Varied stances on question of debt

Candidates from top left, clockwise: Lee Vandervis, Andrew Whiley, Dave Cull, Kevin Dwyer, Pete...
Candidates from top left, clockwise: Lee Vandervis, Andrew Whiley, Dave Cull, Kevin Dwyer, Pete George, Steve McGregor, Olivier Lequeux, Aaron Hawkins. Centre: Hilary Calvert.

Dunedin's debt mountain is reaching new heights, but the Dunedin City Council says everything is under control. Reporter Chris Morris speaks to the city's mayoral candidates about whether they would do anything differently.

The eight men and one woman who want to be Dunedin's next mayor are divided over debt.

They are divided over the figures, divided over the plan and divided over what they would do differently.

Some have declared themselves happy with the Dunedin City Council's approach to debt repayments.

Others remain opposed, and have called for cost-cutting, more money from the council's companies and even for assets to be sold, including Wall Street mall and Forsyth Barr Stadium.

And, in the meantime, the debt mountain continues to climb towards a projected peak that is still two years away.

As it stands, the council's consolidated debt - shared between the council, its companies and the stadium - has reached $623 million, council staff confirmed yesterday.

That was up $125 million since the start of incumbent Mayor Dave Cull's term in mid-2010, albeit mostly - but not completely - as a result of spending on major capital projects agreed to by previous councils.

Within the debt mountain, core council debt - the bit ratepayers are directly responsible for servicing - stands at $225 million.

That has actually gone down $15 million, from $240 million in 2010, but only because stadium debt - totalling $145 million - has been split from the core council debt tally, to become its own category, since 2010.

If taken together, core council and stadium debt has increased $130 million, from $240 million to $370 million, during the past three years.

Add the $253 million in debt held by Dunedin City Holdings Ltd and its subsidiaries - the council's group of companies - and the total reaches $623 million.

And still it is going up. Core council debt - excluding stadium debt - is expected to peak at $272 million in 2015-16 before beginning a gradual decline.

Despite that, the council's financial plan envisages reducing that figure to $200 million by 2021, after which ''modest headroom'' would begin to appear in the council's budget, chief executive Paul Orders has said.

Dunedin Mayor Dave Cull told the Otago Daily Times yesterday the council's debt levels remained ''a constraint'', but one the council was addressing.

Debt had risen under his watch, but that was not a ''fair reflection'' of decisions made by the present council, Mr Cull said.

Councillors had agreed to $14.4 million in new debt-funded projects, such as a new Waitati library and cycleway improvements, while removing another $39 million in planned capital spending on projects including a Logan Park upgrade, he said.

That resulted in a net saving to the council of about $23 million, and was on top of the $22 million in debt paid down during the term, Mr Cull said.

The council remained ''on track'' to reduce core debt to under $200 million by 2021, while using any future surpluses to accelerate that, but success would depend in part on the discipline of future councils, he said.

Some of Mr Cull's mayoral rivals - while warning debt remained a major issue - agreed the council seemed to be on the right track.

Green Party candidate Aaron Hawkins was one, although he warned the council would have to balance cost-cutting and debt repayments with further investment in the community, to attract more people to the city.

He was against asset sales to repay debt, but wanted the council to find new ways to increase the revenue stream coming from its companies and ease the burden on ratepayers, he said.

Pete George was another to support the council's ''reasonable'' debt plan, although the next council would have to remain ''vigilant'' to keep costs and rates down.

''The key thing now is keeping costs under control and sticking to the plan,'' he said.

Hilary Calvert said the council's debt burden remained ''a big issue''.

''The bigger the debt gets the bigger the issue is.''

Uncertainty over the exact return offered by investments such as Wall Street mall also meant the council's real financial position was not yet clear, Ms Calvert claimed.

Once it was, the council should consider selling underperforming assets, beginning with Wall Street, and scrutinising others, she said.

''[Wall Street] is something that, if it is underperforming, should be looked at seriously. But we might need to look at a whole lot of things that people wouldn't want to have looked at if we were in a better position.''

Cr Lee Vandervis said the council's repayment plan was ''just a fond hope'', as was the original plan for DCHL to pay for the stadium by providing $23.5 million a year in dividends to the council.

''The problem with this plan was that DCHL have never made clear profits of anything like $23.5 million and have had of a culture of borrowing which they misrepresented as dividends.''

Instead, Cr Vandervis wanted the DCC to merge with the Otago Regional Council to create a unitary council, before selling the ORC's harbourside leasehold land.

The proceeds could be used to pay back most of the stadium debt quickly, ''to prevent Dunedin succumbing to impossible interest costs, especially with likely interest increases within a year'', he said.

Andrew Whiley said debt remained a ''dramatic issue'' because of concerns interest rates could rise, lifting the council's costs and forcing rates up.

''I think it's quite serious and I don't think we have really appreciated it,'' he said.

The council needed to invest, particularly in marketing and tourism, to grow the city's income stream, rather than just retrench by cost-cutting, he said.

He believed the council's plan to repay stadium debt over 18 and-a-half years was wrong, and the term should be extended again, to about 25 years, to reduce up-front costs.

Kevin Dwyer also worried about rising interest rates and the level of company debt, which he said prevented them bidding successfully for some work.

The council needed to do more, beginning by selling the stadium and investing in the city's economy, but Mr Cull was not doing enough.

''The mayor seems to be a bit of a fence-sitter. He's not bold enough.''

Olivier Lequeux said the council needed to ''stop spending'', but doubted future councils could stick to their debt reduction plan, pointing to planned investment in cycleways.

''The council seems to commit more debt, to commit more money, for future councils to service, especially with the cycleways.

''The message from council is `everything is fine, we are going to pay the debt very quickly'. But I doubt it is true.''

Dunedin's ninth mayoral candidate, Steve McGregor, could not be contacted yesterday, but has previously said he did not think the council was doing enough on debt.

More investment was needed to grow revenue and accelerate debt repayments, he said in an ODT mayoral profile last week.

Candidates' views

Kevin Dwyer: ''The mayor seems to be a bit of a fence-sitter. He's not bold enough.''

- DCC needs to do more to reduce debt.
- Sell Forsyth Barr Stadium and use proceeds to pay off debt.

Andrew Whiley: ''I think it's quite serious and I don't think we have really appreciated it.''

- Not happy with DCC debt plan.
- Need to invest more to promote city and grow economy.

Mayor Dave Cull: ''It [mounting debt] is not a fair reflection on who is responsible for committing to that debt.''

- Debt remains a constraint but plans in place to address it.
- Future councils will need to stick to the debt plan.

Aaron Hawkins: ''I wouldn't want to see that burden fall too heavily on the ratepayer.''

- Supports DCC plan.
- Future councils need to balance debt repayments with community investment.

Hilary Calvert: ''It isn't under control. It's far too big and everyone's concerned about it.''

- Not sure DCC debt plan a good one.
- Better understanding of DCC finances needed, asset sales a possibility.

Pete George: ''The key thing is keeping costs under control.''

- DCC debt plan a reasonable approach.
- Future councils need to control costs and stick to the plan.

Lee Vandervis: ''The current repayment plan is not a plan but is just a fond hope.''

- Not happy with DCC debt plan.
- Unitary council needed to sell leasehold land and pay back stadium debt.

Olivier Lequeux: ''When the tough get tough you have to play ball. We have to to go back to core business.''

- Doubted DCC would stick to its debt plan.
- Next council needs to cut costs and repay debt as soon as possible.

Steve McGregor*: ''I don't think we should be relying on the stadium to pay all its debt off. It would just be impossible.''

- Doesn't think DCC doing enough on debt.
- More investment to promote growth, increase revenue and accelerate debt.

* From Otago Daily Times mayoral profile interview, September 21.


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