Fiscal reality drove stadium loan term

The reality of the council's financial situation, rather than a decision by either the council or council staff, was behind the repayment period for stadium debt extending from 20 to 40 years, council finance and corporate support general manager Athol Stephens says.

The issue emerged this week at annual plan hearings and prompted angry arguments between councillors, and surprise from some who were not aware the 40-year term was already in place.

Last July, it was revealed council companies could not provide $8 million in dividends annually to help pay for multimillion-dollar spending.

Part of that was the $3 million the companies were required to come up with for the Forsyth Barr Stadium.

Staff suggested then the period for paying off the loans should be doubled from 20 to 40 years, and the matter revisited in 10 years, once private-sector debt for the stadium was paid off.

When the matter was discussed at a committee meeting in September, councillors balked at increasing the period of the loan and told staff to investigate ways to keep it at 20 years.

But a report to this week's annual plan meetings from financial planner Carolyn Howard said the loss of the $3 million meant the debt was "now scheduled to be repaid over a 40-year term".

That surprised Cr Kate Wilson, who said she had no idea that was the case.

Asked for a full explanation yesterday, Mr Stephens said staff had reported the situation to a council finance, strategy and development committee meeting in September.

A report said because of the loss of the $3 million, the loan would take 40 years to pay back.

"We recommended the committee approve the 40-year term."

But Mr Stephens said the committee "neither approved, nor disapproved, nor said let it lie on the table". Instead, it asked staff to report back on: the impact of additional ratepayer funding of $1 million per annum; the ratepayer contribution required to repay the loan within 20 years; targeted rate options to allow the term of the loan to remain at 20 years; and ways in which the capital repayments might be structured to reduce the time frame to less than 40 years, taking into account the council and Dunedin Venues Ltd (DVL) debt profile after 2025.

Those matters were to be considered during the annual plan meetings.

"So it's come up, and we've considered it," he said.

"The situation we've been advised of by DVL is that it still needs to be 40 years unless an extra $1 million is put into extra debt servicing. Then it becomes 23.5 years. On what we're paying at the moment, that's how long it would take."

On Wednesday, councillors agreed to accept the 40-year schedule in the meantime, but chief executive Paul Orders was asked to report annually on ways to reduce the time frame.

It was also agreed the draft budget would mention two options for reducing the loan timetable, by adding either $1 million annually in rates-funded debt repayments, or the $1.9 million a year needed to return the loan term to 20 years.

That would see the average ratepayer paying another $13 a year for the extra $1 million, or another $26 a year to reinstate the 20-year loan term.

david.loughrey@odt.co.nz

 

 

Add a Comment

Our journalists are your neighbours

We are the South's eyes and ears in crucial council meetings, at court hearings, on the sidelines of sporting events and on the frontline of breaking news.

As our region faces uncharted waters in the wake of a global pandemic, Otago Daily Times continues to bring you local stories that matter.

We employ local journalists and photographers to tell your stories, as other outlets cut local coverage in favour of stories told out of Auckland, Wellington and Christchurch.

You can help us continue to bring you local news you can trust by becoming a supporter.

Become a Supporter