DCC: Council consolidated debt $623 million

If taken together, core council and stadium debt has increased $130 million, from $240 million to $370 million, during the past three years.

### ODT Online Thu, 26 Sep 2013
Varied stances on question of debt
By Chris Morris
Dunedin’s debt mountain is reaching new heights, but the Dunedin City Council says everything is under control. Reporter Chris Morris speaks to the city’s mayoral candidates about whether they would do anything differently. The eight men and one woman who want to be Dunedin’s next mayor are divided over debt. They are divided over the figures, divided over the plan and divided over what they would do differently.
Some have declared themselves happy with the Dunedin City Council’s approach to debt repayments. Others remain opposed, and have called for cost-cutting, more money from the council’s companies and even for assets to be sold, including Wall Street mall and Forsyth Barr Stadium. And, in the meantime, the debt mountain continues to climb towards a projected peak that is still two years away.

As it stands, the council’s consolidated debt – shared between the council, its companies and the stadium – has reached $623 million, council staff confirmed yesterday.

That was up $125 million since the start of incumbent Mayor Dave Cull’s term in mid-2010, albeit mostly – but not completely – as a result of spending on major capital projects agreed to by previous councils.
Within the debt mountain, core council debt – the bit ratepayers are directly responsible for servicing – stands at $225 million. That has actually gone down $15 million, from $240 million in 2010, but only because stadium debt – totalling $145 million – has been split from the core council debt tally, to become its own category, since 2010. Add the $253 million in debt held by Dunedin City Holdings Ltd and its subsidiaries – the council’s group of companies – and the total reaches $623 million.
Read more + Mayoral Candidate Views

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Mayoral candidates 2013Dunedin Mayoral Candidates 2013
Left to right, (top) Hilary Calvert, Dave Cull, Kevin Dwyer, (middle) Pete George, Aaron Hawkins, Olivier Lequeux, (bottom) Steve McGregor, Lee Vandervis, Andrew Whiley

DCC website — electoral information

Council Elections: STV Q&A – see Legal Beagle by Graeme Edgelar

Faces appearing – and disappearing – in all manner of places (ODT 26.9.13)

Vote

### ODT Online Thu, 26 Sep 2013
Editorial: Rights and responsibilities
While the eyes of some people glaze over at the mention of local body elections, the fact is they offer the biggest opportunity for the average citizen to influence the direction of their community for the next three years – and often much further into the future.
Postal voting papers should now have been delivered to households, and voters have until Saturday, October 12, to make decisions about who they want to represent them as mayor, on city or district councils, community boards, licensing trusts, regional councils and health boards.
The choices we make in these local body elections will affect us, and others in our community. They influence everything from the health services we receive, to roading, water and sewerage infrastructure, social, cultural and sporting and recreational amenities, and planning and development. There are services we take for granted, those we believe are fundamental to our lives, those we bemoan the lack of, and inefficiencies we believe frustrating or unnecessary.
The choices should not be made lightly. Voters are encouraged to carefully read their supplied candidate and voting information and as much other material as they can source in order to make informed decisions about those who will then be expected to make educated decisions on behalf of us.
Read more

Posted by Elizabeth Kerr

120 Comments

Filed under Business, DCC, DCHL, Democracy, DVL, DVML, Economics, Media, Name, New Zealand, People, Pics, Politics, Project management, Stadiums, What stadium

120 responses to “DCC: Council consolidated debt $623 million

  1. DCC’s consolidated debt $623 million, so says Finance, Strategy and Development chair Syd Brown. He is comfortable with that. As well he might as he is departing.
    Do we believe him? The latest DCC annual Report for year ended 30 June 2013 is not scheduled for release till 30 September (at least a month to six weeks later than normal) so, is he privy to that?

    In the meantime we ‘plebs’ can only go by last year’s report. On page 6 section 1 it gives a very interesting table of the debt. It is as follows;
    2007 ($246.087m)
    2008 ($308.828m)
    2009 ($374.048m)
    2010 ($498.072m)
    2011 ($567.170m)
    2012 ($616.382m)
    Syd now says it is ($623m). In Dave Cull’s mayoral term the increase was ($124.92m) while from the time he has been on council (just six years) it has increased by ($376.923m). Regardless of what he might say, he was there and the facts are there also. One can only wait to see the official figures once the new report is available. That will test Syd Brown’s assertion that is only at ($623m). By which time of course most if not all votes will have been cast. Funny that.

  2. Peter

    Interesting letter from Lee Vandervis and Dave Cull’s reply in today’s ODT on the terms of the stadium loan. What do we make of it all?

  3. Hype O'Thermia

    Vandervis could well quote Mandy Rice-Davies: “Well he would say that wouldn’t he.”

  4. Letter to the ODT Editor today from Warwick Johnson (Hon. secretary-treasurer) Maori Hill, of the Crater Dunedin band. Explaining that “it” isn’t a political party (rather, an incorporated society). That’s fine, but then he wrecks it saying the GD councillors “have clearly shown moral leadership in their decision-making and policy-setting”.

    • Mike

      oh how interesting their – finances are available on the companies office web site

      So is their initial membership list, interesting reading …

      And the recent change in their goals from “to enable the development of policies that best represent the citizens and ratepayers of Dunedin” to something that basically says they want to control councillors to do what they want

      To become a member of this august society you need to be blessed by the executive committee, not much different than the old Citizens Party tartan mafia

      I’m not sure how they’re any different than a political party – other than that they don’t allow the general public to join, they exist to push the “best policies” as seen by a small elite who are accountable to no one.

    • ODT 27.9.13 Letter to the editor (page 14)[click to enlarge] ODT 27.9.13 Letter to the editor (page 14)

    • This will get a good airing on Dunedin Television at 7.30 tonight (and repeated tomorrow). Kevin Dwyer sums it up well.

      Typical of Cull’s duplicity in how he explains GD, it’s a ‘group’ when it suits and it’s independent individuals when it suits.

      It defies normal political practice to think they wouldn’t work together at times. They certainly campaign as a team, to expect those relationships to suddenly cease on election day is absurd.

      There are always groupings in politics whether formal parties are involved or not. It’s what you have to do to get majorities. So I don’t know why GD aren’t upfront about this.

      • Pete, listening to Dunedin Television tonight… paraphrasing (until the recording is complete) Mayor Cull says Greater Dunedin is only active in the ‘pre-election’ period and does not operate ‘in term’…. [since it’s not a party].
        UNBELIEVABLE.

    • And this is where a GD mayor would prove their word, or otherwise.

      “Mayors throughout the country will become more powerful under new law changes set to come into action after October’s local elections.

      The changes will allow mayors to appoint their own deputies, set the structure of committees and appoint committee chairpeople.”
      http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11131052

      The current council has a GD mayor and a GD deputy mayor and has one third of the council vote.

  5. Peter

    I realise Greater Dunedin don’t always vote as a block, but it does beg the question, why you would group together in the first place? The reason, of course, is that you have a broad philosophical/policy base which you share. Ultimately, it is up to them what they do as a group.I have no problem with that, but I don’t think it is quite correct to say that the grouping is only a very loose one.
    One point about not meeting as a caucus. This does not have to be a physical thing when these days you can email,skype and text.

  6. Peter

    I know Syd Brown was never bashful about the need for obtaining a majority on council to get what you want. We saw that with the pro stadium councillors, who were rock solid together all along and got the stadium through the gate. Of course he was right and, therefore, why would any other grouping disclaim that this is not what they are also on about….to get a majority to push their overall agenda? It makes sense.

  7. Hype O'Thermia

    Moral =/= holier than thou, huh?

  8. ODT 26.9.13 Letter to the editor (page 25)ODT 26.9.13 Letter to the editor (page 25)

    • Russell Garbutt

      In war, and in politics, the truth is always the first victim, and it is also true that the victor is free to rewrite history in the way that they want.

      The truth is not to be found in politician’s statements – you only have to look at Question Time in Parliament to see that – and I don’t think the truth is being expressed here either.

      The interesting thing to my mind is that Cr Vandervis has a plan that he has promulgated to make further significant savings involving the amalgamation of the Otago Regional Council, and the DCC. I have to say that I’ve not heard a word from any other candidate opposing this plan. What I have heard from Mayor Cull is a sort of “steady as it goes” plan to pay off this debt that was incurred by a mixture of deceit and misinformation – all exposed in the Larsen and PWC reports. Hilary Calvert has expressed a view that she is suspicious of the figures coming out of the DCC and I think it also fair to say that she has every reason to be suspicious – anyone only needed to spend an hour or so with the previous CFO, Athol Stephens, to be completely confused with what was the actuality and what was pie in the sky stuff based on interest rate swap derivatives and goodness knows what else. The fact that he is gone may have led to a bit of clarity, but maybe the true exposure is still being worked on.

      Whatever the dent, it can’t be dealt with in the vain hope that nothing else will pop up – because something will. When that happens, the “steady as it goes” policy gets blown out of the water. Significant measures are needed to pay off this capital borrowing – and while I believe it would be quite satisfying to wring the wallets of the pro rugby people to get them to pay off a significant amount, more could be done to make a dent in the debt by getting those rather wealthy gentlemen that promised substantial donations to disturb the moths in their back pockets.

      • Then there is the tale of one Central Otago gentleman – a prominent businessman – who is currently fighting for name suppression. There are no even hands if he wins, and I’m not sure Sir will still want to attend his parties if he does. Interesting times. Money and politics take us far. But rugby?

  9. Dave Cull’s replies are pure ‘BS’ (2) he states “during the triennium his council approved new discretionary spending of $14.4 million, and in the same period reduced capital expenditure by a total of $39m, giving a net savings of $24.6m of debt.” (3) he then says: DCHL will show in the year to the end of June 2013 its group combined debt level went down by $10m.
    If we look at the DCC’s Y/E 2012 Annual Report we find that this triennium commenced with the consolidated debt at $498.072m, and Syd Brown told us that it finished at 30 June 2013, at $623 million. That is an increase of $124.928m. So clearly Dave Cull is either referring to his own set of figures (from where we can only conjecture) or as is more likely, simply lying. We can each make our own assessments on that.

    • Calvin, the DCC chief executive having had to produce the ‘state of the city’ report prior to the elections, a legal requirement, must surely want to prove or disprove Dave’s assertions for the public good, should there now be a ‘state’ of confusion developing before 12 October hits. A legal requirement, hmmmm.

  10. Elizabeth, no-one gets to see the DCC’s Annual report until September the 30th. Ditto for DCHL’s Annual Report. By which time it will be too late to influence the election one way or the other, I suspect that most who will vote already have. That leaves Cull and his mates to imply that they know the facts, and whether that is true or not the voters have no way of telling. It is no accident that these reports are so late. In ordinary years they are available by mid August at the latest.

  11. John P.Evans, council nominee

    Only 10% have voted until last night (Thursday)

  12. Peter

    Talking about sending mail through our lean and ‘mean’ NZ Post. I sent a small (book) parcel to Melbourne recently by airmail and it took a week to get there. So much for efficiency.

  13. Jock strap

    What do you expect Peter. Once it got to Aussie it would take about 3 days to find someone who could read English, and decide where it was to go. Then the Aussie unions would have to have a 2 day stop work meeting to decide which union was allowed to deliver it. I think a week to get there could be a record. I hope none of the Aussie unionists check this site. If so I can see another 10 days being added to delivery of NZ mail over there.

  14. Peter

    Jockstrap. You may be missing something here before you disparage ‘my people’. Could it be that it took three to four days before it left NZ due to Kiwis not knowing whether Australia was east or west of NZ and having to consult an atlas?

  15. East or West? Actually, Peter it’s both. One way is shorter than the other. Perhaps your parcel went the long way. Maybe you should have specified which way you preferred.

  16. Peter

    Calvin. Maybe it did go the long way, but if it went by Qantas you’d expect it to have gone directly back to its sunny, home base of Australia. We have no way of knowing where Air New Zealand flies in the ‘Land of the Long White Cloud’.

  17. Jock strap

    Peter. Your reply explains everything when you say ‘my people’. If you are an Aussie as indicated, then that tells to me where the problem is. You are supposed to write the address on the outside of the package, not the inside.

  18. Peter

    Mmmmm… this is getting tricky, Jock strap. However. It might depend on whether the parcel was wrapped in smart, clear cellophane/duraseal. (Hence the address IS visible.) Not your No 8 wire, Kiwi thing of using dirty, used newspaper and brown paper wrapping. Because you can’t afford anything better.

  19. The Mayors to be given more powers! He/she will unilaterally appoint committee chairs. If Dave Cull is returned, then watch this space for the GD cabal to take control. The ‘walrus’ to Finance and Strategy, the invisible man stays as Deputy, The ‘wee lady’ from the country will be able to ‘stumble bumble’ along her freaky trail. The ‘ultra green’ will be pursuing the task of putting all but the ‘halt and the maimed’ on push bikes, and in between times fronting the ‘anti-drill’ brigade. Dunedin will forge ahead on the road to ‘perdition’. Peter, which way did you say is Australia?

  20. Peter

    Calvin. Go West, young man. But watch out for the ‘rednecks’.

  21. Anyone read the ‘job add’ in the ODT for the CEO’s position? A whole lot of flowery crap as usual. The only reference of note is: “A key responsibility will be to ensure the organisation is appropriately resourced, well managed and working within self-imposed financial parameters”. No mention of the fact that the city is already ‘imposed’ by $623 million of debt, nor how it may be ‘appropriately resourced’ other than ripping into the ratepayers.
    The main bullets:
    ● Organisational Leadership
    ● Delivery and Communication
    ● Vision for the City
    Jeez! that’s what we need, “more vision” like Jim Harland expressed. Let’s see what turns up. Merlin the magician I hope.

    {Copying this comment to relevant thread. -Eds}

  22. In Dave Cull’s response to Lee Vandervis (see above) I am disappointed that the DCHL chairman chose to support one side of a political debate by making claims that could not be verified because the annual report has been delayed.

    Dave Cull denies that the rates rize of 4% was achieved by loading-up DCHL with even more debt. We are told that the debt went down by $10 million in the 2013 financial year. This would be a good thing if it was true. It would also be unusual – the debt the year before (FY 2012) increased by $50 million of which $16.0 million was to pay the stadium subsidy and the DCC dividends and therefore helped to achieve an artificially low level of rates. For the 2013 year, the company has predicted that it will make only $3.6 million and pay the DCC a dividend of $5.4 million – this shortfall means that DCHL will either have to borrow more or sell something.

    DCHL’s forecasts (Statement Of Intent) shows that it is a very sick company with very low profits predicted and shareholders funds falling rapidly (due to excessive borrowing and low profits). The changes instigated by Dave Cull have not fixed the problem. The problem is that if nothing is done soon, then they will be forced to sell assets. Remember that it will be the profitable assets that are sold, and so DCHL’s financial future could rapidly become even worse. Not just worse for DCHL, but worse for the renters and ratepayers of the city. Dave Cull seems to have no awareness of this, or else doesn’t care. Bicycles come first, it seems.

    Today (Monday) is the last possible day to release DCHL’s 2013 annual report. The company predicts a profit of $3.56 million and the DCC expects a dividend of about $5.20 million.

    • JimmyJones, I don’t suppose DCHL has bought a lotto ticket… such are its gambling tendencies.

      PS. I thought Shale and Baylis were supposed to fix things before they galloped off into the sunset.

    • Dunedin City Holdings Limited Annual Report 2013 (PDF, 1.753 MB)
      http://www.dunedin.govt.nz/__data/assets/pdf_file/0011/343955/DCH-annual-repo…

      Dated: 26 Sep 2013

      ****

      ### ODT Online Tue, 1 Oct 2013
      Big lift for DCC companies
      By Debbie Porteous
      A significant swing in the fortunes of the Dunedin City Council’s group of companies can in large part be attributed to recent changes in governance and the ”tidying up” of the operation of the companies, the chairman of the companies’ parent group says.
      The council’s five companies and Dunedin International Airport, in which the council has a half share, reported a strong result for the year ending June 30. Their annual reports, released yesterday, showed the group posted a $20.5 million surplus, up from a $5.1 million loss last year.
      Not counting forest revaluation, carbon credit revenue, asset impairments and subvention payments, the group’s net profits for the financial year were up $4.4 million on the previous year, to $11.5 million.
      About $15.7 million, including a $9.5 million subvention payment to Dunedin Venues Ltd, interest payments and dividends, was paid to the council, meeting budgeted expectations.
      Graham Crombie, chairman of Dunedin City Holdings Ltd, the holding company for Aurora Energy, City Forests, Dunedin City Treasury, Delta Utility Services, Taieri Gorge Railway and Dunedin International Airport Ltd, said various factors made up the improvement.
      Read more

      ****

      Dunedin City Council – Media Release
      Dunedin City Holdings Limited Annual Result for the year ended 30 June 2013

      This item was published on 30 Sep 2013.

      The Board of Dunedin City Holdings Limited (DCHL) is pleased to report a very strong result for the year ending 30 June 2013.

      Highlights
      ● Profit after tax for the group has improved from a loss of $5.1m last year to a profit of $20.5m this year.
      ● We have distributed to the Dunedin City Council (DCC) and its subsidiaries outside the DCHL group a total of $15.7m. This has fully met budget expectations and been achieved within the policy of not borrowing to pay dividends.
      ● Cash from operations has improved markedly from $19.5m last year to $35.7m this year. This was after paying the budgeted subvention payments of $9.5m to Dunedin Venues Limited.
      ● The solid cash generation has enabled the DCHL group to lower its net debt by $10m. The debt of the parent company also decreased slightly, by $300,000.
      ● Significant progress has been made in restructuring the group governance arrangements.
      ● The improvement in results this year reflects the hard work and focus of the staff and directors of the DCHL group of companies, which is much appreciated.

      Profit after tax for the group has improved from a loss of $5.1m last year to a profit of $20.5m this year. There are a number of factors which go into making up this improvement. All companies in the group have performed strongly this year. City Forests Limited’s profit was increased by the sale of carbon credits, an increase in the valuation of the forest estate and a substantial increase in margins from the sale of logs. Aurora Energy and Delta Utility Services Limited both contributed improved performances, while Dunedin International Airport also had a strong year.
      Cash from operations has improved significantly. Cashflow is the most critical measure as it is the basis for dividends and capital investment. This year, both City Forests and Delta markedly improved their cashflow generation performance.
      The solid cash generation performance has also enabled the DCHL group to lower its net debt by $10m over the year. The group balance sheet shows a slight increase in the debt position as the debt of the DCC (which is accounted for in the Dunedin City Treasury company) edged upwards to cater for the completion of several budgeted projects. The debt of the parent company also decreased slightly by $300,000 over the period.
      We have also made significant progress in restructuring the governance of the group. Directors appointed to subsidiary boards in the last quarter of 2012 have contributed strongly. In some cases, a new focus has been brought to company strategies and good progress has been made in exiting investments now well recognised as non-core investments.
      We would like to make special mention of the contribution of Ross Liddell to both City Forests and Dunedin City Treasury. Ross retired as a director after year end and his contribution to the DCHL group over a period of years has been significant and appreciated.
      The board of the parent company will alter again over the next few months and there will also be further changes to the subsidiary boards. In August, Denham Shale stepped down as DCHL Chair. He and Bill Baylis had been appointed to assist in implementing a range of recommendations from the Larsen Report and many of the positive developments that have taken place over the last year can be attributed to these changes. Mr Shale and Mr Baylis will step down from the board once the replacement directors have been agreed by the Council.

      Contact Graham Crombie, DCHL Chair on 027 436 3882.

      DCC Link

  23. JimmyJones, once again you are on the money. DCHL can not possibly have reduced its borrowings by $10 million as Dave Cull claims. Unless of course it has sold something or things substantial. I suspect that it has ‘rolled over a tranche of $10m which Cull has been allowed to believe was paid off. Just how you could do that I have no idea. But then there is an awful lot that goes on in the finances of both DCHL and the DCC for which there is no ‘normal’ explanations. As you say, DCHL predicts a profit of just $3.6m and a commitment to pay $5.25m (converted to a subvention payment of $7.25m) to DVL as stadium debt reduction. But then, on top of that, the DCC’s Annual Plan depends on $10.450m in interest/dividend payment, else its Plan is in tatters. Yet Dave Cull still avers that the city is on track to service all its debt, repay the stadium in 18.5 years, fund the $40m Transport Strategy, hold next year’s rates increase to just 3% on top of this year’s 4%. and if the people only re-elect him all will be ‘hunky dory’. The man is a bloody genius.

    • Hype O'Thermia

      It’s not such a puzzle, Calvin (“…which Cull has been allowed to believe was paid off. Just how you could do that I have no idea.”).
      When one party knows the other party would like to believe something, and is highly motivated to refrain from asking searching questions, vague ambiguous phrasing works for both of them.

  24. Ommm? Ive had it with ‘OM’. New Agers dressed as Marlon Brando chanting in the Lotus all day long. Ive seen that Lotus parked in the Museum Reserve.

  25. The new set of accounts just released extoll the fact that the DCHL group increased its profit to $20.5m after tax, paid some $15m odd dividend to the DCC and reduced its debt overall by $10m. Great stuff.
    But when I take a look at the accounts I find that the group’s term borrowings stand at $558.872m compared with last years at $557.399m. To me that shows an increase of $1.473m.
    Going to the “star” performer City Forests, I see where its term borrowings stood at $18.973m against last year at $27.987m. A reduction of $9.014m. It paid a dividend of $4.4m and revalued its forestry estate up by $7.046m and gained carbon credits of $5.9m. These add up to $12.9m of virtually unearned income. Not being an accountant I wonder just where the $10m debt reduction lies? Perhaps JimmyJones can explain.

    • Expensive, especially after (ahem) ‘revaluation’ of the forestry estate.

      ### ODT Online Mon, 2 Dec 2013
      Whare Flat forest fire ‘callous’
      By Debbie Porteous
      A suspicious fire in a City Forests block at the weekend was a callous act, and people needed to think carefully about the danger and cost of their actions, the forestry company says. City Forests is a Dunedin City Council-owned company.
      Read more

  26. DVL seems to have suffered a loss of ($4.804m) compared with last year at ($4.312m) This is after a reduction in stadium debt from ($143.531m) to ($138.586m) a net of $4.945m presumably from DCHL. That seems to make a consolidated deficit of ($9.116m)

    DVML is another loss of ($986,000) after paying rent of $4.0m. The carried forward deficit is now ($7.256m). But this has been increased to ($7.98lm) since balance date by an injection of $725,000 from the DCC. This was done by swapping a loan of $3.381m (share issue increase) for another of $4.106m (share increase.) So we can see that until the full authorised quantity of unallocated shares are fully subscribed, then the DCC can keep dripping money in to keep the ship afloat.

    The stadium hole looks to be around ($16.372m) over and above the outstanding mortgage owing of ($138.586m) a total of ($160m) directly to the DCC. That is not taking into account the loss of $5.25m per year of dividend to the DCC to offset rates.

    That stadium would have to be the worst possible investment this city could ever have made.

    • Mike

      And to think this all started because the ORFU owed the DCC $2M and couldn’t figure out how to pay it back

    • Dunedin City Holdings Limited Annual Report 2013 (PDF, 1.753 MB)
      http://www.dunedin.govt.nz/__data/assets/pdf_file/0011/343955/DCH-annual-repo…

      Dated: 26 Sep 2013

      See also DCHL’s half-page colour advertisement on page 2 of today’s printed and digital editions of the ODT.

      • ### dunedintv.co.nz October 1, 2013 – 7:03pm
        Dunedin City Holdings Ltd announces $20m profit
        A strong performance across the group helped the DCC’s group of companies perform something of a turn-around in the last year. Dunedin City Holdings Ltd yesterday announced a profit of more than $20m. And its chairman says there is evidence of an economic recovery.
        Video

        ****

        ### dunedintv.co.nz October 1, 2013 – 6:55pm
        DVML records increase in operating revenue
        Dunedin Venues Management Ltd has recorded a 23% increase in operating revenue from the last financial year.
        Video

        ****

        dunedintv.co.nz September 30, 2013 – 7:35pm
        Dunedin City Council’s group of companies turn a profit
        The Dunedin City Council’s group of companies have turned a $5m loss last financial year into a $20m profit this year.
        Video

        • Recently, Paul Orders had to straighten out Mr Burden, DVML’s chief executive, for attempting to pass invoices for payment onto DCC. (Remember, Carisbrook Stadium Charitable Trust (CST) went through a period of passing invoices onto DCC for payment. Old habits die hard, Darren.)

          Related Post and Comments:
          20.8.13 DVML foists invoices on DCC

          The following item appeared in printed and digital editions of ODT today (2 October).

          ### ODT Online Tue, 1 Oct 2013
          DVML loss bigger than forecast
          By Chris Morris
          Ratepayers will not be hit in the pocket again despite the company running Dunedin’s Forsyth Barr Stadium missing its mark by nearly $700,000.
          Dunedin Venues Management Ltd on Monday revealed a $986,000 loss for the 2012-13 year, which chief executive Darren Burden said represented progress after a $3.21 million loss the previous year. However, the company had been forecasting an even better turnaround, with a $298,000 loss predicted for 2012-13 in a statement of intent published in July last year. In the end, the $986,000 loss was $688,000 worse than expected, the company’s annual report confirmed.
          Read more

        • Comment at ODT Online:

          The operational losses of DVML
          Submitted by russandbev on Tue, 01/10/2013 – 3:56pm.

          Until professional rugby loses its grip on the DCC, until those within professional rugby are bought to account for all of their financial machinations with pokie funds and failures to run their business in accordance with sound business understandings and practices, and until the City forces professional rugby into meeting real costs, then it will be up to the ratepayers of the City to continue to subsidise professional rugby through the on-going losses of DVML. Frankly, there are few on offer for any governance positions in the DCC that seem to have the attitude of changing very much in this regard. I wondered why those that are behind the scenes in the governance of professional rugby aren’t standing for Council, but on a moment’s reflection, why should they? They get what they want anyway.

        • “Dunedin Venues Management Ltd on Monday revealed a $986,000 loss for the 2012-13 year.”
          Losing the recipients of how many salaries would it take to knock that item off the list for next year?

      • Mike

        Yes spot on Russell – today’s article explains which rug they are going to sweep this million dollars underneath – they are going to use money from sales of private memberships/etc – money that was supposed to be used to pay down the $45m ‘private fundraising’ debt to pay off DVML’s losses.

        So the next question I guess is: how will they pay off the $45m loan now?

        • Worth remembering how the DVML shuffle is manufacturing momentum for NO construction debt recovery from Professional Rugby except by ratepayer funding, yet again. Bastards.

          Comments continue at ODT Online:

          A grip
          Submitted by russandbev on Wed, 02/10/2013 – 6:38pm.

          MikeStK, the Larsen report and the PWC report – both of which were published in the ODT – made it plain that the whole basis of the stadium’s finances were nothing than hyperbole. Huge under-estimation of costs of construction, huge over-estimation of economic benefits, and under-estimation of on-going operational costs. By now, surely most proponents of this White Elephant can see how completely destructive this project has been on Dunedin’s well-being. The only people or groups to have benefited directly from this project have been the very fortunate land owners who sold at round 3 times the budgeted amounts, the private CST who received regular fees for their management of the project, the various “consultants” who provided glowing future forecasts for stadium usage which have all proved to be optimistic at best, the ORFU who have been bailed out, the few promoters that have received subsidies for bringing in the few shows that have been staged at the stadium, the anonymous economic impact analysts who provide regular non-peer group reviewed reports on mythical income, and of course the highly paid executives of the entities themselves who seem to make sure the balls are continually being juggled to obscure the true position.

          And of course the people to pay for all of this are the ratepayers. Behind it all are the potential governance people who, it seems largely, want to just pretend that all in the garden is lovely. Well, everyone now has the opportunity to make your views known. If you don’t vote, then you are as much to blame as those that made this mess happen. Vote wisely.

          ****

          Diverting debt repayments
          Submitted by MikeStk on Wed, 02/10/2013 – 1:26pm.

          Now just a minute – back when we were pretending that income from memberships were really “private fundraising” rather than pre-purchased ticket sales the city borrowed $45m to cover the fact that this money wasn’t going to be paid up front but would instead dribble in over 5-10 years. If Mr Burden’s now going to divert this money that was supposed to be used to pay off the debt borrowed against this future income to paying off his own losses who is going to pay off the actual $45m in principal and associated interest?

          This whole rugby stadium thing appears to be a giant game of cups and balls.

        • John P.Evans, council nominee

          It’s not a game of cups and balls, but actually a game of the thimble and the pea. When GD need a pea, they move the thimble.-

  27. John P.Evans, council nominee

    Analysing the accounts as set out on the DCC website, there are at least three concerns.

    Interest rate swaps in excess of 20 million, one would have to look at the contract to know the likelihood of problems here, but the hedging and interest rate swaps nett results are in the negative for the last two years and we have had favourable conditions. One would suspect any hiccup could be disastrous.

    The revaluation of the forestry assets? By Whom and how was this valuation done, or is it an extrapolation on annual log prices done by the company itself?

    The one off carbon price sale!
    I’m not sure who is on the opposite side of that trade but their shareholders won’t be happy with the carbon price now around less than 1c and Tony Abbott prepared to repeal the carbon tax in Australia, you can forget carbon sales from now on except to other New Zealand entities fooled by the same group who set the price at over $10!

    So where are the profits going to come from next year, another revaluation and a one off sale of what?

    Any reduction in DCHL debt has been offset by an almost exact commensurate rise in Dunedin ventures debt, so Dave Cull’s $10 million reduction really was a furphy.

    In order to evaluate these accounts further one would need to look at a number of other factors not represented at present.

    • Russell Garbutt

      Is the situation with interest rate swaps and derivative trading got something to do with the fact that Athol Stephens is no longer CFO? In the interests of DCC transparency, should the ratepayers of Dunedin be informed in clear terms just what this gambling in this shady area has really meant? Should ratepayers also be informed just why Mr Stephens was disappeared?

    • There is no doubt that the DCC consolidated debt has increased over the financial year even with DCHL’s magical profit. Every year during the Dave Cull and Peter Chin dynasties the debt has increased. Since 2007 they have caused the debt to grow from $246 million in 2007, to $623 million now. That will be the reason why the DCC is being threatened with a credit rating downgrade by Standard & Poors (28/11/12). They say “We consider Dunedin’s debt burden as high, and weighing on the rating.” A new credit report is due in November.

    • The danger with the improved DCHL profit is our decision-makers believing that DCHL’s financial problems are fixed and we will all live happily ever after. The $20 million profit was mostly due to a bunch of one-off causes. John P.Evans mentioned the forward sales of carbon credits. This sounds like they have sold carbon credits that don’t yet exist. They acknowledge (page 6) that this can’t be repeated anytime soon. The $7 million boost from forestry revaluations was due to a rise in global log prices. The DCC has no control of log prices. An accidental tax credit was the result of some bad decisions which caused a loss for DCHL in 2012.

      These things amount to $14.3 million. The remaining $6.2 million gain is not properly explained, but payments to employees and contractors are down by $11.9 million (the down-sizing of Delta only accounts for $1.5 million of this). Whatever the explanation is for this cost cutting, it doesn’t look like a permanent way to boost profits. DCHL’s problems remain.

  28. John P.Evans, council nominee

    The accounts of the DCHL demonstrate
    1. The companies are incapable over time of contributing any meaningful payment to the DCC debt without a significant reduction in costs (middle management salaries)

    2. That any rise in interest rates as predicted by the reserve bank will engender serious losses

    3. Multiply those losses should there be a downturn in the world economy

  29. There’s no doubt but that City Forests is the ‘jewel in the crown’ at present. It is enjoying a window in log prices which couldn’t have come at a more opportune time. Just a couple of years ago, the harvest didn’t cover the going and losses were the order of the day. Now, we see a revalue of the stock of some $7m. a sale of carbon credits (in advance we suspect) amounting to $5.9m total of around $13m of virtually unearned income, or bonus. The boom enabled it to increase its cutting by around 15% over the preceding years and the result is as we see. Excellent, until the next downturn. As the saying goes “one swallow does not a Summer make.”

  30. The next schema for increasing debt and risking ratepayers’ money.
    From the Blueskin Resilient Communities Trust newsletter:
    “When Eric Pyle of the NZ Wind Energy Association was in town we had very positive meetings with City Forests (who are interested in community wind opportunities) and Mayor Dave Cull and (outgoing) CEO Paul Orders to discuss supplying the city with electricity.”

  31. John P.Evans, council nominee

    The reserve bank governor today advised he expected 8% interest rates within two years. That will increase your repayments on our consolidated debt burden by at least 60%. So either rates go up by 60% or else the DCC borrows more and risks greater total debt.

    Perhaps most importantly the interest rate increases will ensure lesser profits at borrowing DCHL companies unless costs (middle management salaries) are reduced.

    The elephant in the room is now a large herd including some young elephants without experience of the effects of interest rates in excess of 10%, 15%, 20% and those whom were in business in the mid 1980s when interest rates reached 26%.

    This is the greatest problem facing Dunedin and the GD will want to sell off our assets (if there any) when the right answer is to cut immediately the staff numbers and costs of running the council.

    A good start would be to advertise for the new CEO at a figure less than $200,000. This would ultimately lead to a lower pay regime more in line with abilities.

    Councillors to take at least a 25% paycut and show the way.

    Should I be elected that will be the first remit moved.

  32. Is Mr Pyle interested in Dunedin City as a funder of the ‘Wind mill’ project, or as a customer of his production? There is a difference. I remember nine years ago when Peter Chin became Mayor the first thing he did was sign a contract with Trustpower for the rights to use our water at Deep Stream to establish a small hydro station. The deal was Trustpower had free use of the water and access to the site for 999 years at $1 per annum! That’s right. This was subsequently amended to 99 years. When it was pointed out what a ‘rip off’ this was Mayor Chin said OOPS! Sorry, I didn’t read the contract before signing. He is a lawyer don’t forget. The CEO at the time was Jim Harland. It was stitched up in-house between our water and waste services manger of the time Darryl Robinson and signed off by Harland. To this day I wonder who got what in the way of backhanders out of that deal which is ‘fabulous’ for Trustpower.

    What I am saying is beware deals between City Forests and Mr Pyle before reading any fine print.

  33. John P.Evans, council nominee

    Elizabeth, I think that the nadir of the smelter at Bluff was when the government paid RIO $30 million and Meridian dropped their pants on the 5 year price.

    The steady unspectacular rise in aluminium futures suggests that when or if the Chinese or world economy recovers at all, there is a shortage of capacity for aluminium production. My take is that the smelter will not close, RIO will make a killing funded by the aforementioned in part and Meridian shares will be a good investment.

    When all are selling, start buying.

    • It’s very old plant though, John.

      • John P.Evans, council nominee

        That is of course a distinct negative. Whether Rio upgrades will depend on the balance of demand and the time it takes for demand to recover.

    • Mike

      Actually now is a great time to buy shares that the National Party faithful are selling to buy into Meridian.

      I think we’d all be better off, especially in Dunedin if the Tiwai energy was available on the national grid and power prices were lowered to meet market demand to encourage new industries to grow to use them – I think there’s enough stockpiled Al at the moment that there wont be a sudden giant price rise (more likely there’s going to be more short term drops).

      However, really investing in Meridian is an investment in the past, where does the money you invest go? Not into Meridian’s infrastructure, nothing that would make new jobs or grow the economy – it goes back for the govt to pay for America’s Cup challenges, tax cuts for the rich, and the like – much as I liked my tax cut I think our economy was better off before it.

      I did make a large investment this month – I bought into a VC fund – it’s a risky investment, not something that should be an “all your eggs in one basket” sort of thing, more a “spread your retirement money around” sort of thing – and I did it largely because I think that we (as a city, and as a country) need to be looking to the future – just like our kids, our companies grow up and move away (F&P is a great example), we need to continually grow more, if we don’t our local economy will die (and even more of our kids will move away). Building new successful companies takes time, it needs to be a continual ongoing process, especially if we want to have a functional local economy, and financially viable city council here when we want to retire.

      • Elizabeth

        A summary of “key insights” includes that if Tiwai closed, electricity demand would require nine years to recover.

        “Decommissioning the smelter after 2017 remains a realistic possibility.”

        ### ODT Online Sat, 11 Apr 2015
        Smelter’s future seems more uncertain
        By Simon Hartley
        The future of New Zealand Aluminium Smelters at Tiwai Point near Bluff has been thrust back into the limelight in a report by the Ministry for Business, Innovation and Employment. Meridian Energy’s generation from Manapouri supplies NZAS with the equivalent of 13% of New Zealand’s electricity, but there is “considerable uncertainty” about its future, the ministry says, with a July deadline looming for a decision by smelter owner and Australian mining giant Rio Tinto.
        Read more

  34. Jock strap

    Buy up as many Meridian shares that you can get your hands on. That way at least we kiwis will get a return on our investment. Not like the Labour party that used all the dividends from state owned assets for buying votes from their cronies. How many millions of profits from the state owned assets have gone on treaty settlements, and Labour’s other pet projects, at the expense of better health and education purposes for us all. The choice is yours. Profits back to kiwis or to cronies.

    • ### ODT Online Sat, 5 Oct 2013
      Staff numbers down, wage bill unchanged
      By Debbie Porteous
      The Dunedin City Council now has 41 staff earning more than $100,000, but spending on key management personnel is less than it was two years ago, chief executive Paul Orders says.
      The council’s annual report for the year to June 30 showed that while the total number of council employees had declined, the council’s total annual wage and salary bill remained about the same. The report was published yesterday and will be considered at a full council meeting on Monday.
      Mr Orders said overall the report revealed a series of positive trends. While staff numbers were reducing, service levels were being maintained.
      Read more

      • John P.Evans, council nominee

        There are two major problems with Orders’ view of the performance.

        1. He suggests that the wages/ salaries are comparative with councils of similar size!

        The problem is that all council staff throughout New Zealand are grossly overpaid for their performance.

        2. He praises the performance as judged by the council itself!

        Self praise is no recommendation.

        The chinese wall still exists, it stil takes three days to get an appointment and the staff are still anti private business, the parking attendants are still harassing motorists etc etc

      • Compare and contrast these two actions reported in the ODT

        “Delta equipment being auctioned
        Together with other job losses in Christchurch and Central Otago, the company will have shed almost 150 workers since mid-2012. ”
        That is needed action dealing with the problem!

        Meanwhile Paul Orders advises:
        “Staff numbers down, wage bill unchanged
        There has been a decrease of about 7.5% in full-time equivalent positions at the council since 2011, from 710 FTEs (938 employees) to 657 FTEs (911 employees) at June 30 this year. ”
        That is timid action toying with the problem!

        This so called ‘good news’ about staff numbers all depends upon the baseline adopted. I ask “down from when?” If you go back to the year 2000 the total DCC staff in the order of 440 FTEs that had mushroomed to 710 FTEs. The question to ask is what justification was there for such staff level increase? This for a town whose population has not noticeably increased over that period and core services have not noticeably changed. At the same time, it seems that demographic changes in its student and pensioner populations have a negative impact on its rating base. Is this strategic and planning acumen?

        • Mick, thanks for taking a look at these matters! I put up the link before being called into ED Resus. That kind of morning… No time to set up a post about staffing matters.

    • ### stuff.co.nz Last updated 05:00 06/10/2013
      Opinion
      Turbulent waters ahead for Meridian
      By Rod Oram – Sunday Star Times
      Markets are beneficial when they work. When they don’t, winners reap excessive rewards. Inevitably, politics or economics intervene to redress the balance. Then the winners lose.

      Given falling demand and excess supply, our generators’ only ambition is to sit on their assets and milk them for all they are worth.

      In Meridian’s case, this is a particular shame. During the 2000s it was the New Zealand leader and innovator on wind power, energy efficiency, solar, house energy design and retrofitting and with Powershop, its radical retailing concept. It also was working on how to encourage the take-up of electric cars.
      Read more

      • John P.Evans, council nominee

        Rod Oram is a member if not a prime mover of the movement, pureadvantage.org

        His recommendations wind power, solar power and electric cars are all of the same ilk that will have Dunedin committing to cycleways, no parking and a $47 million dollar contribution from taxpayer/ratepayer.

        Whilst the concept of green energy substitution may make sense in the progession towards peak oil, the problem is that neither the New Zealand government nor the DCC can afford to be at the forefront of such development and the funding of same.

        It might appear to be important to be first in the America’s Cup races and the All Blacks vs the Springboks but to attempt to be first in the development or implementation of economically successful green measures is suicide for the funders if they are small nations or communities.

        New Zealand should watch developments by richer countries, evaluate the best line of fit and emulate the winners.

        In our present parlous financial state funding such schemes will be the ruination of our society not its saviour.

        • I have no idea why anyone would discuss America’s Cup in the context of greenwash anything. The yachting industry and related sectors are doing what NZ is hoping to pursue more of, and must: high-end ‘added value’ industry and export.

        • His recommendations wind power, solar power and electric cars are all of the same ilk that will have Dunedin committing to cycleways, no parking and a $47 million dollar contribution from taxpayer/ratepayer.

          Rod Oram wasn’t recommending these in his column, he was saying Meridian dabbled with these… read the column again.

          Quite frankly, those involved with Pure Advantage are not to be sneezed at. The late Paul Callaghan was no fool – nor is Stephen Tindall, for starters.

          Who is backing Pure Advantage?
          The brainchild of Phillip Mills, Pure Advantage was formed by a group of successful New Zealanders who want a greener, wealthier future for all of New Zealand.

          Hard to compare the GdebtD folks with these people, cough. Not of the same species.

          http://www.pureadvantage.org/our-campaign/trustees/
          Our trustees are Sir George Fistonich, Rob Fyfe, Chris Liddell, Phillip Mills, Jeremy Moon, Rob Morrison, Geoff Ross, Justine Smyth, Mark Solomon, Sir Stephen Tindall, and Joan Withers.

          Our founding trustees also included the late Lloyd Morrison and Sir Paul Callaghan.

          The Pure Advantage secretariat is managed by Rob Morrison (Chairman), Duncan Stewart (Chief Executive) and Hannah Wills (Project Manager).

          The best green growth export opportunities for New Zealand include sustainable efficient agricultural products and services, geothermal energy, biotechnology and forestry, including second-generation bio fuels. In the domestic economy, opportunities include improvements in building and transport energy efficiency, electricity grid technology and matching brand credibility through improved biodiversity management.

          http://www.pureadvantage.org/news/
          [see Oram mentions at this page – like he’s wrong ??? ]

        • John P.Evans, council nominee
          October 6, 2013 at 10:28 pm

          John says “Rod Oram is a member if not a prime mover of the movement, pureadvantage.org etc”

          I couldn’t agree more John. While I agree that Meridian is profiting mightily on the back of existing hydro electric generation (paid for by us) the newer wind and solar generation is uneconomic elsewhere in the world so why should it suddenly become economic here in N.Z. It seemed to me that that part of his contribution was a piece of blatant advocacy. Add to that the prospect that there is diminishing demand for electric energy here and the fact that we are nowhere near ‘peak oil’ where does that leave so called ‘green energy’. If anyone wants to know about ‘green energy’ and its costs, look at the E.U. You are right John to call this.

          Mick

        • Mike

          Rod is an occasional acquaintance (I run into him every year or so), he’s one of the smartest people I know and I have a lot of time for his opinions. He’s also one of the few independent NZ economists playing in the public domain, unlike most you hear pontificating in the media he doesn’t belong to anyone.

          He’s also interested in alternate energy, I’m pretty sure he drives (or used to drive) a Prius, and also has one of those electric bikes from Christchurch (they frighten me – they make you look like you’re running in traffic, I don’t think that a lot of drivers are smart enough to figure out what’s going on when they see one in their rear view mirror).

          I also think he’s right about trying to own an emerging industry like green technologies – there’s a lot of risk to being a pioneer, but also a lot of upside, far larger gross margins by surfing ahead of the wave (look at Apple!) than paddling along behind. There’s only a finite amount of oil, and a finite amount of carbon that can safely be pumped into the atmosphere and into the oceans – whether it’s next year of 50 years from now we’re going to have to switch to something else.

          Of course we shouldn’t put all our eggs into one basket (remember ‘think big’) but if we don’t invest in our future we wont have one – I’m very much in favour of high risk/high reward investments, provided we make a lot of them.

        • Yes Mike, I have similar views on Mr Oram – and I’m all for pushing innovation generously, with investment.

          [aside] Er, on Fishing (technology) as updated in the broadcast and print media last week:

          ### nzherald.co.nz 4:30 PM Tuesday Oct 1, 2013
          It’s here – the future of commercial fishing
          By Christopher Adams
          New trawling technology – billed as “the future of sustainable fishing” – has been unveiled to the New Zealand seafood industry at its annual conference in Auckland this afternoon. The system, which has been in development in this country for almost 10 years, uses a large, flexible PVC tube instead of a traditional mesh trawling net.

          New Zealand fishing companies Aotearoa Fisheries, Sanford and Sealord are investing $26 million into the commercialisation phase of the technology, called Precision Seafood Harvesting. The Government is matching industry investment and scientists from Plant & Food Research, a Crown Research Institute, are working with the three fishing firms to trial the system on commercial vessels.

          Sanford managing director Eric Barratt said precision harvesting was the “biggest step forward” the fishing industry had taken in 150 years and could be put to use in New Zealand’s commercial snapper fishery within two years.

          “What we’ve developed in New Zealand has huge benefits for fish stocks, the environment, consumers and New Zealand’s seafood industry,” said Barratt, who is also the chairman of industry group Seafood NZ. “In the process we’re set to change the global fishing industry for the better.”
          Read more

  35. John P.Evans, council nominee

    Geothermal energy – tick
    Bio fuels-
    The pursuit of a bio fuels industry set up by Helen Clark where one unit of bio fuel cost 5 units of petroleum products is what contributed to the demise of Solid Fuels, New Zealand.

    The only profits made in the forestry sector in New Zealand have been made by the promoters of forestry partnerships.

    Sustainability and improved performance in the buikding industry is not going to occur until the Fletcher/NZ govt duopoly is broken.

    The real possibilities exampled by Iceland’s treatment of the fishing industry in which onshore processing of fish skin into leather and fish livers into pate and other similar treatments are not being explored by Pure Advantage or anyone else in NZ, particularly the government.

    Elizabeth, I am impressed with What Jeremy Moon has done with merino wool, but the growers who have supported his initiatives have not benefited greatly from Icebreaker’s success, many having been forced into shifting from sheep to dairy heifer grazing to survive.

    The fishermen who would support improvements in fish processing will not benefit whilst the quota owners are the major beneficiaries from fishing.

    I am not questioning the intention, I am questioning the ability to implement in the existing bureaucratic environment.

    For New Zealand and New Zealanders to succeed the ratio of public sector passengers in particular those who are in the stopper department must be reduced.

    As to the America’s Cup analogy, my intention was to indicate that whilst the ambition to be first in an International yacht race, a rugby match, or to try to win the Melbourne cup (which I have done) will drive innovation and associated industries of yacht building, rugby coaching and thoroughbred breeding, trying to be first with carbon trading and other new ideas particularly trying to enforce commuters into riding a bicycle to work in Dunedin are doomed to failure until driving to work is impractical or impossible.

    Sadly, my enunciation of the analogy was faulty.

    If the people of Dunedin recognise that they are over taxed, over supplied with stoppers and elect councillors who will remedy that, the subsequent reduction in debt, improvement in services and reduction in rates therefore possible will show the way to the rest of New Zealand which could lead to a peaceful revolution in the way New Zealand is managed. Only Kaipara and Dunedin residents are likely or even possibly considering such change.

    To try another analogy, the patient with cancer will not recover until the cancer is beaten and all other plans and dreams are worthless ideas until the cancer is gone. New Zealand and New Zealanders will not have the opportunity to succeed as a total populace rather than a few small winners as at present until the cancerous growth of over management and mismanagement by the public sector is advanced. Tying rates to the minimum wage and a Reduction in Dunedin city’s numbers of employees in middle management and salaries more in line with performance such as a maximum of $200,000 for the CEO should be our collective aim.

    Dunedin and Kaipara are the only hope for institutional change.

    If Dunedin does not change then march on Animal Farm, socialism is inevitable and it won’t be democratic socialism, it will be institutionalised bureaucratic socialism worse than we have now, Pure Advantage won’t get a look in as new technological ideas will take so long to process that the promoters will run out of funds or energy or both.

    Anyway Elizabeth, What if? would be boring if we agreed on everything.

    • The degree of conflation is problematic if not programmatic. Good to flush out pre-election.

      • John P.Evans, council nominee

        My “rant” on Rod Oram was not only brought on by this one column. On other subjects similar he had made his preferences clear. He is very smart, but that may mean that he is a redoubtable opponent who is incorrect rather than a mystic.

        His apparent investment in forests may be because he is interested in offsetting carbon or it may be because he was sold part of one by a promoter.

        Personally, I like my journalists to be analytical not barrow pushers or soothsayers, but perhaps newspapers and television do not allow for investigative journalism. In the Sunday Star Times, Greg Niness seems to get to the bottom of some interesting stories.

        I see the proponents of carbon credits as Don Quixote mit wooden lance.

        When the great problems facing New Zealand are the fact that as soon as money is earned it disappears to a rapacious IRD, followed by an ever increasing GST, higher rates and petrol taxes.

        What real hope is there for an individual to start from scratch, build a business, own a home and prosper if there is little of the miniscule money supply travelling around the real economy?

        When you add huge profits from Australian banks who loan money to councils for nonsensical fiscal projects which the ratepayer MUST fund and the exploitation of suppliers by supermarkets you start to understand that even less of the money supply is available to those would be entrepreneurs who might develop some of the ideas put forward by such organisations as Pure Advantage.

        In closing I will say one thing for Pure Advantage. If they are really trying to find a way to minimise freight rates I am all for that as some of the richest in NZ are freight company owners who one wonders how the company that moves fish or other goods around make multiple times the profits of the fisherman with the million dollar fishing boat who risks life and limb every day and the lettuce farmer who risks his property cost and the weather to get 20c for a lettuce and the supermarket who own the trucks get $1.99.

        If they can solve that problem then I for one will give them great credit.

        • Rod Oram is a columnist who regularly offers opinion and, of course, strong opinion.

          He is not a news reporter.

          What if? isn’t run as a Yes-outfit, thankfully. Not sure anyone here has opted to follow mystics.

        • Mike

          Well I think that forestry is important, if only because it takes carbon out of the atmosphere – remember carbon credits were not thought up by the greeny left-wingers, they are largely an invention of the neo-liberals trying to bring market economics to bear on the issue of climate change – problem is that half of them don’t seem to believe in their own religion.

          I also think that NZ does the wrong thing with our trees though, why are we grinding them up and shipping them to China – we should be building robot factories here and shipping flat pack furniture instead.

          Despite the propaganda our marginal tax rates are lower than comparable western countries – in California you’ll pay 33-39.6% federal+10%state (+6% social security on the first 100k), in NSW 45% fed+ 5.5% state payroll – and we pay no capital gains and our medical coverage is included – it’s very much a case that we often don’t know how lucky we are.

          We do have a real problem with Aussie banks, they syphon their profits continually out of our economy, a real fiscal drag. We’re also screwed because of the way our dollar is used by world wide currency traders, it forces up our interest rates and as a result our dollar, as an exporter I find it’s continually tough to see my income decrease every time the dollar bumps up – and it’s not because NZ is worth any more – I think we need to stop propping up our overvalued property market – time for a capital gains tax, force interest rates down and move more investment money into productive investments, I’d love to trade some income tax for a capital gains tax – we’d all be better off long term .

  36. Mike, all that you have just said is true, so why isn’t NZ doing much better? I think it is because we are run by the money men. It is not about encouraging innovative manufacturing and exporting, it is all about commodities and manipulating money. The ‘housing bubble’ is the classic example. Who wins out of that? The money men. Here we have the banks accessing unlimited low cost money from off shore and on lending to the housing market. The promotion business is cynical, it tells the punters just what a favour the banks are doing by enabling them to get into the home ownership business, when in reality they are signing the people up to contracts to commit huge percentages of their income to the banks in perpetuity in the belief that they are buying a house. Result, the banks syphon huge profits away out of the country leaving us poorer and short of capital for industry, start up businesses and real growth. That’s why they are ‘miffed’ at the Reserve Bank putting LVR restrictions on in an effort to dampen down the market. Governor Wheeler knows the game and is trying to calm it down, and he is meeting the pressure from all points. The politicians are in on the act as well, fostering the notion that they are there to get ‘first home buyers’ into home ownership. All parties have been seduced into this by the ‘money moguls’. Leading the charge is ‘numero uno’ money man John Key. Screw the workers’ income down, give them just enough to keep hope for a better day to come. Sell them their own businesses (Meridian, Mighty River Power, Air NZ) and let them believe that they are partners. When it all turns to custard and the late comers into the housing and share markets get burnt as it collapses, these people will be nowhere to be seen. It is all just a game, and it is happening all round the developed world. When the crash comes you just won’t want to be around.

    • @Mike
      October 7, 2013 at 1:49 pm

      Mike commented on DCC: Council consolidated debt $623 million.

      Mike says “We do have a real problem with Aussie banks, ….. We’re also screwed because of the way our dollar is used by world wide currency traders, it forces up our interest rates and as a result our dollar, ….– time for a capital gains tax, force interest rates down and move more investment money into productive investments, I’d love to trade some income tax for a capital gains tax – we’d all be better off long term” .

      But the banks (apart from the BNZ) have always been owned overseas so the problem of overseas ownership of the finance industry is not likely to vanish quickly. Our own BNZ messed up its own bed. In consequence it was sold off by the government. So there is not much going for NZ’s performance in the ownership of the banking industry.

      We are ‘screwed’ by the ‘carry trade’ of investors in the NZ dollar because we need that investment – hence our interest rate. Not the foreign investors fault.

      NZers invest in the property market because they understand it and can see their investment. They used to invest in the share market pre the 1980’s share market crash, the investment banks until they got done like a dinner by those now failed institutions. In short they have been regally burnt in the past. Now so much of our industry has moved overseas in order to face the competition. This doesn’t engender huge confidence. The capital gains tax might assist in bringing down house prices if it chased investors away from the property market but they would need to invest their capital with care to avoid the problems of the past.

      • Mike

        Mick: it’s not just the carry trade, we also are the only exchange actively traded for a short period of time every day, money moves in and out of here every day without doing anything useful, messing with our exchange rate in the process. If we had more local investment we wouldn’t need as much from the carry trade would we.

        Kiwibank is an OK bank (I wish there was a similarly sized local competitor).

        People forget that not many people invested in the stock market prior to the 80s crash, other than the few years just before.

        We do have a real problem with naive investors, and crooks ready to fleece them – frankly I’d like to see tougher regulation, and more guys in suits going to jail – IMHO there’s two simple rules in investing “if it’s too good to be true it’s not real, run away”, and “don’t put all your eggs in one basket”

        • Mike
          @October 7, 2013 at 5:25 pm
          Mike said “we also are the only exchange actively traded for a short period of time every day, messing with our exchange rate in the process”.

          True but we have an open economy and have to live with that.

          Mike said “If we had more local investment ….we do have a real problem with naive investors, and crooks ready to fleece them – frankly I’d like to see tougher regulation, and more guys in suits going to jail”.

          True but guys in suits are protected by lawyers in suits and remember that’s what stuffed us before ….cajones are needed.

          Mike said “IMHO there’s two simple rules in investing “if it’s too good to be true it’s not real, run away”, and “don’t put all your eggs in one basket”.

          Absolutely true.

          Mike said “Kiwibank is an OK bank (I wish there was a similarly sized local competitor).”

          Also true but it is a very tiny Kiwi. It doesn’t match up anywhere near those Oz jobs.

        • Mike

          Of course the way for Kiwibank to get bigger is for us to use it, I keep meaning to go and move my corporate accounts, maybe it’s time

      • Mick & Mike: The only problem we have with the Aussie banks is that they are often made scapegoats by the lefty-unionist-anti-capitalist types who refuse to believe that allowing foreign investment is actually good for employment, and good for our economy. I think that you will find that of the banks’ lending margin, say about 1½%, most of it is spent locally on wages and costs, and only a small proportion ends up as profit in Australia.
        Remember that we New Zealanders are currently able to own Australian banks, and many here benefit from the profits. What is it that you guys think is “the problem of overseas ownership of the finance industry”? Does the ANZ charge you excessive fees? or do you think the banks are causing a balance of trade problem? —too much customer choice? or what?

        • Mike

          Jimmy: taking 1%/year of the value of almost our entire housing stock out of the economy every year is a big deal, especially since it’s paid from other parts of the economy, especially if it’s 1%actually of an already inflated overheated reality market – it’s in the bank’s interest that we have large mortgages and high interest rates.

          There’s not a lot of competition in the mortgage market here because of the high penalties in breaking an existing mortgage – in the US for example those numbers are regulated almost to 0 leaving people ready to jump to a cheaper mortgage at the drop of a hat – they’ve been getting 3% 30-year mortgages there recently, people have been switching to slightly larger 15-year mortgages because it makes sense. My Dad has a 99-year 3% mortgage here in Dunedin (he won the Friendly Society lottery early) – no one gets anything like that now.

        • @JimmyJones
          October 7, 2013 at 9:13 pm
          Jimmy Jones said “Mick & Mike:. What is it that you guys think is “the problem of overseas ownership of the finance industry”? Does the ANZ charge you excessive fees? or do you think the banks are causing a balance of trade problem? —too much customer choice? or what?”

          Jimmy
          I don’t have any problem with overseas ownership of the finance industry nor did I say it. I merely pointed out that the banking industry has always been dominated by foreign ownership, and that the only NZ bank of consequence was the BNZ It stuffed up big time and was sold off while the later Kiwi Bank is a minnow compared with the OZ jobs. Nothing in that regard is likely to change in any time scale that I can see.

        • Mike: I said that of the banks’ lending margin, say about 1½%, most of it is spent locally on wages and costs, and only a small proportion ends up as profit in Australia, you are talking about something else. Anyway, you would be wrong to say that the banks are taking 1%/year of the value of almost our entire housing stock out of the economy every year

          I think that there is strong competition in the mortgage market here, but is lack of competition what you meant when you said We do have a real problem with Aussie banks? What is the “real problem” as you see it?

        • Mick: it seems like you have changed from saying the problem of overseas ownership of the finance industry is not likely to vanish quickly., to saying that you regret the dominance of foreign banks here (which isn’t a problem for you).
          The best banks win the customers, anything that prevents that from happening is bad for banking in New Zealand. Remember the Australian banks are also owned by New Zealanders (but not by me).

        • Mike

          Jimmy, I was assuming that you were saying they were making a 1.5 points (1.5%) on mortgages (ie if they loan money at 6.5% on low risk mortgages and they pay 5% on long term CDs).

          Since most houses have a mortgage they are making 1.5%/year on the value of all the mortgages in the country, an enormous amount. Most people pay as much in interest as they do in principal over the term of their mortgages, and it’s not uncommon for people to pay 25-33% on their income on housing – that means that (very very roughly) 2% of all of our income is going into bank’s income – ANZ made $700m profit in the 6 months to March – ANZ does spend lots of money on local wages. mostly because they have doubled up on branches, I expect that to change soon, besides they have a giant call centre the size of a small city block in Bangalore with its own bus fleet.

    • Mike

      Well some sectors of the economy are doing OK – Dairy for example (which is the real reason why the Taranaki economy is (will change! nothing lasts forever) – having all our eggs in one basket is asking for a boom-bust economy.

      IMHO property investment for capital gain is a big part of the problem – it’s not just that the banks are syphoning money off from mortgages on those properties, it’s more that people are socking capital away hoping to catch the next bubble – that capital’s not there to create wealth, not being invested in creating new things, services – it’s a terrible investment from a national point of view and it’s largely because there’s no capital gains tax – remember most western countries capital gains are by default at your normal tax rate, there a “capital gains tax” is a lower tax targeted to particular parts of the economy (like the share market) to try and get capital liquid and invested in wealth creation.

      If I had my way I’d tax all capital gains at one’s marginal tax rate, I’d exempt the family home through its normal lifetime (allow you to buy up without penalty, and a one-time sell down exemption on retirement), and probably do something to help existing farmers to transition. I’d also allow people to nominate certain types of investments that are held for say 3 years or more for a 20-25% (lower) tax rate, and allow nominated capital losses to be carried over for a couple of years to balance nominated gains.

      I think the current “first home buyers” thing is really all about Auckland and its votes next year – if the govt was really serious they would be saying “Auckland is too big, built on geography not designed for commuting, we should encourage people and business to move to other places” – instead they coddle Auckland and starve the rest of the centres, because that’s where the votes are.

    • Anonymous

      Certain rich like the masses kept in their appropriate place: Riding through life in cattle class, following like sheep. There are plenty of machinations to keep you down and desperate and debt is their latest favourite thing. Try to step off the path and some ideology will be there to point out your failings. The media is one of them, particularly in this town.

      So few people even know what day it is in their busy lives, let alone that there is a local and national election occurring.

  37. Mike, you suggest that it is not uncommon for people to be paying 25 to 33% of their income on housing. I suspect you are a little bit conservative on this. Let’s forget about Auckland and look at Dunedin. A modest family home at $300,000. Not out of the way at present. A person earning $20 per hour ( better than the $18 “living wage” the pollies are talking up). This equates to $41,600 per annum. Tax at a modest 25% leaves disposable income of $31,200. The aforementioned house at the 80% LVR would have a mortgage of $240,000. At 6% over 30 years would require interest at $7,200pa plus principal at $8,000pa a total of $15,200pa. Now, according to my reckoning that amounts to 49% of disposable income. And face it, that is the bottom line really. 90 and 100% loans (as has been the norm) would just not work. Hence the need for multiple incomes, working for families schemes etc just to get by. No doubt but this property ‘bubble’ is just that, and the banks have a hell of a lot to answer for.

    • Lower income first home buyers will generally be buying your “modest family home”, you can still get entry level houses in Dunedin below $200k and many first home buyers will be buying into the market at less than $250k.
      When first buying with minimum equity the % of disposable income committed is often high. If on a table mortgage (do they still do those?) the repayments stay the same but wage inflation reduces the %, substantially over 20-30 years.
      If on variable repayments you can get hit hard with interest rate increases, but over time (years) as equity increases then interest payments decrease.
      It can be tough for the first few years but gets easier for most home owners, and once the significant cost of kids have left home the mortgage is often a small part of income, if it remains. This of course depends on whether you upgrade to bigger houses and bigger mortgages.

      • But therein is the assumption, that all of us want to buy a house (no thanks!!) rather than be free agents, as costly as that may be for the ability to live “in the village” without having to use cars, or cycles…

    • [aside] Calvin – me, along with many others I know are paying 50% to 70% of income on central city housing (market rents). It’s been like this a long time. Thanks to the university rent sharks.

    • Mike

      Calvin I was largely handwaving to make a point, when I do I often [use] smaller numbers where possible so that I underestimate reality – which as you point out is probably worse – bottom line, there’s probably $3-5 billion leaking out of our economy because our main banks are foreign owned – that’s not good, that’s money that’s not being invested in future economic growth (well not being invested in NZ).

  38. Mike, that simply reinforces my argument that it is the finance industry at the heart of this dysfunctional society we now have. It is a concerted policy of diverting the wealth into the few pockets. Something which has been going on ever since the control of the money supply and directions of same were taken out of the hands of the people (governments). The stage was set way back in 1913 when the United States Federal Treasury was set up by the banks. Since then it has been a succession of booms and busts with the banks operating a “heads we win and tails you lose” policy. When Nixon, going broke on the Viet Nam war, removed the last ‘measure of value’ (gold) in 1971, the world’s economies have been in a series of dramas as the banksters have run riot. This latest crisis might just be the biggest, but it won’t be the last. Not until control is wrested back to the people (governments) will it change. Just ask Mr Goldman Sachs.

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