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Councillors are trying to plug an $8 million hole in the council's annual budgets from the 2012-13 year, triggered by a shortfall in dividend payments from Dunedin City Holdings Ltd (DCHL).
Councillors at yesterday's full council meeting called for a report identifying projects - like the Dunedin Town Hall upgrade - that could have their spending delayed for the rest of the 2011-12 year.
That was despite warnings the council could face a judicial review if it makes sudden changes to spending plans having already approved them following public consultation.
The debate came after Dunedin Mayor Dave Cull last month revealed an $8 million shortfall in DCHL dividends, prompting renewed concerns about council spending and debt.
The concern also turned a purely procedural item at yesterday's meeting into a political battlefield.
A report by council acting chief executive Athol Stephens sought approval to draw down $66 million over the 2011-12 year to fund the council's capital spending plans.
Loan requirements were based on a budget already approved by councillors following public consultation during annual plan hearings earlier this year, and the request for authorisation was made each year.
However, Cr Lee Vandervis urged other councillors to vote to block the loans, which he argued would derail the year's capital spending and help reduce council debt.
The move would "hit the brakes" on projects he opposed, including parts of the Otago Settlers Museum and Dunedin Centre/Town Hall upgrades and the redevelopment of Logan Park.
"We can stop the train at this point or we can simply let it rumble on," he said.
The suggestion triggered debate lasting more than an hour, with Cr Richard Thomson criticising Cr Vandervis' "sledgehammers and nuts" approach while Cr Syd Brown warned sudden changes without further consultation would lead to a judicial review.
Loans would only be drawn down as required throughout the year, rather than all at once, and voting to grant authorisation to Mr Stephens would not prevent changes to individual projects in the meantime, he said.
Failure to do so would mean the council "would have to renege on paying our bills", he said.
Cr Bill Acklin also stressed the loans were for a list of projects that "has been consulted on, the public have submitted and we have made decisions on", and were not for new spending.
Mr Stephens said the public might need to be consulted again, using a special consultative procedure, before decisions were made to axe or delay significant projects.
Portions of the Town Hall and Tahuna wastewater treatment projects could still have some spending delayed or cancelled, but that was "very much a political decision" for councillors.
Council managers were already preparing a list of savings ideas, prompted by councillors' concerns over the DCHL dividend shortfall, he said.
The report would include possible changes to capital spending during the rest of 2011-12, which, if approved, would allow funds to be carried forward to next year's budget and help ease the pressure that year, he said.
Results were expected in three weeks, but Cr Jinty MacTavish yesterday called for a separate report focusing on possible capital spending savings in 2011-12.
That was supported by other councillors in a 12-2 vote, with only Crs Acklin and John Bezett voting against the move after arguing it was unnecessary.
Councillors also authorised Mr Stephens to draw down the loans during 2011-12, despite Crs Vandervis' pleas, and despite Crs MacTavish, Paul Hudson and Teresa Stevenson joining him in voting against the move.
Councillors also agreed to remove wording in a recommendation of Mr Stephens' report, that the $66 million in loans would be repaid over 20 years.
Removing the wording would ensure the council could in future consider extending loan repayments over a longer period, as suggested by Mr Stephens earlier this month.