Unacceptable Rates Rises and the need to Sell a stake of the Silverware.
Ripping open your quarterly rates invoice has been an expletive-laden business for many Christchurch homeowners in the past fortnight. Recalibrated to reflect the impact of the average annual rates rise and the city’s recent revaluations, my latest rates bill has blown out by 14%. Perhaps I should be grateful, for the minor mauling. Glen, a mate of mine, is in the recovery position after being king-hit with a 36% rates hike. Dove-tailing with these runaway rates demands, Friday’s big reveal on the worsening state of the city council’s financial track. Not only is the council’s capacity to rack up more debt maxed out, but the Cameron Partners report confirms the council faces a funding shortfall of nearly $900 million, which could eclipse $1 billion, if projected insurance payouts don’t materialise. Ever since December 2011, when the council issued its Central City Plan following Share an Idea, and the city’s wretched under-valued insurance cover was exposed, it appeared inevitable that partial asset-sales would be necessary. Yet, as I’ve regularly experienced, challenging Christchurch to get real about this, unleashes salvos of abuse from cyber trolls, who always grossly overstate the benefits of full asset retention. As the Cameron Partners report clearly stipulates on page 55, “…the dividend yield from the subsidiaries is lower than CCC’s assumed interest rates – as a result using the proceeds from the sale of shares in the subsidiaries to pay down debt provides a positive impact on CCC’s funding position.” On Friday, the council admitted that rates rises over the next few years are unavoidable, because of debt servicing costs. Divesting $400 million of the council’s commercial arm would be a welcome circuit-breaker. A 25% stake in CCHL is one option. But even more political courage will be required, if our explosive rates track is to be placed on a firm and frugal footing, whereby rates rises don’t outstrip inflation. Should the curtain finally fall on the Kilmore Island caper, namely the Town Hall restoration? What about the council’s $400 million social housing portfolio? Why should the council continue performing this central government role, long-term? Some anchor projects will understandably face scrutiny. For example, there is provision in the cost-sharing agreement for the stadium to be unroofed, saving $70 million. But the Christchurch Mayor deserves praise for backing the call to action on asset sales. Unlike her past two predecessors, who are still in denial about divestment, Lianne Dalziel has risen above the rabble of tribal politics and rabid ideologies, to put Christchurch first. We should embrace this needs-must moment, too.
Mike’s weekly current affairs column, as first published in The Press. Aug 5. http://www.press.co.nz