Columnist Hilary Calvert poses some questions about Dunedin City Council debt that need answers.
Dunedin has been paying too much interest on our city debt for over five years. This has meant somewhere in the vicinity of $7 million has been squandered by those in charge of looking after our money.
The Local Government Funding Agency (LGFA) was formed in 2011 by various councils and the government to arrange council borrowing on the best terms available. It pays less interest than any individual council because it has a credit rating of AA+, which is the same rating as the government.
Dunedin City Treasury, (DCT), the company in charge of borrowing on behalf of the city, has never even applied to join LGFA, and thus has not made the interest saving available.
In fact, there is nothing in the DCC records before late May showing that they have even considered the merits or otherwise of joining, despite looking after our debt being their one job.
In May Rob Hamlin wrote an opinion piece in the ODT criticising the way the DCT was arranging our borrowings. He then began a correspondence with the DCC finance people.
Dave Cull received a paper from LGFA talking about the benefits of joining and he asked Graham Crombie (chairman of the holding company DCHL and DCT) what he thought about the paper. The new person in charge of DCC finances (David Tombs) asked the DCT Treasury manager Richard Davey what he thought. We don’t know what they thought because they were not prepared to tell us. But the paper by LGFA speaks for itself.
This paper says that the DCC has declined to join because of risks around a guarantee. These risks have been accepted by the Auditor-general who oversees the DCC books as having a contingent liability of zero, so that reason for not joining is just not credible.
It also says that if the DCC joined and had debt of $500 million, it would save itself over $1 million per year. As it happens, our debt has actually been around $600 million for over five years. And the projections into the next 10 years show an intention to increase our debt to $800 million and for it to remain at that level for the next 10 years.It is astounding that DCT have controlled our debt without even trying to join an organisation that could have saved us around $1.2 million a year.
And more astounding when we look at what they knew.DCHL shares the same six directors as DCT: Graham Crombie is chairman of both.
Since 2015 Linda Robertson has been on the board of DCT and also LGFA. Surely she could have told her fellow directors it was costing us millions not to join.
LGFA put a graph in its annual report for 2016 comparing DCC interest rates with theirs unfavourably: the directors of DCT and the mayor should have noticed that.
And LGFA comes down each year "to provide market updates", during which time we could assume they would discuss the benefits of our joining. Yet there is nothing recorded as to what they have provided or in fact anything about the visits. We could have expected that these conversations would have traversed the position that of all the councils in NZ which have a credit rating, only Invercargill and Dunedin have not joined LGFA.
We might also expect our mayor (who has been vice-president of Local Government NZ before becoming president last year) to have known about the advantages from councils getting together and borrowing money at lower interest rates through LGFA.
And all the while DCHL has been reporting how well they are doing, and telling Council and the rest of us that they are doing a fabulous job monitoring DCT (effectively themselves).
If they believe their own publicity, how can we find them competent? If they do not believe it, how can we trust them?
Surely Dunedin deserves leaders who are actually minding our money prudently.
If Rob Hamlin had not questioned the debt arrangements it seems likely that we would have continued to pay what will soon be $1.6 million per year too much for our debt.
We were all troubled that we could lose $1.5 million with Citifleet. This is more than four times as much and climbing.
The directors of DCT may as well put $3287 of our money through the shredder each and every day, or $23,076 each and every week.
Instead of paying too much interest on our debt they could have given 500 ratepayers free rates each year, which would have at least kept the money in Dunedin.
It will be interesting to see if the council is prepared to insist that the DCC join, now it seems that at least the mayor understands it is an issue.
And whether council is prepared to continue relying on the directors of DCT/DCHL for stewardship of our money, or if they are open to finding people who may be more capable of looking after our finances.
- Hilary Calvert is a former lawyer, politician and city councillor.
