Dunedin's financial future is one of high spending and high debt, and a city council manager has warned major city projects, including the stadium, may need to be reconsidered.
While the Dunedin City Council's year-end financial result is a $3.9 million surplus, the city is budgeted to borrow $92.8 million this financial year for the stadium, the West Taieri and northern water schemes, the Tahuna wastewater scheme and the Otago Settlers Museum.
Council finance and corporate support general manager Athol Stephens said in the council's draft annual report that debt management remained a concern in the face of volatile financial markets, and there was concern about the availability of finance.
"For now, this is not expected to delay the progress of the council's projects, but if the sourcing of debt proves to be a consistent problem, it will."
The spending and borrowing in the future was of a magnitude that increased funding risks, and "may affect the council's view of the affordability and/or timing of the larger projects".
Asked whether it was time to take another look at projects like the stadium, Mayor Peter Chin said yesterday the council was keeping a close eye on the situation, and would continue to do so when it considered its draft budget in January.
"The council is being very responsible . . . [with] the whole situation under constant review."
He said the report was for the situation until the end of June, and, since then, "all sorts of things are happening in the financial world way beyond the control of the Dunedin City Council, and New Zealand".
There had been discussions about the situation.
Finance and strategy committee chairman Richard Walls said until the situation changed, projects like the Settlers Museum, the Tahuna secondary treatment plant, and drainage and road renewal might have to be deferred.
"The stadium is in that mix."
But Cr Walls said nobody should be losing sleep over the issue.
"The management of our financing is in extraordinarily good hands."
Dr Alan Stent, a senior lecturer in finance and quantitative analysis at the University of Otago, told the Otago Daily Times he believed now was not the time for councils to be increasing their capital expenditure or debt levels.
Only the Government should be considering cash injections to stimulate the economy during times of economic difficulty.
"I would argue that, compared to a month ago, the council ought to be now more conservative about capital expenditure," he said.
Mr Stephens said yesterday he wrote the comments for the report before he ran into difficulty last week with a 90-day debt-repayment agreement which allowed the council to roll over some of its debts.
That development had lent extra weight to his message about the volatility of the market.
Both capital expenditure and debt are forecast to rise sharply between now and the 2009-10 year, with debt rising to $100 million, and expenditure to $200 million, before dropping to near present levels by 2011-12.
Capital expenditure had exceeded the past financial year's budget by $38.4 million because of payments of deposits on land for the stadium and the purchase of an investment property in Porirua.
The council raised $25 million in the past financial year, mostly to finance the Tahuna outfall.
