WE ALL SAID IT #DunedinCityCouncil #SHAME

ACTUALLY IT’S A HELL OF A LOT MORE THAN $8 MILLION… MORE NEWS TO COME, FOLKS

### stuff.co.nz Last updated 18:39 29/07/2011
Financial crisis for Dunedin City Council
By Mike Houlahan and Wilma McCorkindale – Southland Times and DScene
Dunedin City Council is facing a financial crisis, with two internal reviews warning it faces a $8 million revenue shortfall. Dunedin Mayor Mayor Dave Cull was an angry man when breaking the news, saying “hard choices” would probably need to be made to rescue the city’s financial position.

“Despite earlier suspicions, council has only just ascertained the full extent of this, and has not yet had time to decide on measures to address them. Council needs to pursue that with the utmost urgency.”

At the heart of the city’s fiscal problem lies projected revenues from Dunedin City Holdings Limited – the council’s holding company, which oversees firms such as City Forests Ltd, Delta Utility Services and Aurora Energy Ltd. DCHL has already had to borrow to deliver projected revenues to council. Cull warned that DCHL could become insolvent within a few years if it continued to pay council what was budgeted.
Read more

****

Dunedin City Council – Media Release

Statement re DCHL and DVML Funding

This item was published on 29 Jul 2011.

Over the past year or so, concerns have been raised about the ability of Council and Council companies to service debt. This raised further questions about communication and governance. As a result two significant reviews have been undertaken by Council.

The first was conducted by the Council’s CCO Liaison Group specifically to address concerns about current information flows between DCHL and the Council.

The second review is of the governance of the Council-owned trading entities: the DCHL companies, DVL and DVML and DCC Property. The aim was to ascertain if and how governance and efficiency could be improved and, if so, what a better governance model might look like. The independent reviewer, Mr Warren [Larsen], was also invited to make any other observations and suggestions he thought pertinent.

To an extent these two reviews overlapped both in terms of area of interest and conclusions. In addition, analysis was done regarding the projections included in the DVML Statement of Intent.

The conclusions include:

• The Council owned companies cannot sustain into the future the level of dividends projected to be paid to Council and which Council has budgeted for. From the next financial year, 2012/2013, there will be a $5 million dollar per annum shortfall from this source.

• The $3 million revenue from DCHL provided for in Dunedin Venues Management Ltd’s Statement of Intent is not sustainable either.

• In total there is an $8 million per annum shortfall in revenue across the “family” of Council Controlled Organisations.

This has largely been caused by the need for increased capital expenditure within the DCHL companies. With fewer funds available, the companies have had to borrow to pay dividends. That is not sustainable. Were DCHL to continue to pay dividends at the rate projected in Council budgets, it could become insolvent within a few years.

• The composition of, and skill-sets on, the DCHL boards needs to better reflect the companies’ core activities.

• Reporting mechanisms from the Council-owned companies to Council need to be greatly improved and made more transparent.

These conclusions have a number of major implications:

• First there is clearly an urgent need for Council to address the funding shortfall. This is an extremely serious priority. The possible options for doing that include reducing Council operating expenditure, reducing or deferring Council capital expenditure, increasing DCHL revenue, and reducing DCHL costs. Whatever option, or more likely combination of options, is chosen, some hard choices will probably need to be made.

• It is clear that this information will also impact significantly on projections previously approved for the repayment of stadium debt. Models are currently being reworked and the impact on stadium debt servicing and repayment will be reported back to the next F S & D committee.

• Secondly, the fact that the information regarding the funding shortfall from DCHL to Council was not communicated to Council in a timely manner indicates seriously inadequate communication mechanisms. This vindicates the need for the CCO Liaison Group enquiry, but also underscores the fact that such a confidential reporting group is neither adequate nor appropriate on an on-going basis.

CONCLUSION:
All Council has done so far is to clearly identify the problems. Despite earlier suspicions Council has only just ascertained the full extent of this and has not yet had time to decide on measures to address them. Council needs to pursue that with the utmost urgency.

Contact Dave Cull on Mayor of Dunedin.

DCC Link

Posted by Elizabeth Kerr

Advertisements

36 Comments

Filed under CST, DVL, DVML, Economics, People, Politics, Project management, Stadiums

36 responses to “WE ALL SAID IT #DunedinCityCouncil #SHAME

  1. Anonymous

    Q: Is the DCC currently engaged in any litigation at the level of the High Court?

  2. Russell Garbutt

    Do you know that they are – do tell?

  3. Mike

    “The composition of, and skill-sets on, the DCHL boards needs to better reflect the companies’ core activities.”

    I think that means “Paul Hudson needs to go”

  4. Peter

    All the members of DCHL are responsible for the mess they have got themselves – and us – into. They should all go. It would not be enough for just Paul Hudson to be scape-goated. They all had a hand in making decisions and they all had one vote each.

  5. Lindsay

    When the council is capitalising interest on a debt raised for another part of the operation and yet another arm of the council is borrowing to pay dividends back to the council and being praised for the result, it makes you wonder if they have heard of Enron?

    • Elizabeth

      Asked about Cr Hudson’s future, [Mr Cull] said the governance review suggested “fundamental changes to the structure of the [DCHL] board”.

      ### ODT Online Sat, 30 Jul 2011
      $8m annual DCC shortfall
      By David Loughrey
      A heated political storm has started after an announcement Dunedin City Council companies will not be able to come up with $8 million of dividends to help pay for multimillion-dollar spending. Mayor Dave Cull accused Cr Paul Hudson, who is also chairman of Dunedin City Holdings Ltd (DCHL), of being less than forthcoming about the companies’ financial situation, and is clearly pushing for him to end his time on the board of directors.
      Read more

      REVIEW CONCLUSIONS (via ODT)
      • Council-owned companies cannot sustain dividends projected to be paid to the council.
      • From the next financial year, there will be a $5 million-a-year shortfall.
      • The $3 million from DCHL provided for in Dunedin Venues Management Ltd’s statement of intent not sustainable.
      • Total $8 million a year revenue shortfall across council-controlled organisations.
      • Companies have had to borrow to pay dividends; that is not sustainable.
      • If continued, DCHL could be insolvent within a few years.
      • Composition of, and skill-sets on DCHL boards need to better reflect the companies’ core activities.
      • Reporting mechanisms from council-owned companies need to be greatly improved and more transparent.

      ****

      ### ODT Online Sat, 30 Jul 2011
      Service cuts and job losses predicted
      By Chris Morris
      Services may be cut and job losses would “inevitably” follow as the Dunedin City Council seeks ways to bridge an $8 million annual shortfall in money from its companies, a city councillor says.

      Cr Thomson said axing capital projects only saved the annual interest costs associated with loans taken to pay for them, but the one that should have been scrapped was the Forsyth Barr Stadium. “It’s academic and now we have to make it work, but there’s probably a little bit of bitterness there.”

      Read more

      ****

      “As I said prior to beginning the project, our community cannot afford it. That remains the case. I know where the funding gaps are.” -Mayor Dave Cull

      ### ODT Online Sat, 30 Jul 2011
      Celebration marks end of stadium construction
      By Rebecca Fox
      Dunedin Mayor Dave Cull was full of praise last night for the finished Forsyth Barr Stadium but he also issued a warning – the work had only just begun if the venture was not to fail. In his speech to about 220 invited guests at the “We did it” event in the stadium’s corporate lounge, Mr Cull said he had expended a lot of energy trying prevent Forsyth Barr stadium being built, so the “irony” of speaking as mayor at a dinner to celebrate its construction would not be lost on many.
      Read more

      “The best stadium in New Zealand – on time, on budget and ready for all to enjoy.” -Malcolm Farry

  6. Peter

    What I’d like to ask these Greater Dunedin councillors, who insist we now have ‘to make the stadium work’, is this. How is it possible to do this when we hire out the stadium for a function – to a wealthy group like Allied Press – FOR FREE? They have fallen into a logic trap here. We were promised clearer, more analytical, problem-solving thinking from GD last election.

  7. Russell Garbutt

    Up to now there seems to be a belief amongst Local Body Councillors that they are somehow immune from the consequences of their actions and decisions. But the Local Government Act is part of NZ law in order that ratepayers are protected from stupidity or deception or combinations of both. It does seem that there has been a huge reluctance by the Department of Internal Affairs, who adminster the Act, the Minister of Local Government, who seems unable to pay attention to anything, and the Office of the Auditor General, whose role seems to include ensuring transparency in processes and financial judgement, to actually investigate or get involved in what has been more than obvious to all for some time that the DCC has been acting in a manner contrary to the best interests of the ratepayers and in contravention of the requirements of the Act.

    The Carisbrook Stadium Trust, as an agent of the Council, is not immune from these requirements or investigations, nor are past members of Councils.

    I can only trust and hope that the frank statements made by Mayor Cull and Cr Richard Thomson continue and all ratepayers are provided with a clear and concise summary of what has happened behind this past lack of transparency. From that, quality decisions can be made on the basis of facts and we are not to be continually bombarded by what have been proven to be unsustainable statements made by the proponents of the stadium.

    What is absolutely clear is that we need every bit of profit from DCHL for the forseeable future and to do so we need a quality Board in DCHL. The present Board needs to be dismissed and those that need to be held accountable need to be dealt with appropriately. What is also abundantly clear is that the City cannot afford ANY projects requiring capital expenditure. The City must reduce costs immediately and the savings need to be substantial – no tinkering round the edges.

    Above all, we need to be able to make quality decisions on what to do in the event of the rosy projections of income for the stadium not coming to fruition. Those of us that have looked hard at those projections have a good idea of the type of preparation that needs to occur now.

    This is a shameful and disgraceful time for our City and above all we need to have accurate and timely information to base our decisions on.

  8. Hype O'Thermia

    I’m looking forward to the next big function in the Fubar – a full grovelling apology to the thousands of “negative” people, the “naysayers”, the “opponents of progress”, the people who lack vision … in other words, those of us who from the outset looked at the sales pitch for the stadium and recognised it as at best based on brainfartful self delusions and at worst a cynical series of well-constructed rorts.

    Like all big events involving important stakeholders this will, one would expect, be lavishly catered. Difference being, the catering wouldn’t be paid for by us but come directly from the pockets of those who emptied ours for this folly.

  9. Amanda kennedy

    Crs Hudson, Brown, Collins, Bezett, Noone and Weatherall will not apologise. That will make them responsible. Their agenda is to blend in with the rest of the present councilors and to hope really hard that we have all forgotten that it is they who put the city in this debt-ridden state. The ODT has a strange dislike of reminding us which councillors chose the stadium debt, so I think Crs Hudson and mates can be fairly confident that they have got away with foisting the stadium debt on the city. The media is not overly concerned to hold them to account. Indeed, the ODT is having their celebratory party there so not much chance that Mr Smith will wish any negativity around the stadium to be mentioned in his newspaper.

  10. Amanda kennedy

    Of course the most worrying thing is that these councillors who chose this debt are also in a position to keep on voting more and more funds are thrown at the economically unviable stadium. I do not like the idea of them having to chose whether we privatise our water or not. They will do so in a heartbeat if it means more funds for their stadium.

    • Elizabeth

      Amanda, with respect, I think the severity of the situation declared by Dunedin City Council carries a strong indication that for the foreseeable future the council and its companies are under investigation.

      The stadium is merely a small part of the ‘un-monied situation’.

      We may not like the effects ahead on residents and investors in this city (it is NOT only ratepayers that are or will be affected, I emphasise yet again).

  11. Peter

    The tragedy for Dunedin is that its financial shambles for the foreseeable future – and how it will impact on residents and businesses – make the place more unattractive for others to invest in/move to. We are already disadvantaged by ‘the tyranny of distance’ from other markets, being at the southern end of NZ/World.

  12. Amanda kennedy

    Thank you Elizabeth; “The council and it companies are under investigation”. Music to my ears. Long time coming. Unfortunately too late but it could help avoid even more of a trainwreck.

  13. Anonymous

    @Russell, I believe that there is one action that has been appealed to the High Court. Be a good OIA enquiry to confirm what legal proceedings the DCC has underway currently.

    On a related matter, anyone else notice that the main contractor for the SH88 realignment went bust shortly before completion owing $11 million? And how many local subcontractors didn’t get paid? Can we all say “due diligence”? My feeling is that it won’t be the stadium that will cause the major crisis; SH88 will be the trigger.

  14. Russell Garbutt

    This seems to have the appearance of a rapidly exploding bomb. Shrapnel in all directions and the innocent getting hurt.

    Is it possible to provide more detail of either the possible Court proceedings, or the details of the financial situation surrounding SH88?

  15. Hype O'Thermia

    From the article: “DCHL chairman Paul Hudson – a city councillor – said Cull’s release of the review findings came as a shock.”
    Shock?
    Oh but of course – it’s not the facts, it’s that nobody is supposed to mention the facts in polite society / to the public. How shockingly uncouth of Mr Cull!

  16. Amanda kennedy

    To me Hudson is just doing what all the stadium councillors are doing: deny, misdirect and hope nobody remembers they are responsible for the debt. But the most pathetic comment of all comes from Acklin. In his mind Dunedin people who complain are ‘screaming’ (like lunatics, one presumes) and so he will do what he did before he chose the stadium debt. Just ignore all the ‘screaming’ and continue blithely on sending rate funds to the stadium. Acklin forgets to tell us that he chose the stadium debt when he tells us that he thinks the stadium debt has nothing to do with the city’s current debt crises. That this individual is on council beggers belief.

  17. Amanda kennedy

    And oddly, Acklin, like Crs Hudson, Brown and the other stadium councillors forgot to tell Dunedin people that they supported the stadium in their promotional material when trying to get re-elected in the last election. Smart move. Staunch stadium proponents, Walls, Guest and the other fellow whose name I have forgotten have all been chucked from council.

  18. Hype O'Thermia

    Some people are tall. Some people are smart. Some people are tall AND smart.
    Bill Acklin is tall.

  19. Amanda kennedy

    On the nail. He sure is tall. But credit where it’s due. He outsmarted dear Mr Walls! But then again maybe not. Walls is still obviously Big Man about town and has some hand in the airport. Did you see how many committees Hudson is on? Four. I kid you not. This town is hilarious.

  20. Amanda kennedy

    But the joke is on you and me (as we are not stakeholders but mere minceholders, as you rightly observed).

  21. Hype O'Thermia

    What’s the opposite of consternation? Reason I ask is that back when Cadburys head office relocated and Paul Hudson decided to stay in Dunedin, did many people wonder why his decision was greeted with whatever-it-is?

    Equanimity. Relief. Something like that, I heard at the time, along with something rather droll about being as useful as a chocolate teapot.

  22. Russell Garbutt

    Cr Paul Hudson was in the unique position where he chaired DCHL and agreed to borrow to pay the DCC a dividend that exceeded what could be afforded to be paid. At the same time he sat round the Council table agreeing to tell DCHL to pay a level of dividend that HE KNEW they couldn’t sustain.

    Cr Acklin is in a different position, but his recent comments show that he has no understanding of what has happened, and worse still, doesn’t appear to care.

    Cr Acklin

  23. Mike

    Well as we all remember from the election Hudson has another little problem he’s probably not actually legally elected – the Local Authorities (Members Interests) Act section 3 says that someone who contracts with a local authority for $25,000 or more is ineligible to run for office – note this is a tougher requirement than the “pecuniary interest” clause in section 6.

    • Elizabeth

      Why do I imagine Mr Hudson has not consulted his solicitor, or is ignoring any legal advice on offer to himself as an individual.

      ****

      ### radionz.co.nz Updated at 1:05 pm today
      Ratepayers warned hard choices ahead
      Ratepayers in Dunedin are being warned that hard choices will have to be made to close an $8 million funding gap. Mayor Dave Cull says two reviews have revealed lower-than-expected earnings from council-controlled companies – which had to borrow money to maintain dividends to council. He says Dunedin City Holdings Ltd, which oversees many council companies, did not tell the council soon enough about the shortfall. Mr Cull says it will have a significant impact on servicing the debt for the city’s new sports stadium.

      But Dunedin City Holdings chairman Paul Hudson says the council has been aware for years that it would not make good business sense to continue borrowing to pay dividends.

      Mr Cull says the council has a year to put measures to cope in place. He says it could cut spending or reschedule debt.
      RNZ Link

      • Elizabeth

        ### ODT Online Mon, 1 Aug 2011
        Mayor fends off criticism
        By David Loughrey
        Dunedin Mayor Dave Cull has stuck to his claims the board of Dunedin City Holdings Ltd was responsible for formally acknowledging it could not provide the money required by the city to pay its debts. Mr Cull has also fended off criticism by Cr Lee Vandervis, who on Saturday claimed the mayor was “misrepresenting the truth” about council debt, and when he discovered the extent of the problem.
        Read more

        ****

        ### ODT Online Mon, 1 Aug 2011
        DCC profligacy condemned
        By David Loughrey
        A longtime opponent of Dunedin City Council spending policies says he is feeling vindicated by what he says is evidence of poor financial decisions by the organisation. But council critic Calvin Oaten says questions still remain about why it took so long to uncover the extent of the problem.
        Read more

        ****

        ### ODT Online Mon, 1 Aug 2011
        Opinion
        Oh what a tangled web they wove…
        Russell Garbutt, a critic of the past council’s policies, believes the DCC funding shortfall is not news. In this opinion piece, he argues any surprise in new debt revelations lies in the lack of transparency throughout the Forsyth Barr Stadium project.
        Read more

        – Russell Garbutt is a Dunedin ratepayer.

  24. Hype O'Thermia

    I wrote to Rodney Hide before the Fubar decision was final, entreating him to come down and take a good look at what was going on because it was going to be ruinous. How many of the rest of us did the same? A good many, I believe. I think we have a good case to put his failure before the government in support of Dunedin’s case for a claim for financial assistance.

    Some may say that our problems, unlike Christchurch’s, were self-inflicted. But there are records of how many people here tried damned hard to prevent the unaffordable grandiose schemes – petitions, letters to politicians and media, submissions to council. There is a trail of evidence that their spending was NOT in response to demands from ratepayers – who of the public demanded a new stadium?

    And then there are all the schemes where council employees went off on their own projects – viewing tower down by the Early Settlers for instance, and the variously tweaked Harrop Street horror – that took many many hours of permanent employees’ and consultant architects’ and engineers’ time, apparently in the hope that these pet projects could be sold to councillors and ratepayers as cunningly as Mr Farry sold the stadium “vision”.

  25. Amanda kennedy

    Be assured though, Collins, Brown, Noone and Hudson and the others will blame Dunedin people for the stadium debt. That is why it is so disappointing that Mr Smith’s newspaper has not been reminding us who actually chose that stadium debt. Also a big reason why I have not stopped complaining. As soon as we do, it will all be our fault. This is what Hudson’s stadium cabal plan to do to keep Cull in line. If he stops funds to the stadium, the stadium failing will be his fault; if he keeps funds going to the stadium, Hudson will still blame Cull for being profligate with ratefunds.

  26. Phil

    Talk about the rats fleeing the ship. One rat in particular. After a couple of years of carefully monitored censorship I see that the ODT has suddenly discovered that they were backing the wrong team all along and have started publishing letters and articles that, just 2 weeks ago, would have been tossed out or “abridged”. All of a sudden they are now the people’s champion.

    Too little, too late, unfortunately, if they were hoping to try and recover some journalistic integrity. It took a reporter from outside of the region to scare them into action.

  27. Amanda kennedy

    The ODT lose nothing doing this now. The stadium is built. Mr Smith got what he wanted. Now he and Farry can have a big party celebrating the stadium and the ODT all paid for by the ratepayers. Just as it has been planned for some time I should think. Mt Smith can afford to be a bit more ‘journalistic’. Or give the perception of being that.

  28. “$3 million from DCHL provided for in Dunedin Venue Management Ltd’s statement of intent”?
    I can’t find this reference in the statement of intent dated 27 June.
    What am I missing?

  29. Elizabeth

    On 29 July, Anonymous asked ‘Is the DCC currently engaged in any litigation at the level of the High Court?’

    A little birdie hints that it was ‘the Halls in the High Court saying the CST promised to buy their land, then said it wouldn’t, then didn’t provide an access way into their yard’. No-one on Council seems to know about this.

  30. Chirpbird

    Dave Cull claimed in DScene that he asked via the CCO Liaison Group about DHCL financial situation in February. Impossible because the Council resolution to set up this group took place at the Council Meeting on 28 March 2011.

    {Moderated. -Eds}

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s