Councillor flying kites on higher rates rises

Is Cr Mike Davidson being used as a crash test dummy? Has the council’s high guard dispatched the Papanui councillor to test the waters on repelling the clamour for a zero-per cent rates increase? Despite Mayor Lianne Dalziel publicly committing in April to pursuing a zero rates rise, Davidson’s audacious Facebook post over the weekend is now arguing for an even bigger rates increase this year, than what was signalled in February’s Draft Annual Plan (DAP).

He’s floating the notion of a 5 per cent rates increase, compared to the 4.65 per cent rise in the DAP. It’s a confounding burst of kite flying from a councillor who swept into office in 2016 vowing to fight for inflation-capped rates increases – something that’s never come to pass.

The only time Davidson, pictured, has zealously thumped the desk in pursuit of hard-nosed fiscal prudence was when he took aim in 2018 at the giddy proliferation of exorbitant suburban pools, which isn’t just a drain on the capital budget, but balloons the council’s operational costs, given the enormous losses they rack up.

Davidson now argues that ‘‘going to zero’’ could mean the New Brighton hot saltwater pools may never open and the stadium delayed. Frankly, the saltwater pools should be hocked off for a song to a proven operator, like Nga¯ i Tahu Tourism. The council’s profligate insistence on owning and operating tourist attractions is mystifying.

But to fearmonger over a further delay to delivering the chronically overdue Multi-Use Arena (rugby stadium) is highly mischievous. The first two years of the anchor project’s construction is being explicitly bank rolled by the Government’s $220 million contribution. The city’s $253m share doesn’t come on-stream from its capital budget until 2022-23.

Last week I argued the council was facing as much as a $100m fiscal hole to its operational budget, simply to hold rates at their current level. That was based on a range of financial assumptions, notably the anticipated $79m in dividend flows from Christchurch City Holdings Ltd (CCHL), which the mayor has declared ‘‘is not going to happen’’.

Davidson concurs, estimating a zero-based budget would need ‘‘savings in excess of $75m, maybe $100m.’’

CCHL is due to pay the council $26.3m in June, in addition to a further $51m over the next financial year. CCHL chief executive, Paul Munro, tells me that ‘‘the board has not yet made any decisions about the dividends it can provide … which will be some weeks away’’.

Munro also confirms that CCHL’s group debt has surged from $318m in 2013 to over $1 billion in directly borrowed debt today, in addition to the $1b of debt directly generated and serviced by the subsidiary companies.

But CCHL’s Group debt of $1b is crimping their ability to honour council dividend payments, because servicing that debt now costs CCHL $33m annually. You’ll recall the council directed CCHL to borrow heavily to raise the $440m in ‘‘special dividends’’ between 2016-19.

That mickey-mouse-money-go-around is now costing us a bomb in servicing costs. Truth be told, a smarter council would have executed a 25 per cent partial sell down of the council’s commercial assets to secure its financial position.

It should still be a live issue. Maybe divesting Red Bus will whet their appetite for more. Munro reaffirms the clear expectation that council subsidiaries cut costs. CCHL and ChristchurchNZ have admirably led the way with 20 per cent pay cuts to the board and executive. No such decisive ‘‘shared sacrifice’’ overtures have yet emerged from the airport, port, Orion or Enable.

The council-owned fibre company finally delivered a profit last year, but not a dividend. Nor has Enable’s CEO trimmed his pay package, which totalled a gob-smacking $958,000 last year.

But back to the central issue of blunting rates and I still believe the council’s explosive staff growth and staggering $193.5m annual payroll bill is the great gorilla.

Some councillors will advocate borrowing money to sure up its operational budget, but as council chief executive Dawn Baxendale conceded to me, the council is already ‘‘maintaining a lower level of debt headroom than we’d like’’.

Mike Davidson wants the annual plan reframed as the ‘‘Recovery Budget.’’ Delusions of grandeur won’t cut it. The best way council can support Christchurch’s recovery is to simply leave more money in ratepayers’ pockets.

Council’s explosive staff growth and staggering $193.5m annual payroll bill is the great gorilla.