Two instances in two days [Voting closes on Saturday 8 October] of partial information. Really, this means NO INFORMATION at all. Or at best something Tall, the Recipe for FURTHER IRRITATION. Said Ratepayers who’ve seen quite enough of Cull Council fluff.
Be quite sure of that. The future is cracked quacked.
—
No. 1
Yesterday, Dunedin City Holdings Ltd (DCHL) failed to present its Audit Report to the last sitting of the Cull Council. NO AUDIT REPORT. Is there an Audit Report or not, they asked, or is this a process blip with everything under ‘good’ control. Well, some forms of control are the hedge to unwelcome news —before it comes! Again, WHY is the DCHL Audit Report (because it most certainly exists in some form or other) late ENOUGH, TO MISS tabling at Council BEFORE the elections.
THE ELECTIONS. Leaving the new Council to deal to BAD SCRATCHY items from Crombie’s Cookie Jar, about the Gremlins and Duck Itch within, and indeed, the pending wrath of Audit New Zealand (A Gain again!) and Dunedin Ratepayers (A Gain again!).
Was it that the stadium company, one in particular, could upset Ratepayers before they vote. Just one amongst the growing frequency and severity of storms over South Dunedin. DCHL, the ONE STORM too many.
No. 2
A sort of desperate hotel proposal for the Council-owned Filleul St car park. An election freebie in message, carpet fibre thrown over an unravelling pongy DEAD DUCK (political massage). The accommodation market is trending nationally and internationally to Boutique hotels not a CLUNKER. Five star in the New Zealand visitor markets no longer looks or smells this way. [see ODT horreur graphic —So yesterday’s two star, they said]
Let’s hope Chris Morris is asking the owners of Kingsgate Hotel Dunedin, Distinction Dunedin Hotel and the Scenic Circle hotels what they’re thinking about DCC’s plans, and the offer of friable ‘red carpet’ to a private hotel operator who plans a bulwark. Which it’s thought will FALL OVER. The MOU between the Council and the developer has been about a while – we wondered when this glorious axe axiom of accommodation might sling into sight for the central city.
THE ELECTIONS. So Mr Cull’s publicity machine for re-election has left the room at South Dunedin and DUCK SHOVED bang up close to the Dunedin Town Hall, Public Library and Civic Centre – like Real Business is going on. Let’s hasten to suppose Enterprise Dunedin is to thank for all this in some small way.
Waiting for the final Vote Count (“no stars”)
—
“JUST TO HAND”
█ Released via LGOIMA:
19 September 2016
EXTRACT FROM THE NON-PUBLIC MINUTES OF THE COUNCIL MEETING HELD ON 19 SEPTEMBER 2016C5 PROPOSED DEVELOPMENT OF DCC OWNED CENTRAL CITY SITE
A report from Management and Enterprise Dunedin sought approval for an exclusive six month due diligence period to NZ Horizon Hospitality Group Limited (NZH) for the sale of the Council owned property on the corner of Moray Place and Filleul Street. As part of the due diligence, Council would undertake geotechnical investigations, estimated at $100,000, and provide this to NZH.
NZH was proposing to develop part of the site as a five star hotel, with purchase of the land conditional on development contribution relief of up to $1 million. The purchase would be at market value and require development within a specified timeframe.
There would be no obligation on Council to enter into a sale and purchase agreement for the site either during or after the exclusive period.
The Chief Executive Officer and staff responded to questions from Councillors.
Moved (Cr Chris Staynes/Cr Andrew Noone):
That the Council:
a) Approves a Memorandum of Understanding with NZ Horizon Hospitality Group Limited for a three month exclusive due diligence period for the purposes of determining the viability of a five star hotel development on the property on the corner of Moray Place and Filleul Street.
b) Notes under the Memorandum of Understanding:
a. Council agrees to:
i. Not enter into any discussions or negotiations with any other party other than NZ Horizon Hospitality Group relating to the sale and purchase of the property.
ii. Undertake geotechnical investigations required that will be provided to the NZ Hospitality Group.
b. NZ Hospitality Group agrees to:
i. Undertake due diligence relating to the purchase of the property at Moray Place and Filleul for the development of a five star hotel.c) Notes that should the due diligence confirm the viability of the proposed five star hotel development, Council and NZ Horizon Hospitality Group Limited may negotiate a sale and purchase agreement conditional on:
a. The sale of the land at market value; and
b. Up to $1 million in development contributions relief; and
c. Development timeframes; and
d. Full Council approval.d) Delegates the Chief Executive Officer as the Council’s spokesperson for the purposes of any media about the due diligence process.
e) Notes that the approval of the Memorandum of Understanding is not to be taken as any predetermined Council position on any future sale and purchase, or conditions in a sale and purchase agreement, and specifically that Council has yet to consider any development contributions remission and would do against the Development Contributions Policy should a sale and purchase agreement be pursued.
f) Directs that staff use the three month exclusive period to examine other uses and options for the site, in the context of the city’s Strategic Framework and Central City Plan, and that they be put to the Council at the same time as they consider any sale and purchase agreement from the developer.
Division
Voting was carried out by division.For: Crs Dave Cull, Chris Staynes, David Benson-Pope, Doug Hall, Aaron Hawkins, Mike Lord, Jinty MacTavish, Andrew Noone, Neville Peat, Lee Vandervis, Andrew Whiley and Kate Wilson (12).
Against: Nil
The division was declared CARRIED by 12 votes to 0.
Motion carried (CNL/2016/134)
—
Posted by Elizabeth Kerr
Election Year. This post is offered in the public interest.
*Images: With thanks to Daffy Duck from The Looney Tunes Show via (from top) thepinksmoke.com, fanpop.com, toonbarn.com and giphy.com
What if? Dunedin... 
Comments from another thread:
JimmyJones
2016/10/03 at 10:23 pm
Dave Cull, during his election campaigning often mentioned his super-hero type efforts to fix the financial and governance problems of DCHL and restore it to profitability. We aren’t yet allowed to know the latest profit result, but the 2015 profit was only $13 million from total assets of $1 billion. The official DCHL forecast (Statement Of Intent) tells us that the future profits will be much less than this (2016: $0, 2017: $3M, 2018: $3M, 2019: $2M).
Compare DCHL with Port Otago (owned by the ORC) which only has total assets of $0.5 billion – half the size. Port Otago made a profit of $34 million for 2016 and that was a bad year. The year before it made $52 million. Dave Cull’s DCHL reforms seem to be a failure.
DCHL used to be a financial benefit to the city, but now it appears that it will be a net cost. DCHL, which now includes the stadium companies, will need to be subsidised by the hard working citizens.
****
JimmyJones
2016/10/04 at 5:50 pm
The pdf version of all the annual reports of the DCHL subsidiary companies, but not DCHL (holding company), is now available from the DCC. The DCC, DVL and DVML annual reports are also included. These had been html only and couldn’t be saved. We still need to see the DCHL annual report.
duck verb [oxford dictionaries]
1 [intransitive, transitive] to move your head or body downwards to avoid being hit or seen He had to duck as he came through the door.
duck (down) (behind/under something) We ducked down behind the wall so they wouldn’t see us. … He just managed to duck out of sight.
Moved from another thread.
JimmyJones
2016/10/04 at 7:14 pm
The good news is gushing out of every orifice at Allied Press. Dave Cull is here and there, signs something, smiles at some children on TV and such. Not to mention the local economy: booming, it seems. It doesn’t seem very subtle.
The ODT diligently and persistently ignores the very large annual losses of DVL, the other stadium company. It wouldn’t matter how much money this company consumed, you won’t read about it in the ODT. Apparently the needs of the DCC are more important than the needs of the ODT’s customers.
Anyway the latest annual reports show that DVL made a loss of $14.9 million including the subvention subsidy ($7.3M) and the capital subsidy ($2.0M) and the interest on DVL debt paid by DCC ($2.0M).
But, don’t forget about DVML. Terry Davies has proudly announced that this is the company’s first year of profit – a profit of $0.4 million. He fails to acknowledge the amount of subsidies paid by citizens to achieve this so-called profit. The obvious ones add up to $0.6 million (capital subsidy and subvention subsidy), but there are a number of other (sneaky) subsidies that could reach a total of over $12 million per year. More work is needed to uncover the exact amount, but the total annual cost to the city is likely to be in the range of $20 – $25 million per year. This is a problem for the city and a problem that Dave Cull and the staff have not fixed.
Delta, the elephant in the room has been given a holiday in Vanuatu so that he does not shit the blanket during the election.
If you want to know the real story here it is.
Delta losses-
Luggate $9 million
Jacks Point $12 million
Yaldhurst potentially $25 million
DCHL- Three companies will not pay DCC a dividend for 3 years, why did we create them?
550,000 hits on Trade me
6% rise in CEO’s salary despite total failure.
South Dunedin, we have to manage a retreat AND lose $108 million, AND reduce your house value by 20%!
Dave Cull- Floods in South Dunedin were caused by climate change.
Cycle ways- stuff up, rethink and stuff up, rethink and stuff up and you/we Pay. CEO gets 6% pay increase!
RE-ELECT Cull and Staynes
They have driven the economic failures in Dunedin
VOTE NOW, VOTE for Continuity, we can rob you and you will not Know!
DVML and DVL used to pull this stunt – not releasing their reporting on time to avoid embarrassment.
On the current CEO’s watch so far:
– Delta debacle
– Citifleet fraud
– several senior manager departures, few details (hello Rhonda)
– abject Gigatown failure
– staff morale at low ebb, alleged culture of bullying
– reduced civic debt
If civic debt had not been made a priority, then the city would now be bankrupt. No question, it was that critical.
Dunedin median wage: $23000 (no 10K/10K/10K here yet)
CEO salary: $371K
Dunedin City Council -Media Release
Survey work to begin for five star hotel for Dunedin
This item was published on 04 Oct 2016
The Dunedin City Council welcomes a proposal to build a five star hotel on the Filleul Street car park.
DCC Chief Executive Officer Sue Bidrose says staff have been working with NZ Horizon Hospitality Group Proprietary Limited to provide advice and support where appropriate, since the developer approached the DCC with an offer to purchase the land.
“The Council has been clear for some time it would welcome a five star hotel in the city. It would complement the great facilities and services Dunedin can provide and bring economic benefits. The proposed site is a great location for a five star hotel, with its proximity to the Dunedin Centre’s first class conference facilities and our vibrant city centre.”
The Council and the company have signed a Memorandum of Understanding which means the company has an exclusive interest over the car park site for three months. This is to allow for a due diligence process, including obtaining geotechnical data about grounds conditions at the car park.
The DCC owns the Filleul Street car park, which offers a mix of public and leased parking.
DCC Property Manager Kevin Taylor says the DCC has contracted a geotechnical engineer to provide an investigation assessment report on the sub-surface conditions. This will involve testing and sampling of the land, involving drilling and, depending on the results, test pits.
This means heavy machinery, such as a drilling rig, will be on site initially and later possibly an excavator and related machinery. The drilling rig will be on site for up to three weeks from 10 October. There will be 7-8 sonic bore holes, including two holes on the neighbouring York Place site. The core samples taken will then be sent for analysis. Three piezometers will be installed to enable groundwater levels to be monitored.
Mr Taylor says efforts will be made to keep the car park open, but a short closure is likely depending on the location of the bore holes. Drilling will take place on specific mapped sections, meaning areas of the car park will be unavailable for several days at a time. Other parks will be made available for people who cannot use their leased car parks. The mapping is not available at this time.
The geotechnical work and report is expected to cost about $50,000. As the DCC will own the report, the data could be used for other projects. Mr Taylor says the information will also be helpful when the DCC updates its seismic assessments of nearby DCC facilities, such as the City Library and Civic Centre.
Contact Chief Executive Officer on 03 477 4000.
DCC Link
What a great spot for a hotel, in the coldest part of Dunedin facing the back of the civic centre and losing 100 car parks for the business people of Dunedin.
—
{Moderated. DCC are not becoming hoteliers. As the Memorandum of Understanding indicates, DCC are offering to sell the land to a private developer. In addition, we see mention by ODT of a potential link to Chinese finance – laughable, because no New Zealand bank would touch this one, it’s completely NOT where the NZ hotel and accommodation market sits for international or domestic tourism. That bus (slab hotels) has already left the rank never to return. -Eds}
Elizabeth, the DCC were not going to develop the Stadium, the DCC were not going to develop Wall Street, the DCC were going to profit from Luggate, Jacks Point and Yaldhurst. An orchestrated litany of denials about being involved in projects. I think you have missed the point, the DCC will become part developers because no one in their right mind would develop a Hotel in that ugly part of town except the DCC.
Wrong. The developer has been known for months and DCC doesn’t have access to $75M plus.
Wrong. This is a very attractive walkable area of town if we had any visitor market worth catering to. We don’t. A couple of hotels have quietly reported a very quiet winter In Dunedin bookings wise. Not alleviated by Rugger at Stadium or other Dunedin Venues jollities there or at Town Hall and Regent. DEAD.
Arguments for a Chinese financed hotel for the waterfront are more or less replicated for the Filleul St site. Although the geotech might find some rock not liquefaction material. However, the global visitor market is more sophisticated than ever and this proposed blot on the earth is hardly Architecture worth our GigCity name (mutter mutter) or our City of Literature status.
Designed by a draftsman, ahem.
One strongly literate in Contemporary or Contextural DESIGN is the open question !
More like a design-build package from elsewhere. Crimped for Filleul.
Remember the $100M slab packages that resulted in LEAKY BUILDINGS at Orewa and Takapuna etc – the same are available all round the Pacific Rim care of our Asian friends with money to park or launder (see comments elsewhere at this site; use the search term *hotel*).
—
Dunedin is a New Zealand City of Architecture (local is best) – way in advance of its claims to Literature.
Most of Dunedin’s Architecture has not yet been assessed – swathes of nationally outstanding residential structures that hordes of private people in their own right have been appreciating and maintaining, as the voluntary best stewards of City Fabric. Stunning efforts.
Then another ‘someone’ in 2016 thinks to build an INSULT to Intelligence in our CBD.
This won’t end well. The numbers don’t stack.
Wait.
From the first release: “As part of the due diligence, Council would undertake geotechnical investigations, estimated at $100,000, and provide this to NZH.”
From the second release: “The geotechnical work and report is expected to cost about $50,000”
Follow the money. Where’s the other $50K gone?
“Where’s the other $50K gone?” Another casualty of Dunedin’s special localised climate change. Ask Dave, he knows about climate change.
Wed, 5 Oct 2016
Positive hotel response, but design concerns
The man promoting an 18-storey five-star hotel in Dunedin says the public response is encouraging, despite the early emergence of opponents vowing to fight the development. Ken Taylor, the project’s Dunedin-based spokesman and architectural designer, said it was possible further compromises could be made to ensure the hotel was welcomed. That could include to its height or design….
—
My full brief comment to Chris Morris has now been sent to ODT as a Letter to the editor.
DCC and Enterprise Dunedin being positive is only about money and offloading a property —Hardly matters that concern the quality of our architectural environment. The chief executive is no expert in this field of critical assessment – neither is she an expert in the commercial hotel sector.
Baloney of the first order. CARGO CULT.
This is like Dunedin stepping back to the 1980s when all sorts of cheap nasty crap got built in Princess Street – DCC is so OFF the style beat and OFF the essential visitor industry business arguments that matter for the future of this city.
Why has ODT not spoken to other hotel owners ?
Then too, Council is hardly offering a ‘red carpet’ incentive to the developer free of clawback – since any Geotech cost met will be offset by the development contribution demanded. The same likely applies to any rates relief offered during construction.
****
Wed, 5 Oct 2016
Drilling set to start on hotel site
Heavy machinery will move on to Dunedin’s Filleul St car park within days to explore its suitability for an 18-storey five-star hotel. Dunedin City Council property manager Kevin Taylor, in a statement yesterday, said the council had contracted a geotechnical engineer to begin studying the site.
—
THIS TIMING is
All about raising Mr Cull’s profile for re-election.
And seeing high salaried operationals benefit from that ‘political continuance’.
Naturally, the powers that be think the Dunedin voting public is that stupid. Just maybe it is.
We’ll have irrefutable proof of that in a week or two.
The long wait is over; we are now permitted to see the 2016 Dunedin City Holdings (DCHL) annual report – but not all of it: there are no financial accounts for the DCHL parent company, all we get is the group accounts. This obscures some aspects of the financial dealings.
The reason given for keeping it secret at Monday’s Council meeting was: The commercial information within this report has not yet been the subject of a final audit opinion and Council and it is also subject to final director approval. Consideration of this matter in public may prejudice the commerical interests of the entity that is the subject of the auditor’s advice
We now know that the audit was completed on Friday (30/9/16), so it seems like it should have been publicly available on Monday and no secret meetings were necessary. The reason for the secrecy was invalid, anyway. The report was only released today, 6/10/16.
The DCHL annual report shows that, for the first time, DCHL has paid no dividend to the DCC. With $1 billion of assets and many hard-working employees, the end result is nothing. No dividend. This has been forecast, but not publicised. Cull and his cunning plan to restructure DCHL and “bring it back to profitability” might impress some voters, but not if they know that there is no dividend and there won’t be for a while. The DCC will try to manage the bad publicity of this by telling us about the $6 million annual interest payment, but don’t be deceived, there is no benefit from receiving this payment because the DCC pays about $6 million per year to provide this loan ($112 million). No nett benefit from the interest.
JimmyJones
Please could you direct me to document source for the statement:
The commercial information within this report has not yet been the subject of a final audit opinion and Council and it is also subject to final director approval. Consideration of this matter in public may prejudice the commerical interests of the entity that is the subject of the auditor’s advice
The English appears faulty as I have bolded.
Yes, Elizabeth, it looks like something is missing. This statement purports to be the reason why that part of the council meeting was secret and why the DCHL annual report was not publicly released until 6/10/16.
The quote is from the Council meeting agenda for 3/10/16 – Resolution To Exclude The Public (page 88).
Thanks JimmyJones!
Dunedin City Holdings have in the 2016 financial year disclosed “Bad debts written off” of $13.5 million. Expect more to come (see Gurglars, above).
Even worse than this is a problem that the auditor warns us about: about 3 months ago the stadium companies were sold by DCC to DCHL as a way to be seen to be doing something about the stadium losses. Nothing useful was achieved. The auditor is concerned because the DCC has failed to comply with the NZIFRS accounting rules because they have decided to not obtain a valuation of the stadium asset. A valuation is required because the stadium has become part of the assets of DCHL. The DCC has previously obtained a valuation, but this was unrealistically high because an inappropriate valuation method was used. There were questions about the independence of the valuer.
Another valuation would be much lower (more realistic) because of a much greater level of scrutiny at this time. The DCC prefers to tolerate the criticism of the auditor, rather than suffer the embarrassment of people finding out the real value of the stadium. If it was sold, the value would be just the value of the land ($29 million). $29 million is a realistic valuation for the whole stadium. This represents a loss to the city of what we paid for it ($224 million) less what it is worth now ($29 million). $224 – $29 = Loss of $195 million. The problem is that there is no plan to sell it and so there is the never-ending cost to the city of $20+ million per year.
To summarise, the stadium that cost $224 million to build, now has a likely valuation of $29 million and was recently sold to DCHL for $113 million. The auditor recognizes that a valuation is required, but lacks the courage to take any useful action to fix the breach.
A qualified audit should be unacceptable to us. The auditor is in effect saying that we have the stadium in the books of DCHL at a significantly overstated value, a value not established by usual valuation methods. If we accept DCHL overvaluing an asset of such significance, how are we to take confidence in their idea of the value of other so called assets, like say Delta?
Can we not find people who will run DCHL by the rules?
This breach of the accounting rules is a very serious matter for a number of reasons:
● because we are being intentionally misled so that a falsely optimistic impression is given.
● because this fake valuation completely destroys the usefulness of the annual reports of DVL, DCHL and DCC. Because this stadium value is wrong, underestimated and uncertain, then these annual reports are invalid and might as well not exist. Knowing the value of things is a fundamental part of accounting.
● because it demonstrates a disturbing lack of honesty from DCHL and the DCC – and the attitude that the rules don’t matter as long as you don’t get caught, or as long as the auditor can be bullied into signing his report.
● because it demonstrates a continuing, very low standard of auditing from Audit New Zealand and The Auditor General. The auditor should have failed this audit of DCHL and DCC. There have been other auditing failures from Audit NZ.
Let’s not forget that Audit NZ were sacked and replaced at Kaipara for not attending to the District Council’s ‘misconduct’ – which was clearly not in the ratepayers’ interests and cost them dearly.
We mentioned this earlier at What if?Dunedin.
Same applies here. Audit NZ is on thin ice.
There are obvious ways to fix this. Using a sharp group of ratepayers here South.
“Can we not find people who will run DCHL by the rules?”
The real question is surely, will we ever find people who can bear to find people who will run DCHL by the rules? And report without twiddling the facts.
It’s like finding out Trump had been a sperm donor and having to tell your kid, “You were asking about your real father….. Well…..”
Fri, 7 Oct 2016
DCHL’s profit up 57%
The Dunedin City Council’s group of companies has continued to cut debt and return good profits after a year of what Dunedin City Holdings Ltd chairman Graham Crombie described as “solid returns”. Debt across the companies and the council has reduced by $16.8 million to $581 million. […] There was no dividend to the council this year, although the group distributed $11.2 million to the council and subsidiaries, $5.9 million in interest and $5.3 million net in subvention payments.
****
I note the ODT has again just accepted a media statement from DCHL as gospel without assigning a business reporter of any expertise to critique the financials and spin. And we wonder why DCHL and DCC are in such a mess.
On top of comments made by JimmyJones and Hilary, no mention by Crombie of the loss making excesses of Delta Yaldhurst.
Thank you JimmyJones for all your in depth opinions on DCC group finances. They make fascinating reading. If I understand you correctly, it appears DCHL are happy to benefit from comprehensive accounting rules to value up the forestry asset, and include it in their wonderful 57% paper profit increase. But they are keen to avoid using the same rules to revalue the stadium down, as that would incur a Trumpesque size accounting loss? Perhaps it would be a little too much red ink, on top of the bad debts expense this year.
Yes, Anon, that seems to be the case. The forestry revaluation was done by City Forests – an internal revaluation. Most of this value increase was because of a change in the discount rate from 7% to 6½% – something that is likely to be reversed and not any indication of good financial management.
Dunedin City Council – Media Release
Strong annual result from DCHL
This item was published on 06 Oct 2016
Dunedin City Holdings Limited (DCHL) has recorded a 57% profit increase, announcing its annual result for the year ending 30 June 2016 today.
The after tax profit of $20.3m (including a positive revaluation of City Forest assets) for the June 2016 year was well up on the previous profit of $12.9m.
DCHL Chair Graham Crombie says the result is a continuation of solid returns for the group.
“This is a strong result which reflects the hard work and focus of staff and directors of the DCHL group of companies.”
DCHL has distributed $11.2m to the Dunedin City Council (DCC) and subsidiaries outside the DCHL group: $5.9m in interest and $5.3m net in subvention payments.
“With subsidiaries embarking on a substantial reinvestment programme, it’s prudent to ensure a balance between distributions and using internally generated surpluses to fund reinvestment,” Mr Crombie says.
Total assets employed by the DCHL group sit at $1,143m. This compares favourably with group borrowings, which have decreased from $598m at June 2015 to $581m at June 2016.
While a number of group companies had lower debt levels that the previous year, Aurora Energy recorded an expected increase due to its capital investment programme.
Cash from operations remains strong at $31.6m. This was after budgeted subvention payments of $7.9m to Dunedin Venues Limited.
“The ability of the group to maintain strong operational cash flows is important to meet future dividend and capital investment requirements.”
DCHL had signalled via its annual Statement of Intent that distributions to the DCC would increase marginally over the next three years. With planned capital investment by Aurora, it is prudent that Aurora reduces dividend distributions to ensure the funds are invested into capital while maintaining an appropriate equity to total assets ratio. This impacts on the distributions DCHL can make to the DCC as some funds will need to be retained to continue the maintenance programme.
“The outlook for the next few years is favourable. Capital investment by Aurora will provide financial and operational stability for the company, Delta continues to grow core contracts and growth in the tourism market will be good for the Taieri Gorge Railway. A continued favourable interest rate environment will assist in reducing the cost of debt for Dunedin City Treasury Limited, and assist City Forests to continue operating well in the global market.”
HIGHLIGHTS
● At 30 June 2016 the group acquired the ownership of Dunedin Venues Limited and Dunedin Venues Management Limited. The assets of these two companies form part of the DCHL group while the operating result for the year remains with the DCC.
● Total borrowings across the group have reduced by $17m to $581m.
REPORTS
● DCHL report
● DVML result see page 9 of the report
NOTES FOR EDITORS
Individual results
Aurora Energy Limited made substantial progress during the year to meet growing consumer demand, while continuing renewal of assets due for replacement. The company ended the year with an after tax surplus of $6.5m. The company invested $37.2m in capital projects, including completion of a number of new sub-stations, overhead line upgrades, power pole replacement and progress on the longer term network system control and communications upgrade. Over the next decade Aurora Energy plans to spend $417m on preventative maintenance and renewal investment for the Dunedin network, and investment to cater for growing demand on the Central Otago network.
City Forests Limited had a successful year, with an excellent trading result (surplus after tax $16.0m) supported by strong cash flows ($11.8m operating) allowing the company to provide a record dividend payment. Strong demand from both the domestic and export markets was the primary driver for this.
Delta Utility Services Limited ended the year with an after tax surplus of $4.7m. The year was marked by steady demand for core services in the energy and environmental sectors.
Taieri Gorge Railway Limited ended the year with an after tax surplus of $137,000 on the back of good growth on the Taieri Gorge and Seasider train services.
Dunedin Venues Limited and Dunedin Venues Management Limited joined the group effective 30 June 2016. As such their operating results are not included in the DCHL group for the year.
Dunedin International Airport Limited achieved an operating surplus of $1.9m for the year, up on $1.7m surplus for the previous financial year. The company paid a dividend of $704,000 during the year, up from $640,000.
Dunedin Venues Ltd (DVL) / Dunedin Venues Management Limited (DVML)
Property, plant and equipment of $187.091m was added to the DCHL group following the acquisition of DVL and DVML on 30 June 2016. This includes $185.025m related to Dunedin Venues Limited (Forsyth Barr Stadium) and $2.066m related to Dunedin Venues Management Limited.
After its acquisition the group recorded the stadium assets using DVL’s financial statements, on a public benefit entity basis. In consolidating DVL into the for-profit group financial statements for the first time at 30 June 2016, the group was required to initially record the stadium assets at carrying values that are supported by a valuation on a commercial basis.
It is possible a commercial-based valuation of the stadium assets could be materially lower than the carrying value recorded in the group’s statement of financial position. The stadium is a unique asset with no active market to make a reasonable assessment of fair value between a willing buyer and seller. While it is possible to identify certain cashflows with stadium assets, its primary purpose is to provide public benefit for which there are limited or no directly attributable cashflows within the group. As such, the nature of existing cashflows within the group do not necessarily represent commercial cashflows for the purposes of undertaking a discounted cashflow calculation to assess fair value. These factors mean that establishing a commercial value using a market value or discounted cashflow approach
involves significant assumptions and estimates which are highly uncertain, so the group could not determine the value of the acquired stadium assets on a commercial basis.
As a result Audit New Zealand has issued a qualification in its Independent Auditor’s Report related to the stadium asset valuation.
Contact DCHL Chair on 027 436 3882.
DCC Link
The stadium has a nett present value of $1 max.
A commercial asset is valued at its ability to generate net income. The stadium generates a considerable loss. A realist would value the stadium at -$200 million. Negative 10 times the annual loss of $20 million.
This places DCHL assets $380 million below their current estimate.
If you’ve got a better more practical measure of the stadium value, please outline it for my edification.
DCHL’s profit up 57%
On the good side, the DCC scriptwriters have acknowledged that no dividend has been paid and we see a rare mention of the other stadium company, DVL. The loss of $3.5 million for the year is mentioned but not all the other stadium losses, costs, and subsidies which together are likely to add up to something over $20 million.
We are told that “This is a strong result which reflects the hard work and focus of staff and directors”, but this isn’t true: most of the increase in DCHL’s profit for the year was because of a decision to use a different discount rate to value their forests. This may or may not have been justified, but the subsequent boost to forest value and therefore to DCHL profit, does not reflect any sort of good management.
The important thing to keep in mind is that not one cent of this “strong result” was paid to the DCC, so this is a very weak result. Profits were made and dividends were paid, but not to the DCC. Dividends get paid to a “middle man” in the form of the DCHL parent company. This company has debt and interest costs and is the company that pays the dividend to the DCC. We can’t tell what has happened to the finances of this company because all of the financial statements have been removed from the DCHL annual report. There are no figures for the DCHL parent company, only the DCHL group figures are given. This is the first time for this behaviour and it seems to contravene the accounting rules. It seems like DCHL has been making up its own accounting rules. Audit New Zealand have taken no notice.
ODT’s Simon Hartley exposes a little more of the trousers-down, to useful effect.
—
Sat, 8 Oct 2016
ODT: Audit NZ criticises Stadium valuation
The Dunedin City Council’s parent trading company has fallen foul of Audit NZ for valuing the Forsyth Barr stadium on a non-commercial basis. The Government agency “tagged” Dunedin City Holdings Ltd (DCHL) accounts with criticism over the valuation. […] Scott Tobin, of Audit NZ, signed off the Independent Auditor’s Report on DCHL, saying “our work was limited over the carrying value of [the] stadium assets in the group financial statement”.
He offered a “qualified opinion”, meaning the financial results were tagged with a criticism.