DCC low lifes #RugbyDebtStadium

Huh? Huh?

The council is increasing the capital of its investment company by $850m. (Ch39)

### dunedintv.co.nz June 30, 2015 – 7:24pm
DCC takes ownership of Dunedin Venues Limited
City councillors have voted for the organisation to take on an extra $30m of debt. That’s being transferred today from Dunedin Venues Limited. Councillors have also approved the equivalent payment of DVL shares, to repay the debt. And they’ve voted for the council to take ownership of the company, as well as Dunedin Venues Management Limited, for the new financial year.
Ch39 Link [no video available]

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Posted by Elizabeth Kerr

22 Comments

Filed under Business, CST, DCC, DCHL, DCTL, DVL, DVML, Economics, Highlanders, Hot air, Media, Name, New Zealand, NZRU, OAG, ORFU, People, Politics, Project management, Property, Site, Sport, Stadiums

22 responses to “DCC low lifes #RugbyDebtStadium

  1. Anonymous

    Put out the fire, call in the dogs. It’s all over.

  2. Gurglars

    Interest rates go down, should be a winner eh. But not if you have taken up interest rate swaps. The fiscal geniuses at the DCC, watch them spin this little monster.

  3. Calvin Oaten

    “DC takes ownership of Dunedin Venues Limited.” Headlines can be so emphatic even when they are wrong. As I understand it, council on Monday voted unanimously to accept the recommendations of the Department of Financial Planning to “Increase the Capital of Dunedin City Holdings Ltd” The reasons given were encapsulated in the followings recommendations:
    That Council:
    a) Approves the transfer of $30 million of DVL debt to the Council on 30th June 2015.
    b) Approves the payment of shares in DVL of $30 million in order to repay debt.
    c) Approves the transfer of ownership of DVL and DVML to DCHL during the 2015/16 year.
    d) Approves an increase in the capital of DCHL of $115.839 million to $965.839 million.

    I might be wrong but that looks to me as pretty obvious that the news report is wrong.
    The truth is one of Council trying once again to mislead the public about the true financial disaster that the Stadium is. It is nothing more than a “classic hide the parcel” game which will play out in the future with all manner of behind the doors juggling by DCHL which is a group of all manner of nefarious activities not least of which is Dunedin City Treasury Ltd which is the city’s de facto banker. Say no more.

    A pity that the ODT or Channel 9 can’t, or prefer not to, get their facts correct.

    • Elizabeth

      Thanks for the clarification, Calvin. By the time I got that Ch39 ‘report’ I was too annoyed (tired! of the whole performance) to bother tracking back into DCC documents.

      Report tabled at Council meeting held 29 June:

      Report – Council – 29/06/2015 (PDF, 139.4 KB)
      Increase in the Capital of Dunedin City Holdings Limited

  4. Mike

    So if the council now owns DVL/DVML directly does that mean they can no longer reduce their tax burden the way that DCHL could?

  5. Anonymous

    If borrowing is required to increase the uncalled capital, then tax on the interest is payable, not deductible. i.e. you can’t magic money out of thin air.

    https://www.ird.govt.nz/resources/f/6/f6ea9f804ba387d28618bf9ef8e4b077/tib9-5.pdf

  6. Calvin Oaten

    Mike,
    As from today, 1st July, DVL and DVML will belong to DCHL not the Council. I believe they were formerly free standing subsidiaries of the Council. Until now the Council had direct share ownership in the two Stadium companies.

    With the transfer, Council decided to assume $30 million of DVL’s debt prior to the change of ownership. The transferring of this debt from DVL to the Council involves DVL raising $30 million of additional share capital from the Council. The Council will borrow $30 million to pay DVL. DVL will in turn use the $30 million received to repay part of its debt.

    Previously, the annual payment by Council to DVL for debt servicing and renewals funding was $2.550 million. Following the transfer of ownership of DVL to DCHL, these annual payments will be made by DCHL. DCHL will then make an annual call on unpaid capital (held by Council) of $2.550 million to Council. This annual transaction will have the effect of reducing the uncalled capital in DCHL. This will go on till the Council has exhausted the uncalled share capital it holds in DVL. DCHL will enjoy the same effect.

    So, it looks for all the world to me that not only does Council (ratepayers) continue to pay $2.550 million yearly as before, but it also has the task of paying down the $30 million assumed. All this results in DVL reducing its annual rental required from DVML from $4 million to $2 million yearly. This gives DVML CEO Terry Davies cause to predict he will achieve a profit next year of $395,000.

    It is pertinent to note that all along Council has been furtively subsidising both DVL and DVML by the process of calling up and paying uncalled share capital. If we look at DVL’s six monthly report to 31 Dec 2013 we see on the 14 July a $500,000 call was made. Again on 15 Oct and then on 31 Dec. In all $1.500 million in six months. Prior to that in 15 April 2012 $250,000, 15 July 2012 $250,000, 15 Jan 2013 $250,000, 15 April 2013 $250,000. All in all $2.500 million. In the case of DVML we find in the 2013 annual report that its ‘issued capital’ was $200,000 fully paid ordinary shares in 2012. from then to June 2013 calls were made for an additional 4,106,065 paid up shares to inject into DVML. That would appear to be a total of $4.306 million. So, in just eighteen months Council injected some $6.8 million of ratepayer subsidies to keep the ship afloat. Just where those monies came from who knows?

    So we can all see what a ‘merry go round’ it all is in effect winding up back where we were at the beginning with DCHL possibly enjoying some tax relief, but the ratepayers just that worse off.

    Who was it who said: “Oh what wonders we conceive when once we practice to deceive.” Know it wasn’t Dave Cull or any of the ‘dazed’ councillors.

  7. Calvin Oaten

    The 29th of June was an auspicious day at Council. It was the day in which the Long Term Plan was adopted and rates set at an increase of 3.8%. Mr Cull lauded what he described as a balanced plan. He said the plan “gave an affordable rates rise of 3.8% for the next financial year, continued debt repayment and invested in the city”. Not sure how you can both repay debt and invest it in the city in one go. But he said it.
    A brief discussion on the merits of stipend increases all round and that was about it.
    A celebration of sorts and luncheon was next. I heard from an un-named source that this was quite a fun event. All were assembled around the table, with “Bob the Builder at the head, next to him was the ‘court jester’ with tousled hair and empty grin. Rumour has it he was late due to a faulty clock and a vehicle stuck in his driveway. Then there was the greyish gentleman in charge of the libations. He was nameless but would leave his mark on all of their bibs. First there was a ‘cryptic ‘ puzzle set in which all had to work out the total cost to ratepayers over an eighteen month period for the Stadium. Furrowed brows all round here with none getting it right. To be fair most got the total for the puzzle’s explanations of the transfers to and fro of debt and ownership at around $10.6 million for the period. But none seem to be aware of the other components which were difficult brain teasers. These were the ‘subvention payments’ of $832k to DVML and the $10.938m to DVL. These both came to $11.77m.Then there was the missed deficits of DVML at $1.479m and DVL’s at $7.206m. All these added up to $31.06m, which annualised amounted to $20.702m. No-one got within a ‘bull’s roar’ of the correct total. There was much embarrassed laughter at the end of which, special thanks were given to author: Carolyn Allan, Financial Planner and Authoriser: Grant McKenzie for arranging such a cryptic mind engaging diversion.
    Then there was the luncheon, one leading money guru seen ‘wolfing’ down an ‘eggs benedict’ on ciabatti bread fried in dripping, filtering the detritus through his hirsute accessory, (looking like a south Dunedin post flood ‘mud tank’) wipe his ‘greasy chins’, belch, pause, and waving a blood stained knife offer a toast to his “very good friend” absent overseas. Then came the main course of ‘potted, plucked peasant in a basket’ (I was told these are now on open season). This brought a twitching apostrophe-like pervert waving a ‘mode of conduct’ board. Across the room came the plaintive call of a man from the far northern regions say “oiy thar, oim’ only a country member”, to which someone replied, “put a hyphen in the right place and we’ll never forget”. There was the demur young lady eyeing with some concern the ‘sustainability’ of it all, purposefully searching out old ‘fossilized types’ with her beady eyes. Pensively fiddling at some ‘bling’ on her wrists. On closer inspection these were revealed as diamond encrusted cycle clips, gifted, I am informed by grateful residents of Portobello Rd, New and Bellona Sts. The rest were discreetly silent except for low murmuring about the stipend windfalls bestowed on everyone. Then came the dessert, a magnificent presentation, complete with tall lit sparklers embedded in a sumptuous looking iced cake, clearly modeled on a simulated cricket field. The symbolism was greeted with much ado, none more so than the aforementioned ‘greasy chinned’ person.
    All in all, a good send off of the old year and welcoming of the fresh new one. It is all hearsay from my part as I was only made privy to it all yesterday.

  8. Elizabeth

    Calvin, hearsay passes for DCC financial wizardry and truth these days. So glad no-one will starve. Crumbs for all, if we’re awfully good children and go to sleep when we’re told!

    Happy to put the guru across the shearing board. I’m sure the guys would love to stitch him into a wool pack and let rip, through a small opening left, with a small burst from the fire extinguisher. It’s a marvellous reality check, on the wayward and uncouth. Only have to hope victim not asthmatic? Zero harm?

  9. Rob Hamlin

    THE RECKONING

    You may recall that I have pointed out that this City has a massive exposure to both interest rate and exchange rate derivatives, this disguised as a ‘multi-option variable rate note facility’.

    This arrangement is unique to the DCC and is guaranteed by an ‘on call on capital’ facility of $850 million pledged by the DCC to DCTL which directly exposes every ratepayer to this arrangement to the tune of c. $17,500 each. This arrangement was specifically put in place to circumvent Section 62 of the Local Govt Act, which was supposed to protect citizens from exactly this type of exposure.

    So enormous is this exposure to currency and interest rate derivatives that even the relatively innocuous currency and interest rates movements seen over the last five years have generated reported annual losses to the DCC of $25 million plus.

    The golden calm is now over. The dairy prices will fall further and will stay down for many years. Fonterra’s forecast payout based as it is on a forecast near doubling of milk prices from their current levels is mere fantasy. The dollar has fallen in value against its US and UK equivalents by 15 & 20% in just the last month or so – it will continue to fall. Falls against even the troubled Euro are of a similar magnitude.

    We do not know what the multi-option variable rate note facility’s arrangements are. However, they plausibly involve a ‘swapping’ of pretty much all of our original fixed NZD bond commitments for a basket of various doubtful debts largely denominated in these three overseas currencies. Thus if they rise 20% against the dollar, then so do our 5/10/20 year swap commitments to repay interest in these currencies.

    All this may make the current ‘record’ $25 million annual loss for the DCC seem like the twittering of little birds. It may get worse. Some derivative swaps involve taking on principal repayment risk in return for a reduced interest rate – Do we as ratepayers personally hold Greek government bond capital repayment liabilities via any DCC fiscal arrangements and commitments? It can’t be ruled out.

    All in all the DCC’s derivative exposure and related debt may end up being well in excess of $850 million quite soon. When that situation becomes manifest, our ‘partners’ in the ‘multi-option variable note facility’ may well come calling with that pesky on call capital commitment.

    $850 million – right now! Does the DCC have that cash? Of course not – but collectively we do. Remember how these guys say the DCC’s assets far exceed its debts – well so do ours. Think of all those lovely houses and pension plans we have? Those assets may shortly belong to our multi-option variable note partners, or at least $17,500 per ratepayer head does.

    Best make sure that you have it handy then. Don’t rely on Jonky and his money mates to do anything about it. Rather the opposite in fact – remember Kaipara?

  10. Gurglars

    Well noted Rob, the elephant in the room has become a herd, and not a mahatma in sight. One comforting thought is when the call comes in to repay the excess above $850 million it will be made to a commissioner.

    Who will rid me of this meddlesome priest?

    Debt will.

  11. Anonymous

    It’s one of life’s little ironies that the coming NZ recession will save the DCC, not economic growth. With the OCR heading downwards, at least they won’t have an interest blowout.

    Pity about the 10000/10000/10000 campaign though.

  12. Whippet

    To quote Mr Rugby Union Steve Tew on the Lions Tour about Dunedin missing out. “The logistical limitations of Dunedin”. That is gratitude for you. After the ratepayers of Dunedin spent $250 million to build him a stadium for the world cup.
    No mention that Auckland’s stadium has a capacity about three times Fubar. That’s three times more income. Right Steve ?

  13. Calvin Oaten

    Mike, you’re absolutely right. The DCC’s grovelling adulation of rugby (in all its forms) on the back of the citizens’ checkbook is an appalling display of stupidity. But hey! watch for the hype and column inches expended over the ‘crumbs’ the NZRFU deign to bestow on our “mickey mouse” (by comparison) stadium. “It’s all about the money stupid”. Funny that?

  14. Gurglars

    No, give Steve Tew credit for looking after the planning of Dunedin.

    Firstly involved in developing the stadium at the ratepayers’ expense.

    Now, resurrecting the superlarge hotel for Dunedin (at the ratepayers’ expense).

    Next year he’ll crown the new mayor.

  15. Elizabeth

    Goddam, seem to have mislaid any recent media blurb featuring thugby head Tew.

  16. Mike

    John Oliver on Stadiums:


    LastWeekTonight Published on Jul 12, 2015

    • Gurglars

      The question that has irked me for some years has been this.

      If DCC employees wasted their time on 550,000 hits on trademe what else on the computer did they do?

      It is now clear they watched John Oliver and played the relevant video game.

      Someone should advise John Oliver that the $8 million annual cost of the Milwaukee stadium, he highlighted as an extraordinary cost is a mere bagatelle when compared with the annual bill for little old Dunedin, Noo Zealand.

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