The Star: September 21, 2023

The Star Thursday September 21 2023
16
OPINION
Readers of The Star said a decisive ‘no’ last
week to Mayor Phil Mauger’s view ratepayerowned
assets like Christchurch Airport,
Lyttleton Port Company, Orion and Citycare
should be sold or partly sold to offset rates
increases. It is a U-turn from what Mauger
campaigned on to get elected last year. The
issue of asset sales will be discussed and
potentially voted on by city councillors before
Christmas. Today Mauger explains his position
on the issue, and former mayor Garry Moore
says why assets should not be sold
Latest Canterbury news at starnews.co.nz
Confronting costs v future proofing:
WHEN I was campaigning I
said we should be looking to a 4
per cent rates rise for this year’s
Annual Plan – which I truly
believed was possible at the time.
However, once I became
Mayor and was able to look
further into the city council’s
books, it soon became apparent
this would not be possible. After
a lot of hard work by councillors
and staff, we managed to land on
a 6.4 per cent increase, compared
to 7.7 per cent in Auckland.
In July we began working on
the 2024-2034 Long Term Plan,
which will be finalised in June
2024. This will set next year’s
rates which are currently looking
to rise by 18 per cent. You and
I both know this is totally
unacceptable, especially in a cost
of living crisis.
To reduce this increase, we
must look at all of our options.
One thing we are doing is
conducting an independent
review of the role of
Christchurch City Holdings
Ltd – this had not been done
before. In other words, it is the
first time we are asking whether
we still own the right companies,
whether we own the right
amount of those companies,
whether we are getting the
right return from those
companies, or whether there are
new companies we should invest
in.
The previous council kicked
off this review as it had become
apparent CCHL’s cash return
on investment was only around
2 per cent on nearly 6 billion of
assets.
Out of the 2 per cent return,
CCHL pays the city council
a dividend each year. Over
the next few years, CCHL has
forecasted dividends to the
council of around 50 million.
However, to meet this, they may
have to borrow part of it. This
is not good business in anyone’s
language.
Part of the reason for this is the
debt that CCHL currently holds
from the earthquakes.
After the earthquakes, the city
council had to borrow about $2
billion, which it still owes today.
To put this in perspective, if this
were your mortgage for 15 years
at 4 per cent – very optimistic
terms – then it would cost you
$15 million in payments each
month or about $340 per minute.
‘This does not mean
flogging the silverware,
but it does mean making
sure that Christchurch
City Holdings Ltd is
performing well’
– Phil Mauger
COSTS: A projected rates rise of 18 per cent, coupled with debt from the February 22,
2011 earthquake (below), has Mayor Phil Mauger putting all options on the table.
However, this led the city
council to hit its own borrowing
limit about five years ago. So it
asked CCHL to borrow $440
million to give to the city council
as a special dividend. CCHL
did as asked, but it means it has
debt in the holding company
as well as in the operating
subsidiaries. Total debt across
the whole CCHL group (i.e
the holding company plus the
port, airport, Orion, Enable,
and Citycare) amounts to $2.3
billion.
This level of debt means the
city council and CCHL are both
facing rising interest costs and
a need to repay it. Alongside
insurance premiums going up
and rising inflation causing
some costs to balloon on certain
projects, this leads to a lower
dividend from CCHL to the city
council and a limited ability to
borrow for new investment.
This puts us in a difficult
position. We must get our rate
increase down from an 18 per
cent rise.
This leads to three very hard
questions – does the city council
do less, sell something, or put
rates up 18 per cent?
I know – like you – that 18 per
cent is not possible. So, we must
look at other options rather than
rates rises.
This does not mean flogging
the silverware, but it does
mean making sure that CCHL
is performing well, providing
its services and delivering the
dividends our council needs.
We will continue working on
our draft Long Term Plan before
Christmas. We will also finish
the strategic review for CCHL,
which may end in no changes –
but at least we have looked at that
option.
After that, it is over to you to
have your say on the draft Long-
Term Plan around March next
year.
Together we have some very
hard decisions to make.
I hope this gives you a bit of
insight into the challenges facing
the city council’s books at the
moment. We are working on it,
but like every household right
now, the cost of living means we
must put all options on the table.
6th, 7th & 8th October
1 day admission: $5.00 | 3 day admission: $10.00
www.canterburybranchvintagecarclub.org.nz