DCC’s debt level — who do you believe?

Updated post 7.7.14

### ODT Sat, 5 July 2014 (page 34)
Opinion: Letters to the editor
Drastic action urged on DCC’s debt level
The recent Ratepayers Report on New Zealand councils’ relative financial performance makes for sobering reading for Dunedin’s 53,266 ratepayers. The Dunedin City Council’s debt per ratepayer of $15,093 is nearly the highest in New Zealand and is exceeded only by Auckland.
The DCC is amongst New Zealand’s worst-performing councils in terms of operating expenditure at $6885 per ratepayer, well ahead of the national average of $3175 per ratepayer. DCC employee expenditure per ratepayer is $1783, which is three times the national average.
It’s hard to believe Dunedin was once famous for thrift and living within its means. Mayor Cull and the new CEO Sue Bidrose must wake up and make some drastic cuts as soon as possible, given the DCC’s shocking performance compared to most other local authorities.
T. Stevens, Dunedin

[Dunedin City Council group chief financial officer Grant McKenzie replies: “The figures quoted by your correspondent are for the group position of councils and highlight the fact the Dunedin City Council has significant other assets (Aurora Energy Limited, Delta Limited, City Forest’s Limited and Taieri Gorge Railway Limited). The actual asset value for the group is in excess of $70,000 per ratepayer.
“For Dunedin, the average rates bill is $1750, which is the 13th-lowest of all the councils and reflects the benefits we receive from the wider DCC group.”]

I note Grant McKenzie leaves off mention of the stadium companies DVML and DVL, which are now part of DCHL, and the effect of their growing debt on the council’s overall position. And what of all misappropriation of funds and serious fraud at DCC, DVML and CST still to be revealed, you have to ask.

█ Ratepayers Report at http://www.ratepayersreport.co.nz/

Larry Mitchell’s opinion of DCC’s reply to T. Stevens would be interesting – further, it’s not like other councils don’t have their own companies or significant and strategic assets.

█ Then to blow everything out of Otago Harbour there’s DCC’s exposure to global markets through borrowing – see new comment by Rob Hamlin.

Related Post and Comments:
12.6.14 Fairfax Media [not ODT] initiative on Local Bodies

Posted by Elizabeth Kerr

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21 Comments

Filed under Business, DCC, DCHL, DCTL, Delta, DVL, DVML, Economics, Media, Name, New Zealand, People, Politics, Project management, Property, Sport, Stadiums, What stadium

21 responses to “DCC’s debt level — who do you believe?

  1. Phil

    13th lowest of all councils. What a totally meaningless statistic. Is that good or is that bad ? Who are the 12 ahead of us ? How do we rank compared to towns of the same size ? A sniff of relevance wouldn’t go amiss. I was the 5th fastest runner in my family but for some reason I was never picked for the Olympics.

  2. I harbour some cynicism in relation to the veracity of that Ratepayers Report. I’m not sure what the drill is now, but historically many councils billed their utility services (water, wastewater etc) separately. So it’s a futile (and mischievous) exercise to present these figures without stating whether they represent the ‘General’ rate only or whether some councils are quoting General rate only, and some include utility services. There’s a world of difference between the two scenarios. For instance, Christchurch City one time billed water and sewerage separately (like your electricity or telephone account) whereas Dunedin’s rating invoice includes approx. $750 in utility charges. Regardless, if the rates do include utility service charges, it’s perverse to compare, say, Christchurch (which is almost wholly urban and in consequence almost the whole of the rating catchment would receive water and wastewater services) with Dunedin which is 90%+ rural in rating catchment so fewer than 10% of the rateable properties receive (and are rated for) water and wastewater services. [Can] somebody tell me that all these contradictions have been factored in and accounted for in a comprehensible way? Please note that Dunedin City which (as earlier stated) is in excess of 90% rural in catchment is categorised in this table as ‘METRO’. Yeah right.

    {Moderated. -Eds.}

  3. To compare council on council is simply a pedantic exercise. Just as it is to state that a city’s assets backing the debt is very comfortable per rate payer. What assets does a city have that can be realised in cash at their respective values? What price a ‘hardly used stadium’, a ‘Settlers Museum’, an ‘International Conference Centre less conferences’? Any bidders? It is a relatively simple exercise when you can simply divide the total debt by the number of ratepayers to arrive at the average indebtedness. In Dunedin’s case we take the ‘consolidated debt’ of $623m (as at 30 June 2013) and divide it into 53,000 notional rate payers and the simple answer is $11,754 each. Now how many ratepayers, if a push came to a shove, could write out a cheque for $11,754 at a moment’s notice?

    • Hype O'Thermia

      The Taieri Gorge railway is indeed an asset, unlike the Fubar and other icons of cargo cultism. How realistic it is to count its “value” (untested by market) to attempt to diminish the ugly figures in T Stevens’ post is something else. Remember the Kingston Flyer? What was it “worth”? What did the market say? How’s it doing now, huh?

  4. Elizabeth

    “DCC employee expenditure per ratepayer is $1783, which is three times the national average.”

    I was more than happy to accept this notion as a salutary guide or rule of thumb — have ‘we’ not had Considerable misgivings about the number of managers and team leaders and the dreadful gradient system at DCC.

  5. Rob Hamlin

    This argument is pointless. As the DCC group’s debt now appears to be largely (entirely?) in the form of various swap derivatives via DCTL’s ‘multi-option variable rate note facilty’, it is actually impossible to estimate the DCC’s debt in terms of money that will eventually have to be repaid. This certainly applies to the interest payable, and possibly to the principal too if principal obligations have also been swapped under this arrangement.

    By this I don’t mean that it is impossible for me, the Mayor, any councillor or any other member of the general public to assess it using the inadequate information that we are given in the DCC’s public reports, and what can occasionally be yanked out of them using the LGOIMA. I mean that it is impossible for ANYBODY to estimate it, and that includes the DCC’s CFO, the Chairman of DCHL and the CEO of DCTL, or even our delightful trio of banking partners who dwell within the ‘multi-option variable rate note facility’. It simply can’t be done now – not even approximately.

    The best information that we have from the DCC is little more than an unprovenanced and unitemised guess of how much our eventual derivative obligations may have changed in any one year – this is reported in the annual report. Over the last five years these guesses have ranged from -$26 million to +$12 million in a single year, a ‘spread’ of some $40 million.

    That’s how much the guess fluctuates in a single year, and that’s just the change in what we might owe – not the full amount. So as to the full amount we are liable for, and can it be sized? – I’ll repeat – it simply can’t be done now – not even approximately.

    • Elizabeth

      Another complex of woe Larry Mitchell could comment on if he would like to step outside the council’s audited reports and really seek danger… to agree with Rob. He could try that wider view with the councils of the other main centres, and really scare the Taxpayers’ Union! Would make great news for Fairfax to broadcast. I await the day by not holding my breath – Rob’s pragmatic comment more than suffices in the interim. Not sure Cr Richard Thomson or Grant McKenzie feel able to approach this level of pessimism for the good of society.

  6. Rob, the only good thing (as much as there can be) about this situation is that, as you say it is an impossible calculation, so it is for both sides. The more so, as the money only ever came out of the ether (not measured against goods or service of value) so it will go back to the ether, and none will be the richer or poorer, but simply destitute. Richard Thomson, any comment? Perhaps a prediction of when?

  7. Elizabeth

    Updated post at top of thread.

  8. JimmyJones

    [my comments not appearing here until today, perhaps today – We’ll check the spam filter… otherwise not sure why your comments not appearing??! -Eds]

    Elizabeth: You say Grant McKenzie leaves off mention of the stadium companies DVML and DVL, which are now part of DCHL, and the effect of their growing debt on the council’s overall position. While I agree with your point, I just need to point out that DVL and DVML are completely and totally not in any way part of DCHL. Both companies are owned by their shareholder, the DCC. DCHL has no ownership or decision making powers over DVL+DVML. Sue Bidrose and others have been deliberately trying to mislead the councillors that DCHL has some type of ownership/responsibility for DVL+DVML. To create this impression DVL+DVML statements of intent and financial reports have been wrongly associated with the DCHL companies in meeting agendas (this has now stopped) and the DCHL CEO is chosen to represent DVL+DVML at meetings (Council, 23/6/14). Also councillors are told that DVL+DVML monthly reports are sent to DCHL: this might be true, but generally they don’t produce the required monthly reports. By law DVL+DVML must send their annual and six month reports to the shareholder (DCC).
    This misinformation campaign has been happening for a few years; probably its purpose is to help the councillors accept the idea of DVL being swallowed by DCHL. This would be a very nasty pill to swallow for DCHL, but for Sue Bidrose and the team, the legal requirement to make public the very embarrassing financial reports of DVL would disappear. Then, as soon as Sue can say “abracadabra”, DVML (aka “The Stadium”) will be making a profit. Problem solved.
    I speculate that the primary purpose of Sue’s stadium investigation is not to investigate anything, but her report is intended to provide justification for hiding DVL’s current losses (over $10 million per annum) inside DCHL. Sue isn’t good with numbers, so she might not understand some of the difficulties with this plan. I think Bevan Dodds (the ex DCHL CEO) did understand these difficulties and that is why he doesn’t work there now. The new guy will do what he’s told.

    • Elizabeth

      JimmyJones, I had believed that, via the Larsen Report recommendation, DVML and DVL were to, and had already, come under the DCHL umbrella – such that the new Group CFO could see what in hell is happening there. Hmmm!!

      • JimmyJones

        It won’t be long, and DVL will disappear. It looks like most of the councillors believe that DVL is now owned by DCHL because Sue Bidrose keeps telling them that it is. In a few weeks she will announce her restructuring and those councillors will believe Sue’s wonderful news that the $4 million/yr rent has vanished and they won’t be troubled any more by the big losses in DVL’s annual reports, because there won’t be any annual reports. The stadium will run at a profit, if you believe the DCC and the ODT and don’t look too closely at the finances.
        Grant McKenzie’s appointment as DCHL CEO will remove resistance to Sue’s plan, but Grant might be beneficial in other ways. I hope so, because DCHL is very unhealthy.

        • Elizabeth

          It has been touted that DVML and DVL will be absorbed into DCC, from the time the stadium review was announced. The mechanism for this wasn’t detailed for consumption at that stage. I guess we wait and see – and get our LGOIMA questions in early following public release of the Review in August. The debt does not disappear, and there is no DCC money tree (see Tremain 8.7.14).

    • JimmyJones

      Thanks Elizabeth. Its been working fine without without the web-address.

  9. Jimmy, you may well be right, but the whole idea of putting DVL and DVML into the DCHL stable was to remove the embarrassingly large stadium debt from the DCC’s books. Seemed a good idea at the time until DCHL hit its own debt storm. Now, as I understand it, DCHL can no longer sustain the drag on its finances any more than the city could. That of course is due to the inept DCHL directors (under the chair of Paul Hudson) debt financing its dividend to DCC policy. Sooner or later it had to come to pass and the deferred maintenance plus ‘bum’ management decisions by Delta management brought home the truth. The big problem now is for the ‘numbskulls’ in the mayoral and councils’ chairs to be able to grasp the enormity of the ‘monster’ they have created. Personally, I believe that they will all stay in denial until the ‘proverbial merde’ hits the fan. By then of course they will all hope to be in Queenstown or Wanaka like all the other ‘rats’ who have deserted the ‘good ship Dunedin’.

  10. JimmyJones

    Calvin: le merde should be well splattered already; and it would have been all over the ODT if the editor was doing his job. But there’s nothing to see on the front page – just a nasty odor of collusion and corruption. Perhaps this has already been discussed here, but DCHL’s latest Statement Of Intent shows that it will pay a normal dividend this year, but for the following years this will drop to zero. There will be no dividend because there will be no profit. There will be no profit because of the financial drain of the Financial Black-hole Stadium. The backlog of deferred maintenance would normally be paid for out of profit, but there’s none of that, so DCHL will need to go deeper into debt and possibly rates will need to be increased to pay for a subsidy to support DCHL (so that DCHL can subsidize DVL+DVML).

    {You say “Perhaps this has already been discussed here…” – not a lot, see comment, and Hype’s in reply. -Eds}

    • JimmyJones

      And also Calvin: here is an example of what you mentioned about the lack of insight from “the ‘numbskulls’ in the mayoral and councils’ chairs”: At the Council meeting (23/6/14) where the DCHL Statement Of Intent (SOI) was approved, there was discussion about DCHL borrowing to pay dividends to the DCC. Cr Richard Thomson explained to the numbskulls that DCHL had in recent years been bled dry (not his exact words) by the DCC’s demand for excessive and unsustainable levels of dividends. This was done to temporarily keep the rates increases low and the spending high.
      This deception was started by Peter Chin and continues to this day under Dave Cull. But straight after Cr Thomson explained the sins of the past, he and all others (except for Lee Vandervis) voted to approve the DCHL SOI which, for this year, continues the tradition of paying the DCC a dividend that is bigger than the profit they are expecting to make (dividend: $4.5m, profit: $3.0m). This will compel them to borrow to pay their dividend.

      It’s not just that the average councillor is too thick to do the job we pay them for, it’s also Sue Bidrose and her staff that manipulate the decisions of councillors to suit their own agendas. There are various traditional methods and this behaviour also corrupts the decisions of the ORC and the Councils of other cities.

  11. Exactly!! It is what is known as the ‘day of reckoning’ or the ‘chickens coming home to roost’ There can be no escaping the outfall, either deeper debt or higher rates. If the former, the latter will come anyway, but bigger. Does Cull and his GD mates understand this? They don’t seem to, as they still think the stadium can be brought under financial control. As for the ODT, I think it is hoist on its own petard’ by buying into the stadium at the outset and not being able to see the wood for the trees.

    • JimmyJones

      For a politician like Dave Cull and his Greater Deception comrades, I think he believes that he can provide the impression that the stadium finances are under control – at least for a year or two – long enough to get re-elected and continue his obsessive destruction of our city’s transport system to satisfy his car-hating stakeholders, the DCC activist staff and the GD team.

  12. Hype O'Thermia

    MPs get major handouts-for-life when they retire after having been in the job for 9 years or more. Is there a similar incentive for local body politicians?

  13. Cars

    The Mayor gets knighted!

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