Tag Archives: Salaries

Delta #EpicFail : Strategic Reasons & Outrageous Logic

Election Year : The following opinion is offered in the public interest. -Eds

Delta - AuthorUphillBattle - The Books [blog.smashwords.com]

Received from Christchurch Driver [CD]
Tue, 19 Apr 2016 at 10:48 p.m.

Readers, tonight’s exposition is to examine the Dunedin City Council (DCC) worldview that does not contemplate a sale of Delta at less than $45M. Your correspondent says that will never happen on any rational economic basis, so the next best thing is to pretend that it would not be in the ratepayers’ best interests to sell at all, seemingly at any price.

However, annoyingly, logic and reasons must intrude at some point, and in the recent report on DCHL asset values, the DCC have a crack at pushing the Delta water uphill.

Agenda – Council – 11/04/2016 (PDF, 1.6 MB)
Item 22 Dunedin City Council Investments and Returns (pp 109 – 123)

Tonight, readers, we shall dwell on and allow the TWO big “strategic reasons”, the DCC propose to retain Delta, to stand in splendid isolation, while readers allow the cool chill of logic to bring these clouds of hot air back to reality.

We shall also overlay some markers over Delta’s financial figures that give support to your correspondent’s contention that Delta is at risk. (careful words needed here, readers !)

Safely camouflaged at para 55 (page 117), deep in the DCC report, the following statements appear : “If Delta were to be sold by the DCC, one likely outcome…. [it could be] purchased by a competing company in the same field. One consideration…. is the potential ‘head office’ job loss to Dunedin if Delta were to be sold to an existing company which is not locally owned.”

Stop right there, readers. The DCC say the first, most important consideration in retaining Delta is to retain the Delta ‘head office jobs’ in Dunedin. At one level we can take this to mean that the DCC are very fearful that the current occupiers of the Delta head office jobs in question would not find similar work in Dunedin. Your correspondent thinks that is a very well-founded fear. But the DCC head of economic development tells us the city is growing and it is hard to attract executive staff to the city…. it is a taxing puzzle why the authors of the report ignore their own staff…. At the next level, your correspondent is vexed at the concern shown by the DCC for the six figure inhabitants of the Delta Head Office suite. (Note, there are 70 people earning in excess of $100,000 at Delta, your correspondent guesses that the Head Office inhabitants occupy the highest echelons of those salaries). This brings a whole new meaning to the (draft) Statement of Intent requirement to be a “socially responsible …. corporate citizen”. At a higher level again, the DCC appear to say that the welfare and future of the head office positions rank ahead of the core task of providing returns to the ratepayers.

Readers, remember that DCC provide these reasons as reasons not to sell Delta even if someone paid the massive premium of 300-400% over the $15.804M shareholders equity (which is about to suffer a severe Noble induced virus).

Your correspondent is very sure these revolutionary themes of Soviet Style central planning and corporate welfarism were not intended in the Delta ‘Statement of Intent’ which is meant regulate how the company is run.

Next up as the DCC apologia for retaining Delta is the statement, “the loss of Delta from the local contracting market, particularly if through acquisition from an existing contractor, would remove an element of competition from an already limited local market”.

This is illogical. Let us count the ways:

1. If competition is “limited” then margins will be high, and demand for skilled staff intense, so any logical purchaser would leave the Delta structure alone to continue its high margin work…. but of course, if there is limited competition and Delta are not making good profits, then there is a problem…. and Delta should be sold to an entity that can generate good profits in a limited market.

2. It can be safely assumed that Delta’s local competitors Fulton Hogan, Downer, SouthRoads, Whitestone, Asplundh, Waste Management, and any of the local power contracting companies are not stupid and they would have no interest in paying the DCC $45-60M for $15.804M of equity (on a good day). If Delta expired, the limited competition just got less, and paydays all round for all left standing. Your correspondent says then that any purchaser is likely to be someone who does not have a presence in the market, and sees potential for profit in this market, allegedly with limited competition. If that were true they would leave Delta as it was, maybe even with some of its precious head office jobs, to continue their (merry and profitable ?) way. (For the time being at least).

3. The bottom line is your correspondent posits that Delta will never be sold in its current form, because its competitors know, even if DCC Treasury does not, that Banks have certain standards for lending money to companies, and an important one is the debt to equity ratio. Delta has $26.9M of debt and $15.804M of equity. That is a debt : equity ratio of 183 % which this correspondent says is far too high for a contracting company. A debt : equity of 100 % or less is usual in this sector. Another is the Liquidity (Quick) Ratio which is Current Assets / Current Liabilities. Contractors should have a minimum of 1.35 and many accountants would say 2. (What would Mr McLauchlan say ….?). Delta has $17.5M of current liabilities and just $220,000 of cash in the bank. This is one seriously undercapitalised contracting company.

Delta will no doubt say their quick ratio is fine because the accounts show $25.244M in receivables, but this includes the very non-current and very illiquid Noble debt of $13.2M. They do have $2.84M of Work In Progress (WIP) which is included under inventories. They then have proper current assets of $0.22M cash, $2.84M WIP, and $12.2M Receivables, ($25.24-13.2M) for a total of $15.08M and a quick ratio of 0.88. The bottom line is : even putting aside the elephantine $26.9M in debt, Delta have serious cash flow issues with a quick ratio of less than 1, and if they have a further problem contract, or even just a delay of a month or two getting paid on a larger contract, they are not just on a cashflow knife edge, but in serious trouble. Delta has basically no cash reserves as at June 2015. Of course, Mr Cameron did not dwell on that factoid in his report….

Readers, the quality of the excuses made in support of retaining Delta are of the same quality as the prediction of its value at $45-60M.

[ends]

█ For more, enter the term *delta* in the search box at right.

Posted by Elizabeth Kerr

1. factoid

*Image: blog.smashwords.com – AuthorUphillBattle, tweaked by whatifdunedin

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Filed under Aurora Energy, Business, DCC, DCHL, DCTL, Delta, Democracy, Dunedin, Economics, Finance, Infrastructure, Name, New Zealand, OAG, People, Politics, Project management, Property, Public interest

DCC Annual Report 2013-14

IMG_20141029_132653ODT 29.10.14 (page 5)

http://www.odt.co.nz/news/dunedin/321565/460k-departing-council-staff

Report – Council – 30/10/14 (PDF, 2.5 MB)
Approval and Adoption of Annual Report

Recommendation: That the Council approves and adopts the Dunedin City Council Annual Report for the year ending 30 June 2014, subject to any minor editing required between adoption and final publication.

Posted by Elizabeth Kerr

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DCC adds staff positions, significant ratepayer cost

Two permanent full-time project co-ordinators to run the Project China and Export Education Uplift initiatives.

### ODT Online Tue, 21 Oct 2014
Vandervis takes aim over funding request
By Chris Morris
There were heated exchanges between Dunedin city councillors as a debate over an economic development funding request turned into a spat yesterday. The dust-up came as councillors considered a request from the Grow Dunedin Partnership to use $190,000 a year from existing council budgets to pay staff salaries for two projects during the next three years.
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Report – EDC – 20/10/2014 (PDF, 126.7 KB)
Economic Development Strategy Projects Budget – Project Co-ordinators’ Funding Request

From the report…

Enterprise Dunedin’s EDS projects budget is $518,000 for the current 2014/2015 financial year and has yet to be ratified for the 2015/16 year and future years. This budget pays for progressing EDS projects and includes payment for the project co-ordinators and project management costs.

RECOMMENDATIONS
That the Committee:

1. Approve the earmarking of $190,000 on an annual basis from the Economic Development Project Budget for the purpose of employing two project co-ordinators.

2. That this funding be included as two line items within the Economic Development Project fund for a period of three years:
- Export Education Uplift Co-ordinator – $95,000
- Project China Co-ordinator – $95,000

Dunedin Economic Development Strategy 2013-2023BACKGROUND
Dunedin’s Economic Development Strategy (EDS) was adopted in 2013 by its six partners. There are two specific economic goals:

1. 10,000 extra jobs over 10 years (requiring employment growth of approximately 2% per annum.

2. An average of $10,000 extra income for each person (requiring GDP per capita to rise by about 2.5% per annum).

. . .

The Strategy is built around five themes:
1. Business vitality
2. Alliances for innovation
3. A hub of skills and talent
4. Linkages beyond our borders
5. A compelling destination

Related Posts and Comments:
14.8.14 Mayor Cull’s reflections on Edinburgh #SisterCity #Junkets
21.4.14 Dunedin economic development strategy — low flying Year 1
15.3.13 Dunedin showcase (election year tripe): economic development strategy
19.6.12 DRAFT Dunedin Economic Development Strategy
31.5.12 Public Forum: Dunedin’s DRAFT Economic Development Strategy

Posted by Elizabeth Kerr

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DCC salaries and retention payments

Comment received.

Phil
Submitted on 2012/07/16 at 5:42 am

If Paul Orders is hunting for more suggestions, he can take a look at the ridiculous “retention” money being paid to lower and middle DCC managers over and above their listed salary. Bumping up the gross income to between 30 and 50% higher than the salary listed for them. No staff member in the DCC is that indispensable. Likewise to the staff members receiving 105% of their graded salary, year after year, supposedly reserved for a “one off action”. This practice has been going on for so long now that staff are expecting it as a right.

Posted by Elizabeth Kerr

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DScene exposes museum director’s salary

“Council was not aware of it. It was certainly a surprise to many people who had heard the figures.”

### DScene 18.1.12 (page 3)
Council in the dark over Paul
By Wilma McCorkindale
Dunedin City Council should have been told what the director of the ratepayer-funded Otago Museum is earning, deputy community development chairman Cr Paul Hudson believes. Hudson acknowledged D Scene’s persistance on making the information public: “And the answer has been very revealing.” […] Figures showed Paul earned $310,793 last year — higher than the highest-paid staff member at the national museum of New Zealand, Te Papa.
{continues} #bookmark

Register to read DScene online at
http://fairfaxmedia.newspaperdirect.com/

Posted by Elizabeth Kerr

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‘Divided We Stand: Why Inequality Keeps Rising’

The gap between New Zealand’s rich and poor is growing faster than any other developed nation, a new OECD report shows.

### 3news.co.nz Tue, 06 Dec 2011 12:48p.m.
Rich, poor gap growing fast
The report, called Divided We Stand, charts the widening gap between the top 10 per cent wealthiest residents and the poorest 10 per cent. The richest Kiwis now claim an income 10 times that of the poorest residents. This is considerably less than the huge margin seen in the worst countries Brazil, Russia, China and India where the wealthy earn 50 times more, but New Zealand won the dubious honour of the gap widening the fastest. On an inequality index called the Gini coefficient, where zero means everybody has the same income and one means the richest person has all the income, New Zealand scored 0.33. This is up six percentage points from 1985, when it scored 0.27, constituting the biggest jump of any OECD country.
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****

### freshbusinessthinking.com 05/12/2011
Divided we stand: rich-poor gap hits 30 year high
By Maximilian Clarke
The richest 10% of OECD member states own 9 times more than the poorest 10%- the highest income disparity for more than 30 years. A new report by the Paris-based OECD (the Organisation for Economic Cooperation and Development) entitled Divided We Stand: Why Inequality Keeps Rising urges governments to act quickly to prevent the growing discord between the haves and have-nots, which – particularly during times of economic decline – can fuel political instability.
The main driver behind rising income gaps has been greater inequality in wages and salaries, as the high-skilled have benefitted more from technological progress than the low-skilled. Reforms to boost competition and to make labour markets more adaptable, for example by promoting part-time work or more flexible hours, have promoted productivity and brought more people into work, especially women and low-paid workers. But the rise in part-time and low-paid work also extended the wage gap.
Tax and benefit systems play a major role in reducing market-driven inequality, but have become less effective at redistributing income since the mid-1990s. The main reason lies on the benefits side: benefits levels fell in nearly all OECD countries, eligibility rules were tightened to contain spending on social protection, and transfers to the poorest failed to keep pace with earnings growth.
The income gap has risen even in traditionally egalitarian countries, such as Germany, Denmark and Sweden, from 5 to 1 in the 1980s to 6 to 1 today. The gap is 10 to 1 in Italy, Japan, Korea and the United Kingdom, and higher still, at 14 to 1 in Israel, Turkey and the United States. In Chile and Mexico, the incomes of the richest are still more than 25 times those of the poorest, the highest in the OECD, but have finally started dropping.
Income inequality is much higher in some major emerging economies outside the OECD area. At 50 to 1, Brazil’s income gap remains much higher than in many other countries, although it has been falling significantly over the past decade. FBT Link

OECD Link

Posted by Elizabeth Kerr

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Stadium – serious work for the pay

Will this role end in tears…

### ODT Online Mon, 9 Nov 2009
Salary of stadium boss revealed
By Chris Morris

The Welshman head-hunted to manage the Forsyth Barr Stadium in Dunedin is set to become the Dunedin City Council’s second highest-paid employee. David Davies (50) has negotiated an annual salary of up to $250,000 for his role as chief executive of Dunedin Venues Management Ltd (DVML), the company formed by the council to run the stadium and other ratepayer-owned venues.
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Post by Elizabeth Kerr

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