750,000 a year, ...

Correct. But the original resolution, allocating the funding, was as follows:   The Council provide, from the 2012/13 year onwards, $750,000 per annum to fund an annual service level agreement with DVML in return for a range of services that will be provided by DVML. 

This was open for consultation in the Long Term Community Plan but it was never made clear what the 'range of services' would be and that they would amount to a ratepayer subsidy of stadium use for selected community groups.

This is a significant amount of money and the DCC should have been far clearer about its intended purpose. Such vagueness makes public consultation a meaningless gesture.