### The Press Last updated 05:00 29/08/2012
Councils should stay away from business
By Chalkie – Tim Hunter
There are people who believe local councils should own businesses because they generate returns and ease the burden on ratepayers. Chalkie is not one of them. Your humble correspondent thinks councils should stick to their knitting. The reasons are many and varied. Taking a couple of examples at random:
a) Councils can start to think they are there to make money instead of, say, distribute water; and
b) Councils are not commercially savvy shareholders.
Poppycock, you say. Show me a single case of a council’s emptyheaded pursuit of unprofitable goals. In response, Chalkie invites you to consider Dunedin.
In that southern city the council is the proud owner of Dunedin City Holdings, whose job, according to its report, is “to manage the commercial investments of the Dunedin City Council to maximise returns”. The businesses under DCH’s umbrella include electricity network company Aurora, forestry company City Forests, the Taieri Gorge Railway Company and an engineering business called Delta Utility Services. DCH’s 2012 numbers are not yet available, but last year it trumpeted an improvement in revenue and profit and a total cash return to the council of $23.2 million. If you thought that was a good result, you’d be wrong.
When you look at several years of DCH numbers a disturbing pattern emerges of ever-increasing millions being borrowed and pumped into underperforming assets. The cashflow statements tell the story.
…A picture therefore emerges of a group prioritising asset growth over profit growth, and staying cashflow positive, just, through heavy borrowing. Chalkie suggests another term for this behaviour is empire building. Of course, it could be justifiable if the asset build-up is value enhancing in the long term, but is it?
[Reference: New Zealand Companies Office]
DELTA UTILITY SERVICES LIMITED
DELTA ENERGY LIMITED (13 May 1998)
THE ELECTRIC COMPANY OF DUNEDIN LIMITED (29 Mar 1995)
Company number: 453486
Incorporation Date: 16 Feb 1990
Company Status: Registered
Entity type: NZ Limited Company
Registered Office – 10 Halsey Street, Dunedin
Address for service – 10 Halsey Street, Dunedin
Directors (5 of 5):
Full legal name: Michael Owen COBURN
Residential Address: 154 Portobello Road, Vauxhall, Dunedin 9013
Appointment Date: 08 Oct 2003
Norman Gilbert EVANS
15 Irvine Road, The Cove, Dunedin
13 Jul 2005
Ross Douglas LIDDELL
33 Leithton Close, Dunedin 9010
24 Jun 1998
Stuart James MCLAUCHLAN
3 Walsh Lane, Maori Hill, Dunedin 9010
01 Jun 2007
Raymond Stuart POLSON
80 Browns Road, St Albans, Christchurch
21 Dec 1994
Posted by Elizabeth Kerr