Council forces CCHL to deliver $47m more
Christchurch City Council is demanding its investment company cough up another $47 million in dividends over three years to help ease the rates burden.
But the company’s chairperson warns the move puts it in an “extraordinarily difficult position”.
Christchurch City Holdings Ltd (CCHL) chairperson Abby Foote told the council last week there is “no more money”.
She said the company was not able to pay down debt, grow dividends to the council, invest in resilience and grow critical infrastructure. “These things simply do not add up. We cannot do them all and this is what we have been saying for the last 12 months.”
CCHL owns $5.8 billion worth of assets on behalf of the city council, including 75% of Christchurch Airport, 89.3% of electricity distribution company Orion and 100% of Lyttelton Port Company, fibre broadband company Enable, construction and maintenance business City Care and recycling and waste company EcoCentral.
CCHL told the council it would provide $38m in dividends in 2024/25, $46m in 2025/26 and $54m in 2026/27 – a total of $138m. That would have given CCHL room to start repaying its $2.3 billion of debt and put money aside to invest in the future of its companies.
However, council staff recommended CCHL pay $55m in the first year, then $65m for each of the following two years – a total of $185m.
Council acting chief executive Mary Richardson said the council believed the higher dividends were “realistic and doable”.
It was the minimum amount the council needed to be able to strike a long-term plan (10-year budget) that was acceptable to the community and still allow the council to deliver its services and its capital programme, Richardson said.
The council’s long-term plan is forecasting a cumulative rates increase of 57.8% and 13.24% in the next financial year.
But, Foote and CCHL acting chief
executive Paul Silk clearly disagreed with Richardson.
“I am concerned this approach is inconsistent with the long-term financial sustainability of our core infrastructure and also inconsistent with what you told us were your investment objectives,” Foote told the council.
Both Foote and Silk said they did not want to see the council’s assets “wither on the vine”.
Foote pointed out other councils were facing similar financial challenges and were looking to move assets to more liquid funds, so they could raise their returns, grow their asset base and alleviate ratepayer pressure.
However, this was something the council decided not to pursue, she said.
Last year, CCHL asked the council to let it take over control of the assets in a bid to increase dividends for the city by an estimated $450m over 10 years.
The council voted in December eight to seven not to develop a business case to cede control of assets to CCHL. If the council had agreed to the business case, the public would have been consulted before any final decision on the future of the assets was made.
Foote said to put the council’s current dividend demand into context, CCHL had forecast $170m in dividends over three years if it had been allowed to actively manage the portfolio. But it was now expected to find $185m without the additional flexibility.
“This is a very difficult position for CCHL,” Silk told The Press this week.
“When you are dealing with competing demands, you typically need some flexibility in managing that. We currently have very limited flexibility.”
Silk said it was now unclear when the company was going to be able to start repaying its debt.
“We cannot pay down debt, pay more in dividends and invest in the future of our companies.”
CCHL has no choice but to pay the increased dividend, especially since the move was approved by the council last week. Crs Celeste Donovan and Victoria Henstock abstained, but remaining councillors voted for it.
Mayor Phil Mauger, who voted to pursue the business case last year, said he felt sorry for CCHL and council could not keep knocking on its door asking for more money.
“I don’t like this situation, but I think we’ve got to go ahead with it.”
Cr Mark Peters said the council needed to empower CCHL to thrive.
“We can’t just keep hog-tying our companies and then whipping them and asking them for more.”
Cr James Gough said the council was making “schizophrenic” decisions.
“As a councillor I don’t think there is a viable alternative not to support this.”
Cr Yani Johanson said councillors must not forget they voted to put a huge amount of money into the Te Kaha stadium, which amounted to a 2.17% rates increase next year alone.
“We should celebrate the fact we have kept our assets in public ownership.”