DCHL borrowed $23 million to bail DCC

Why are the Otago Daily Times (Allied Press) and DScene (Fairfax) refusing to print the truth about Dunedin City Holdings accounts?

The $23 million that DCHL reportedly PAID as dividend etc to Dunedin City Council, is borrowed.

DCHL borrowed $23 million to bail the spendthrift DCC and make it look like we have a 5% rates increase instead of the real 25% increase without the new borrowing.

You’ll find all the details here:

DCHL Annual Report 2012 (PDF, 2.1 MB)

The ‘debt-deniers’ from DCHL are trying to characterise this year’s disastrous council-owned companies annual accounts as one of ‘ups and downs’.
ODT 18.10.12

The DCHL annual report actually shows:

● Delta business goodwill – Down
● Jacks Point/Luggate property values – Way Down
● City Forests carbon credits, log returns and valuations – All Down
● City Forests Milburn Wood Processing Mill – Down
● DCHL cashflow – Down
● DCHL profit – Down and Out and Negative: minus $5 million
● The only significant ‘Up’ is more DCHL borrowing

Repeat:
What DCHL has delivered is another $23 million of debt which they have had to borrow against company assets because the council has already spent it.

The claim that DCHL’s borrowing to supply dividends will stop from next year is a claim with onerous consequences.

– The council’s gross spending continues unabated.
– Together, DCC and DCHL have racked up all possible debt.

Without serious moves to slash staff and shrink the number of company directors, the only option that remains is Asset Sales.

———————————————

A note on two DCHL subsidiaries

The directors of Delta Utility Services Ltd and Delta Investments Ltd are guilty of having made the decision(s) to speculate on property at Queenstown’s Jacks Point and Luggate, using ratepayer funds. No other conclusion is able to be drawn, they are all responsible. They are all liable.

The value of the properties has been written down by millions of dollars, a loss to the ratepayers who were unaware of the purchases until the deals were concluded.

This is not simply a matter of loss of ‘book value’.

The directors of the two companies had real and perceived conflicts of interest in conducting the property deals. They continue as directors with clear conflicts of interest.

The directors should be SACKED. Meanwhile, we await news of ‘board restructuring’. [see post]

DCHL chairman Denham Shale should be SACKED for misrepresenting the facts and condoning the actions of the two boards.

Who are/were the directors responsible?

Delta Utility Services Limited
[formerly Delta Energy Limited; The Electric Company of Dunedin Limited]
Michael Owen COBURN
Norman Gilbert EVANS
Ross Douglas LIDDELL
Stuart James MCLAUCHLAN
Raymond Stuart POLSON

Delta Investments Limited – property subsidiary
[formerly Newtons Coachways (1993) Limited]
Grady CAMERON [also, Chief Executive of Delta Utility Services]
Michael Owen COBURN
Stuart James MCLAUCHLAN
Raymond Stuart POLSON

Throw out Athol Stephens, DCHL Secretary, for good measure.

Posted by Elizabeth Kerr

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17 Comments

Filed under Business, DCC, DCHL, DVL, DVML, Economics, Geography, Media, Name, People, Politics, Project management, Property, Site, Sport, Stadiums

17 responses to “DCHL borrowed $23 million to bail DCC

  1. Anonymous

    The abuse of position, escalating corruption and pending tragedy unfolding at the Dunedin City Council is so unbelievable I cannot put down in the words the horror that defines it. These people are psychopaths. It is all that is left to me to explain their actions.

    They are no different to criminals except their behaviour is based on the immoral use of loopholes, agendas, lawyers and votes. They believe it is their entitlement to steal from you and they do not care who gets in the way.

    I hate what they have done to Dunedin.

  2. Anonymous

    ‘The Dunedin City Council and its companies are about to reach the top of a $600 million debt mountain and start down the other side.’

    Yeah, right.

    Notice how the Otago Daily Times continues to reprint this hogwash every few months or so. The same paper that knows it companies are far, far up the creek and the council living in La La Land? The same paper that – at least – should suspect the real debt and its interest is much worse than $40M… $180M… oh wait, $205M… hang on, $360M… oops, $450M… I mean $600M… oh hell, maybe it’s $850M… $1 billion?

    This from its corrupt companies who borrow millions so it can be given to its corrupt council to blind the ratepayers with false hope. As anyone knows who lives with debt and uses one credit card to pay off another, it is not possible to get on top of and only through hardship and dedication can you slowly bring it down.

    Multiply that financial suffering by hundreds of millions and then dismiss any financial prudence and now you are the Dunedin City Council. Oh, and by the way, it is you and me who has to pay for their corruption and spendthrift ways.

    They have remortgaged the city and used your home as collateral to build an entertainment centre and feed the gawping mouths of Stakeholders.

    Council debt to peak at $600m
    By Chris Morris on Mon, 29 Oct 2012
    http://www.odt.co.nz/news/dunedin/232341/council-debt-peak-600m

  3. Hype O'Thermia

    Getting that much money by honest means, i.e. not shuffling numbers into different categories, would mean it has to have earned, sold & taxed a great deal and spent very little. Did this happen? Was I watching Sesame Street at the time, I seem to have missed it.
    Anything else consists of writing IOUs on scraps of paper and shifting them from one piggy-bank to another on the mantelpiece.
    How devoid of any spark of intelligence does this sloppy reporting make the ODT look?
    And don’t mention the other i-word – integrity.

  4. Elizabeth

    ### ODT Online Tue, 30 Oct 2012
    Mayor sees red over Vandervis questions
    By Chris Morris
    Sparks flew as Mayor Dave Cull and Cr Lee Vandervis clashed repeatedly over debt and dividends at yesterday’s Dunedin City Council meeting. In what at times resembled a running battle, an angry Mr Cull eventually accused Cr Vandervis of giving in to his “obsession” and threatened to prevent him from speaking. The pair found themselves at loggerheads over reports detailing Dunedin City Holdings Ltd’s latest financial results and the council’s annual report.

    DCHL recorded a $5 million loss, but still delivered $23.2 million in dividends, interest and subvention payments to the council and Dunedin Venues Ltd.

    Cr Vandervis attacked the figures at yesterday’s meeting, claiming the entire $23.2 million – which helped keep council rates increases to a minimum – had been funded from loans.
    Read more

    Comment at ODT Online:

    Digging deeper
    Submitted by MikeStk on Tue, 30/10/2012 – 6:55am.
    Well the DCHL companies borrowed about $23m and at the same time delivered $23m to the DCC in mandatory dividends and subvention payments to pay the stadium mortgage – using that money the council was able to reduce this year’s rates rise from 25% to 5%. Seems pretty cut and dried to me. Mr Shale didn’t say it hadn’t happened, only that they will stop doing it in this coming financial year. Of course the companies wouldn’t have needed to borrow money to keep operating if they hadn’t been forced to pay the council unsustainable dividends and stadium payments in a time of economic downturn.
    Borrowing $23m to reduce your rates, or to fund your dividend this year is foolish, it means $23m plus interest you must pay in a future year – if you’re stuck at the bottom of a deep hole with a shovel, of course it’s easy to dig the hole deeper by throwing dirt out of the hole than it is to save yourself by filling in the hole with no dirt – but you’re still stuck at the bottom of an ever deepening hole, and given the world economic situation it is the rainy season.

  5. Calvin Oaten

    I submitted the following to the ODT on 21 October. They sent me the rejection email. I then sent it to ‘DScene’ and it might turn up tomorrow in some form or other.

    DUNEDIN CITY HOLDINGS LTD, in announcing their results for the year ending 31 June 2012, produced a document with more anomalies than ‘Granny’s’ front room. If we view it in conjunction with the DCC’s 2012/13 Annual Plan we can see difficulties in reconciling the two documents. In the preamble, chairman Shale stated:
    Total Revenue at $254.922m. Total Expenses at $239.449m. Profit (before tax, asset impairments, and subvention payments) $15.543m. Subvention payments (tax adjusted) to DVL/DVML, Write Down impairments of Assets, and Tax Expense add up to a Net/Loss of ($5.087m) The provisions for the dividend/interest to the DCC of $10.450m, plus $5.25m capital reduction dividend to DVL and DVL/DVML subvention payments of $7.5m come to $23.2m. In order to pay this sum it was borrowed by DCHL, thus adding to its total Term Borrowings.

    This is shown as being in 2011 at $534.22m, whereas in 2012 it is now $557.399m, an increase of $23.179m. Balanced? But if we look at the six monthly set of accounts we see that at 31 December 2011 the total was $602.008m, a discrepancy of $44.6m which has gone where? You don’t just lose that amount without trace. Auditors please?

    It was then stated that the overall borrowings of both DCHL and DCC stood at $618.5m. Now if we look at the DCC Annual Plan we see that net debt for 2012/13 stands at $274.505m plus the official DVL Stadium debt at $146.6m. A total of $421.105m. Add that to $557.399m and we have a total of a staggering $978.504m. Is this true? Who would know?

    In DCHL’s accounts, note 31 page 57 it shows that the DCC owes DCHL over five years advances of $346.998m. Note 32.6 page 64 Financial Assets shows DCC owing DCHL $366.126m. Which is it? Further, in the Financial Liabilities it shows DCHL’s total borrowings at $730.550m.

    Chairman Shale says that DCHL can no longer sustain borrowing in order to maintain payments to the DCC. With the above figures one can well understand that, but then how can the DCC survive without those payments? The $23.2m would be the absolute minimum amount required if it is to get anywhere near a budget. The costs are as we know, still escalating, $480,000 relief to the ORFU, additional costs to all projects including the Settlers Museum, the Town Hall [redevelopment project], the Tahuna Sewage Treatment Plant and of course the Stadium. Even with the subvention payments maintained, DVL is still running at a deficit, as indeed is DVML. Where is the end to all this? How is the DCC going to produce its next Annual Plan if the DCHL payments are reduced or not forthcoming? It is patently obvious with the current market conditions that DCHL will be highly unlikely to produce a tax paid profit turn around to the tune of $30m or thereabouts, to just maintain the status quo. I fear that the ratepayers might be in for some serious ongoing shocks in future years. It all reminds me of that delightful endless narrative which goes like this:
    “There’s a hole in my bucket dear Liza, dear Liza, a hole. Then mend it dear Henry dear Henry, then mend it……..”

  6. JimmyJones

    DCHL is financially very sick: if it was a horse, you would have to shoot it to put it out of its misery. It is amusing to see how sensitive Dave Cull is to Lee Vandervis stating-the-bloody-obvious, that DCHL doesn’t make enough real money to pay its interest and dividends to the DCC, as well as the subsidies to DVL and DVML.
    The DCC are forcing DCHL into more and more debt every year. For the 5 years that I have Annual Reports, DCHL has always paid for its distributions to the DCC by increasing their debt. Not just part of the distributions are borrowed money, but the whole amount each year.
    In 2012 they added $50.3 million to their debt (page 37), so you can see that even without being forced to provide distributions of $23.2 million, it already had a severe cash-flow shortage. This negative cash-flow is the result of their own incompetence from spending very large amounts on new investments and expanding their operations. The incompetence comes from the fact that there has been no expansion in profits as a result of this low quality spending. They seem to be followers of the Homer Principle (if something doesn’t work, keep doing it), because not once in the last five years have they earned enough cash to pay for their spending on new stuff. Poor-old Dave and the new-guy, Paul, don’t seem to understand the problem. Let me summarize –

    ● DCHL is heading towards bankruptcy
    ● It is going bankrupt because DCC councillors and staff have been using it like a magic money-box where distributions are paid from debt (debt that doesn’t show up on DCC books – because of their choice)
    ● The LTP shows that they fully intend to continue this foolish practice, despite the DCHL Chairman’s aspirational comments to the contrary and Mayor Cull foaming at the mouth about it
    ● DCHL has been, and mostly still is, being run by a bunch of fools that need to be kept well away from anything financial or owned by the People Of Dunedin.

  7. Anonymous

    Re the Mayor is yellow story and ‘…leaving other councillors to praise the report…’ – any chance they were the Stadium Councillors and new bff’s Lesser Dunedin? You can’t count on the Stadium Councillors to think in the best interests of Dunedin. They stopped doing that a long time ago. They enabled the rorts and helped create the dire financial situation Dunedin is in. It is in their best interests to ensure zero awareness ever EVER gets into the Otago Daily Times.

    Dunedin, it’s all rort here!

    —–
    Who are the Stadium Councillors?
    https://dunedinstadium.wordpress.com/2012/02/17/does-the-insolvent-orfu-deserve-any-more-community-support/#comment-22110

  8. Calvin Oaten

    Jimmy; I couldn’t agree more. I have been banging on about this since the first blatant case of highway robbery at gunpoint of DCHL by Jim Harland around 2005/06. That was when the draft LTCCP showed a rate increase approaching 12%. Shock horror said the dopes around the table, “that will never do”. One week later “Jimbo” came back and said it’s all fixed, “we get a bonus one-off dividend of $10m from DCHL on top of the $9m already programmed”. “BINGO” rate increase below 5%. I asked Athol Stephens how this could happen when DCHL hadn’t even made enough profit to cover the $9m. His response was that “we had a look at our balance sheet and decided that several assets were undervalued. So we revalued some, specifically the standing forests of City Forests and increased our borrowings accordingly.” In fact, when the next set of accounts came out it showed that they had increased their debt by over $16.5m. (small beans by today’s standards)

    As you say, the dividend/interest payments made to the DCC each year have never been covered by profits. The exercise has been to continue to borrow and consume their own equity. That, dear friends is a recipe for bankruptcy as Mr Shale is suggesting. The problem now is that the DCC is a dividend addict and can’t live without them. So the most interesting thing to watch now is how they can put together a new Annual Plan without them. It’s election year, Cull either doesn’t understand or is in denial, the rest, except Cr Vandervis, simply wouldn’t know a deficit if it jumped up and bit them. That is one reason why they all turn on him, because he puts them right outside their comfort zone. They would far rather drool on about the John Wilson Drive and ignore all of the “STUPID” spending decisions made over the last decade. All that time they were basically hoodwinked and screwed by dopey admin staff led by “Jimbo”.

    [Jim Harland] will go down in this city’s history as the worst CEO ever seen. But it all coincided with equally the worst, least competent bunch of elected scoundrels ever. Watch this space for a concerted attempt to sell the idea of divesting assets. It will be spun as a very timely exercise, and all organisations should constantly reassess their portfolio of operations. It, of course, would never occur to them to do the obvious and lock the chequebook away in the vault, cut all non essential spending, seriously reduce staff, shut the door and turn the power off the Stadium, pull the plug on the Settlers Museum, let it stand on its own feet or close. Ditto the Chinese Garden, and forget about chasing conferences and events for the Town Hall. Draconian? You betcha! Bite the bullet, turn the place around and look further down the track at these “Vanity Projects” as Cr Vandervis so aptly describes them. They are quite simply unaffordable.

    Will Dave Cull and his hapless team consider this approach? Not in a month of Sundays. Why? Because that would be tantamount to admitting that they had “cocked up” big time, and in election year it is something too awful to contemplate. Anyway, they wouldn’t have the intellect to see it through. It would even mean being honest and fronting up to the people telling them the truth. What!! Never.

  9. JimmyJones

    Yes Calvin, I think we have suffered long enough from incompetent councillors. The trouble with getting new councillors is that the new ones can be even worse. Imagine if we get two more like Fliss and Jinty; there could be more pedestrian only streets, worm-farms on every floor, morning prayers to Gaia (the earth mother) and even less ability to avoid being manipulated by the staff.
    I see that the upward revaluations are continuing with the airport being revalued.
    Lee has found a very sensitive issue it seems. Dave Cull looks bad because either he didn’t know about the DCHL debt-funded magic money-box (and he should have), or else he did know about it and let it continue for the last two years that he has been mayor.

  10. Calvin Oaten

    Jimmy; my guess is that Cull did know (but couldn’t understand the ramifications) about the DCHL magic money -box. That he chose to do an about face from his election pledges suggests that he is either moronically fixated with the power of office or is just plain stupid. I would back the latter.

  11. Peter

    Dave Cull really needs to take a cold shower and do something about that temper of his. More than once, lately, we have seen the media words ‘angry’ and ‘infuriated’ to describe his reaction to people like Lee and Bev. Once again, he attacks the messenger and doesn’t take on board the message. You’d think he would be grateful to have someone like Lee Vandervis on board to give a hand in suggesting ways of bringing down debt. Instead he snuggles up to someone like Syd Brown – making him Chairman of the Finance, Strategy and Development committee. Sydney is the ultimate big time spender – the stadium being his penultimate joy. At least Lee makes a sincere contribution around the council table unlike the stable of drones who are more interested in their salary and freebies for morning/afternoon tea.
    I know he sees Lee Vandervis as a political threat, but it doesn’t have to be that way. It is the city’s future we are talking about. Not the political ambition of any aspiring Mayor. Dave needs to grow up and lead and leave political futures out of it.

  12. Calvin Oaten

    Cheer up Peter, Dave Cull’s intransigence will be his undoing. You know the old saying which says: “Know who your enemy is and clutch him close.” That is how Lee needs him, that way he can needle Cull into biting at every provocation. Outsmart him by simply knowing the subject better and besting him in debate. That way the people will get to understand just what a “straw man” he really is.

  13. Hype O'Thermia

    A worse-than-expected $3.2 million loss recorded by the company running Dunedin’s Forsyth Barr Stadium did not rate a mention at this week’s Dunedin City Council meeting.
    It emerged yesterday Dunedin Venues Management Ltd and Dunedin Venues Ltd’s annual reports had quietly slipped through Monday’s full council meeting without a question or word of debate.
    There had been no mention of DVML or DVL on the meeting’s public agenda, and it appeared the reports had not been circulated publicly, to media or even some council staff, as required, in the days before the meeting, the Otago Daily Times discovered yesterday.
    http://www.odt.co.nz/news/dunedin/232660/report-about-stadium-loss-slips-under-radar

  14. Hype O'Thermia

    http://www.odt.co.nz/news/dunedin/232665/stadium-finances-dismay
    Look at the but-but-but… responses a.k.a. lame excuses from Peter Hutchison.
    All they need is more money:
    “Dunedin needed an events fund to compete with other centres fighting to lure big concerts and other events to the city, he believed.”

    Financial Homeopathy: another smaller dose of what causes the same symptoms (borrowed money coz we ain’t got none left in the kitty) will raise our elephant from the dead — and cure the eyesight of those who have spent so long not seeing poor old Fubar in the middle of the room.

  15. Jacko

    After today’s front page headline on the stadium and councils debt issues, I would suggest that the next time you see a head line about the stadium. It will be on the inside back page of the ODT

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