Hamilton Mayor has it right —DCC has lost ratepayers hundreds of millions of dollars

The misuse of public funds at Dunedin is far from being over……

Received Sun, 8 Jan 2017 at 5:21 p.m.

hcc

Questions mount over Hamilton City Council’s commercial nous. By comparison, how does Dunedin City Council stack up ?

### Stuff.co.nz Last updated 12:03, Jan 6 2017
Business: Property
Hamilton City Council urged to stay away from property ‘gambling’
By Aaron Leaman
….Hamilton Mayor Andrew King said the city council has a poor record when it comes to commercial property deals. And he doesn’t want any more ratepayer money risked on commercial developments. Records obtained under the Official Information Act show the Hamilton City Council has taken a multimillion-dollar hit on a raft of property deals dating back to the mid-1990s. The council incurred heavy losses after selling properties at well below their purchase price.
….In 2017, city councillors will consider restoring the council’s property development company, Hamilton Properties Ltd, after an almost 20-year hiatus. Last term, the council voted to transfer the city’s municipal and domain endowment funds, valued about $52 million, to the council-controlled organisation. The decision can be overturned by the new council. Hamilton Properties Ltd was set up in 1989 and retired in 1998 after developing a host of commercial and community sites, including the BNZ building and Novotel Hamilton Tainui in the central city.
….King said the council should enable developers and investors to risk their money to build Hamilton. “We’ve got $50 million sitting in these funds and I think the proposal to give it to Hamilton Properties Ltd is very, very scary, in my opinion,” King said. “It’s not our job as councillors to risk ratepayers’ money and go into competition against others. The record clearly shows that we are way out of our depth. We’re not specialists in this field and anything council does seems to cost twice as much as what the specialists in the field can do it for.” King’s views, however, are at odds with senior council staff, who have defended the city’s investment nous.
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Posted by Elizabeth Kerr

This post is offered in the public interest.

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10 Comments

Filed under Business, Construction, Democracy, Design, Economics, Finance, Media, New Zealand, OCA, Ombudsman, People, Perversion, Pet projects, Politics, Project management, Property, Public interest, Resource management, SFO, Site, Town planning, Travesty, Urban design, What stadium

10 responses to “Hamilton Mayor has it right —DCC has lost ratepayers hundreds of millions of dollars

  1. Raymond

    Some wisdom in high places? Phew!

  2. Gurglars

    “The city council staff defended their decisions”

    The fox caught in the glare of the light emanating from the chicken house.

  3. Hype O'Thermia

    King doesn’t understand: “King’s views, however, are at odds with senior council staff, who have defended the city’s investment nous.”

    You’ve been playing poker with your cousins for matchsticks, it was fun, not only that but you’re so crash-hot 2 of the cousins actually volunteered to go peel potatoes they were losing so bad. Big improvement on last holidays. Then you get the chance of a free trip to the casino with an unlimited supply of chips to play with and someone wants to stop you!

    You KNOW you’re a natural winner.

    What does he know, he didn’t even speak to your cousins!

  4. Gurglars

    Lovely analogy Hype – a classic to start the year 2017 in which:

    Management of DCC assets reaches new heights producing annual measurable profits.

    The DCC divests itself of all council liabilities and removes itself from the arduous task of managing the unmanageable.

    The staff previously employed in these impossible tasks are “let go” and are faithfully pursuing worthwhile tasks in private enterprise producing wonderfully creative products attracting International recognition.

    The sewage treatment plant produces potable water.

    The mudtanks are cleaned monthly and there is no flooding in South Dunedin.

    3000 dangerous electricity poles are replaced economically, speedily and without any contract graft.

    Work on the aging pipes and services is undertaken.

    Engineers are appointed to manage the aging infrastructure.

    Wall Street is sold.

    Five executives in the DCC get fleet cars, the rest cycle to work on the footpaths.

    The ridiculous cycle lanes in the main thoroughfares are pulled out and forgotten.

    The DCC is considered unsustainable and a target of reducing staff by 50 pa is set in place for the next ten years.

    Airora is charged with maintaining its pole and supply assets and is charged with employing linesmen and engineers and has no PR department which is not needed due to efficiency.

    A mayor/commissioner is appointed to achieve the above requirements of the majority of the populace.

  5. Calvin Oaten

    That ‘Stuff’ story on the Hamilton City and its properties deals reads like our ‘Mickey Mouse’ deals as well. Property deals are not what Councils should be about. Its function is to run the city in as efficient and cost effective manner as possible and to leave the business side to business. End of story.

    Look at the ‘sad Carisbrook’ story. Bought for $7.5million, held for no useful purpose then on sold for $3.6million. Why ? Just to buy the ORFU out of bother and debt. Build a Stadium for an estimated $188million which on investigation proved to cost nearer $240million with incomes not even reaching break even rates. Who else but a dopey Council would do that?

    Now that we are nearly six years further ahead we find that the annual costs of servicing the debt plus supporting the operational loss factors are costing the City over $20 million pa. And we wonder why the DCHL Group of companies can’t now meet their past habits of paying dividends to cover for some of the city’s shortfalls. With a dangerous electricity supply desperately needing serious updates, and the consolidated debt at around $620million the ratepayers have been well and truly shafted by the negligence of the “gifted” people who run the city.

    The appointment of a commissioner to run the city and get it based on a financially viable basis seems the logical option.

  6. Simon

    ‘Appoint a commisioner to run the city”. Yeah Right. Just like the one appointed to get the hospital out of the shit.

  7. Gurglars

    Simon, you have a valid point. One would hope that the appointer and the commissioner would learn from previous local mistakes, errors of judgement and their own appointments which have in the case of the SDHB been unfortunate at best.

  8. The Wellington Regional Council is also facing big losses from reckless property “investment” :
    http://www.stuff.co.nz/business/87295032/Stephen-Franks-Will-Wellington-Regional-Council-go-down-with-Harbour-Quay

  9. Elizabeth

    Theory: Rating the University of Otago will help paper over the Council’s spendthrift ways.

    At Facebook:

    ****

    Such a change would “clearly be helpful” for the city and ratepayers and “$4.7million is a significant amount of money”. –Mayor Cull

    Wed, 22 Mar 2017
    ODT: Full rates for uni worth millions
    By Vaughan Elder
    The Dunedin City Council’s rates take could increase by more than $4.7million if the Government acts on a recommendation to make tertiary institutions pay full rates. The recommendation was included in the Productivity Commission’s report on tertiary education, commissioned by the Government and released yesterday. The report, which also made a series of other recommendations, including scrapping interest-free loans for students, said there was no “principled justification” for tertiary institutions not to pay full rates and the exemption led to inefficient use of assets and land. Cont/

    ****

    PRODUCTIVITY COMMISSION
    New models of tertiary education
    Go to http://www.productivity.govt.nz/inquiry-content/tertiary-education

    Our brief – 3 November 2015
    Issues paper – 24 February 2016
    Draft Report – 29 September 2016
    Final report – 21 March 2017

    The Productivity Commission has completed its inquiry into New models of tertiary education. The report is a broad-ranging inquiry into how well New Zealand’s tertiary education system is set up to respond to emerging trends in technology and the internationalisation of education, and changes in the structure of the population, and the skills needed in the economy and society. As part of the inquiry, the Commission was asked to identify potential barriers to innovation.
    The Commission has made a number of recommendations including better quality control and self-accreditation for strong performers; making it easier for students to transfer between courses; abolishing University Entrance; better careers education for young people; enabling tertiary institutions to own and control their assets; making it easier for new providers to enter the system; and facilitating more and faster innovation by tertiary education providers.

    ****

    Re payment of rates (in brief), go to page 7 of the Overview contained in the Final Report, under the heading ‘Increase tertiary education institutions’ autonomy and responsibility’. It says:

    One reason government maintains tight control over tertiary education institutions (TEIs) – ITPs, wānanga and universities – is because government bears legal liability for their debts in the event of failure. So government has a reason to closely monitor the financial performance of TEIs, and keeps close control over how TEIs use and dispose of assets. This inhibits the kind of innovation that might significantly change a TEI’s business model.
    A TEI is required to produce a small surplus, but it also has an incentive to spend what it earns. If its surplus is too big, the TEI will find it hard to seek higher funding levels from government. So it can have an incentive to accumulate assets like buildings, which can lock in particular models of delivering education and prevent capital being invested in new models.
    Financially competent TEIs should own and control their assets and be liable for their debts. The exemption from paying local government rates should be removed. These recommendations enhance the ability of TEIs to direct capital investments towards new models of education.

    [my underlining]

  10. Hype O'Thermia

    If we have to pay rates on real estate but not on academics, perhaps we would be better investing in staff and offering more choice of courses, instead of aimin’ to be the biggest ranch holder this side of Momona.”

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