‘Devious or incompetent’ – hard to tell if the books are closed

NEWSFLASH 31.7.10 – go to comment

### ODT Online Thu, 29 Jul 2010
Opinion: Rates levels alright here, says councillor
By Richard Walls
Does the Dunedin City Council have a recipe for increasing rates and debt, and are its elected officials either devious or incompetent – as some of the council’s critics suggest? Richard Walls answers some specific criticisms.

Mr Oaten departs from the script, however, when he says Dunedin Venues Ltd “is to be part of the DCHL (Dunedin City Holdings Ltd) group”. Indeed, he does so deliberately knowing full well from a direct discussion with Mr Athol Stephens, general manager, finance and corporate, as well as exchanges with me on the What If Stadium website, that DVL, like its sister company DVML (Dunedin Venues Management Ltd), is not part of the DCHL Group.
-Richard Walls

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Post by Elizabeth Kerr

37 Comments

Filed under Economics, Politics, Project management, Stadiums

37 responses to “‘Devious or incompetent’ – hard to tell if the books are closed

  1. Elizabeth

    Last week, so it goes, CST went to the Dunedin City Council seeking more money for the stadium but any decision was deferred.

    Questions:

    1. How much?
    2. For what?
    3. When by?
    4. What possible excuse?
    5. To be followed by how many more requests?
    6. Why are the Dunedin City Councillors opposed to the stadium (if they mean it) not blowing the whistle NOW?
    7. What sort of chumps do the Councillors think we are?
    8. How ethical is your local Councillor?
    9. Will you vote for them again in October?
    10. That was just another tough Monday, wasn’t it.

  2. Phil

    7. Obviously pretty big chumps.

  3. Russell Garbutt

    Elizabeth

    Not the first time I’ve heard that the CST approached the DCC last week.

    If this ocurred, I’m sure that the core group of existing Councillors and CEO Harland will do their very best to ensure that this request will remain secret.

    If this approach for more ratepayer money did occur then it is way past the time for those Councillors who oppose the runaway debt to start to speak out. I’m sure that Richard Walls, Fliss Butcher and Kate Wilson who we know monitor this site, will be only too eager to clarify this situation. I look forward to hearing any news of this, as yet, confirmed approach.

  4. Russell Garbutt

    Read “unconfirmed approach”

  5. Peter

    Elizabeth. In reference to your point 6 above. I heartily agree. It is not the time to go limp if we are to ever get real change around the council table. It is about time the council told Farry/ CST to wait till they are called by councillors and to not come swanning into Council Chambers as if they own the place.

    • Elizabeth

      Peter, it occurs to me CST might not have gone to “Council” as such, rather it could have been to just some Councillors, or City Treasury or …. well, some people at City Hall or DCHL to test the water. Who knew. Certainly, not all Councillors knew. Thinking Richard was in Australia at the time. Some narrowing down to do.

  6. Peter

    Yes, that’s quite possible, Elizabeth. Now they will all know. Word gets around. How they ALL react will be telling.

  7. kate

    I am unaware of such an approach. There is a new report that should be available online from the CST to F&S for Monday’s meeting.

  8. Peter

    Was the A Team on council the only ones who know of an (unconfirmed) approach? We know how it works on this council. A council within a council. For example, the stadium ‘debates’ on council have always come across as stage- managed affairs that the A Team has had to endure before going ahead and doing what they wanted to do all along.

  9. Russell Garbutt

    Just further to my point about Councillors that may feel restrained to “talk out of turn” by some feeling of collective responsibility, that practice is only applied to appointed members of a committee or body.

    My understanding is that while, for instance, the Cabinet of the Government is bound by a collective agreement because the members of Cabinet are appointed by the Prime Minister, that agreement cannot and does not apply to Members of Parliament.

    Applying that to the DCC and the ORC, as none of these Councillors are appointed, I can’t see any reason why individual Councillors would feel in any way restrained by some feeling of collective responsibility. The Councillors are at all times answerable to the people who appointed them – the ratepayers, and not a few other Councillors.

    Am I right in my interpretation?

    And further, am I also right in assuming that any Councillors that met with say, members of the CST, have no authority whatsoever to have such meetings if the content or purpose of the meeting was to in any way, subvert any other due process set up by the whole Council?

  10. Richard

    “Last week, so it goes, CST went to the Dunedin City Council seeking more money for the stadium but any decision was deferred.”

    RUMOUR.

    • Elizabeth

      Ah. Perhaps they asked for something else? Or they were wondering how to handle internals or legals, which always takes money. Either way it could make a person depressed. Stadium Stakeholders Group meetings probably have that effect (Monday, 19 July).

  11. Peter

    Richard. So, to clarify, is that a denial of that particular rumour or does it have some currency?

  12. Richard

    I cannot find anyone who is aware of any approach to Council by the CST “for more money”.

    So the rumour has “no currency” – pun fully intended.

    I will – just for the sake of form – followup at F&S tomorrow.

  13. Peter

    That’s good Richard. Perhaps you weren’t in the loop so it’s best to check for yourself.

  14. ro

    So no-one is aware of any approach by the CST for more money (1 August 2010)… I dearly wish that we could infer from this that the CST is not about to approach the DCC for more money. But sufficient unto the day, Richard.

    • Elizabeth

      Ro, it would be fair to say I might have inadvertently witnessed trouble in camp a few days back – and think there will be some news pending.

      • Elizabeth

        See Cr Dave Cull 7 hours ago at Facebook The DCC has lost the plot.

        Dave Cull for Mayor 2010 A good number of questions and discussions here revolve around the debt mess the new Council will inevitably inherit. It’s actually worse than that, because until the new Council gets to “open the books” we won’t really know what we have to contend with. It’s not like the real situation is ever broadcast, even to Councillors. For example what extra funding demands might appear for the stadium? I’ll address the specifics of that later since the possibilities range from “absolutely essential if the stadium is to operate” to “let’s spend a squillion bringing U2 and the Stones out to promote it!”. Just as important in the long run is whether Council owned companies are being pressured to take on more debt to cover those costs. Ultimately the issues of debt and Council cashflow merge into one toxic brew. Debt, once has been taken on, has to be serviced and repaid. Not something that can be done in a hurry. Even then, if $1 million is retired, the saving to the ratepayer is only some 10% of the principle sum per annum. Reduced operating costs on the other hand, produce immediate relief. Cut a dollar and that’s a full dollar the ratepayer does not have to pay. So a hard look at operating costs will be task number one for the new Council. The trick will be to get the savings from efficiencies and not from cutting services. Providing services is what Council does (or ought to). Cutting services to save the ratepayer money is denying them what they pay rates for. That is not acceptable. We will need to be innovative and we will need to do it transparently. Fancy that for a change.”

  15. Richard

    Further to my post of yesterday. As indicated, I raised the matter at today’s meeting of Finance and Strategy.

    Confirmed. No approach. No meeting.

  16. Richard

    Nope! I think there were only two members of the public present today. One is a contributor to ‘What If’, the second, well I am not certain, although her husband is!

    So, let’s see what is reported in tomorrow’s ODT!

    Cheers!

    • Elizabeth

      Aw. Do you think it was a whitewash Richard? I mean the critical path docs are coming aren’t they. Didn’t the Mayor say something like you’re all there for questions when Cr Guest might’ve grown tired of all the questions. Councillors sound to have been lively, as usual?

  17. Richard

    No, the Mayor did not say that at all. Quite the opposite.

    As for ‘a whitewash’? Not at all.

    • Elizabeth

      The Mayor said we are not here for questions? Oh, disappointing.
      It’s these bits that don’t get caught in the minutes, understandably.

  18. ro

    So, Elizabeth, are you & Richard agreed that the mayor told the councillors they were NOT there to ask questions? So they were there in order to pick up a supply of white emulsion in which to immerse our elephant?

  19. kate

    Ro No, it was not the Mayor, in fact he seemed happy to have the questions aired and encouraged it straight after one other Councillor had tried to stymy questions with a rhyme about a donut but I can’t recall it. Oddly sad to hear.

    I think Richard has misunderstood your earlier post Elizabeth.

    I do not recall any mention of paint of any colour yesterday or of elephants.

  20. Richard

    I concur with Kate’s comment posted at 9.38 on what The Mayor said. I spoke immediately after Peter and endorsed his comments.

    I could hardly do otherwise having ‘wheeled up’ a number of questions (some sourced from ‘What If’)!!!

  21. Anonymous

    I want to know more about the donut.

  22. ro

    Okay, having cleared up the confusion, let us get to the issue: the critical-path document – either the one that the CST have undertaken to furnish this week or the one that the council got last October. Could we have them both posted on What if?

    And to the council the CST said that the first of the roof trusses were only 12 days late. Did the CST repeat what was said to Chris Morris & published in Saturday’s ODT: that the first of the arches would go up this week? Or was that one too memorable a deadline to utter on a Monday?

    {Those with the critical path information should ensure they have an url or a file that is appropriately formatted for posting. All formatting queries can be addressed to the editors. -Eds}

  23. Russell Garbutt

    Appropriate that Cr Guest should refer to doughnuts.

    It would be good to hear the names of the Councillors that failed to ask any questions of Mr Farry during the F and S committee consideration of the CST report. One can only assume that these people were happy with the content of the report and were fully informed by its contents. So who are these happy people?

    • Elizabeth

      The F&S Committee meeting agenda lists the following for attendance, unless there were apologies received: Crs Richard Walls (Chairperson), Chris Staynes (Deputy Chairperson), Bill Acklin, John Bezett, Syd Brown, Fliss Butcher, Neil Collins, Dave Cull, Michael Guest, Paul Hudson, Andrew Noone, Teresa Stevenson, Colin Weatherall, Kate Wilson and Mayor Peter Chin.

      We know that Crs Walls, Fliss Butcher, Dave Cull, Teresa Stevenson and Kate Wilson asked questions (not sure if all were directed to Mr Farry).

      Any more? Clarifications?

      • Elizabeth

        The Stadium Stakeholders Group met on Monday 19 July as their report to F&S states. The same day CST representatives were debriefing and discussing internals at a local establishment.

        Who are the Stakeholders?
        Jim Harland’s ‘Stakeholders Report’ to Dunedin City Council on 17 August 2009 says:

        Recommendation 4
        That the Stakeholders Group membership is to include the following people:
        The Mayor, Deputy Mayor and Chief Executive – Dunedin City Council
        The Chairperson and one other trustee – Carisbrook Stadium Trust
        The Chairperson – Otago Regional Council
        The Vice-Chancellor or his nominee – University of Otago
        In attendance: the CEO of Dunedin Venues Management Ltd/CST, the CEO of the Otago Regional Council and on an as required basis the DCC’s General Manager Finance and Corporate Support, the CST’s Development Manager and the CST’s Commercial Manager.

        ****

        Richard 2010/08/02 at 11:53 pm
        Asks Russell of Kate: “Was there any form of approach made to any members of the DCC either in Governance or Management by members of the CST last week that in any way circumvented the process of DCC business and accountability? And how would you know the truth?”

        The last question says more about the questioner than anything else.

        As for the first part, I simply repeat what I have posted on another thread: “Further to my post of yesterday. As indicated, I raised the matter at today’s meeting of Finance and Strategy.

        Confirmed. No approach. No meeting.”

  24. kate

    Bill Acklin put in an apology for the meeting. John Bezett & Chris Staynes also asked a question – need to get my notes later to check others although my notes may not be complete. Teresa made a statement but no question I think but sometimes it is hard to tell the difference.

    My notes to date are not complete and Fliss asked other questions of DVML about the Statement of Intent and free access to the stadium for community groups which DVML are going to report on separately next meeting.

  25. Calvin Oaten

    {Calvin also submitted this comment at ODT Online under the title Critic omits what? on Wed, 04/08/2010 – 7:11pm. -Eds}

    ‘Rates Levels all Right Here’

    Cr Richard Walls went on the offensive (ODT 29/7/10) at my article in which I suggested that the DCC’s Annual Plan process was deceptive. He said: “Calvin Oaten avers (ODT 19/7/10) that after sifting through the DCC’s accounts, the city has a recipe for both increasing rates and increasing debt. No wonder Dunedin’s rates are so high.” Simply an opinion, he says, and unsupported opinion at that. No facts, no comparisons. The facts would, he says, get in the way of the case I attempt to build. He says Dunedin has one of the lowest average residential rates in the country. Who cares? I am only concerned with here in Dunedin. Right. Facts.

    Rates revenue
    (2002/03) $64.517m (2010/11) $103.182m (2019/20) $158.733m

    Net Debt
    (2002/03) $52.465m (2010/11) $337.151m (2019/20) $199.916m

    Interest
    (2002/03) $3.844m (2010/11) $10.956m (2019/20) $18.411m

    Interest not paid (capitalised)
    (2002/03) Nil (2010/11) $12.262m (2019/20) $366,000

    When I stated that upon completion of the stadium, Dunedin Venues Ltd (DVL) would take ownership and pay back to the DCC its share of the construction cost, some $104m plus, Cr Walls took umbrage at my saying that DVL would be part of the DCHL group. Whether it is or not, the fact is that it will arrange for Dunedin City Treasury Ltd (DCTL) to raise the money to be paid to DCC to reduce its debt. The fact that DCHL is to pay back the capital of that loan at $5m per year confirms that. The down side of this is that we, the citizens will receive $5m less per year in dividend until that debt is paid. We are initially to make this up by way of the “average $66” per year until 2012. Thereafter, it will be accommodated out of the rate revenue, hence the increases.

    Cr Walls challenges my assertion that the capitalising of some $44.35m of interest is carrying forward interest as debt incurring interest into the future. Well, if it is not paid on due date where else can it go? He claims the capitalising of interest is normal procedure on big projects. So, it is still there, isn’t it? Cr Walls claims the major drivers of council borrowing remains core infrastructure, in particular water and wastewater. Not true. The Mt Grand and Southern water upgrades are done and dusted. If we look at the 2006/07 Plan we see that provision is there for some $100m for the Tahuna upgrade plus the pipe line extension. That plan shows a peak net debt in 2010/11 at $214.391m, a difference of $122.76m from the $337.151m in this year’s plan.

    Let’s look at the non core projects as provided in the Plan, all debt funded, and see what they add up to. Stadium $165.526m (including covering the private funding until it is received, if it is), Town Hall/ Conference Centre (including borrowing costs) $51.5m, Otago Settlers Museum $30m, Regent Theatre $6.4m, Carisbrook purchase $7m and SH88 realignment (subsidised by Land Transport) $11.145m. This all adds up to $271.611m. In doubt, some $30m for stadium land purchase, possibly additional.

    Cr Walls says I have been a vociferous critic of the Town Hall development. True. My criticism all along has been the flawed arguments underlining the concept. The latest feasibility study conducted by Horwath HTL consultants, commissioned by Kate Styles in September 2008, upon which the decision to proceed was made, shows that if it meets their projections it will in 2016 show revenue of $1.567m. Deducting operating costs, depreciation, rates, interest etc. results in a deficit of ($593,430). Add the loan repayment provisions and the total cost per year to the ratepayers is a loss of ($4.264m). And that is based on 36 conferences per year from 2016 on, compared with 16 held in 2008. All their figures, not mine. That is why I am opposed.

    Cr Walls maintains that the DCC manages its debt very, very competently. It’s not the management I query, but rather the creation of the debt. He says our credit rating is good with no trouble in raising money. True. The reason why that is so is because of the DCC’s statutory right to strike rates. In effect the lenders’ risk is underwritten by the ratepayers.

    There is much more, but on balance I do not resile from any of my assertions.

    {Your figures have been reformatted, unfortunately we didn’t have time to insert them in a table. -Eds}

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