Crisis forces Christchurch to sell assets

Christchurch Mayor Lianne Dalziel says her council will look at “releasing capital” from the city’s investments.

She made the comment at a media conference this morning when releasing a Cameron Partners report into solutions for the city’s post-quake finances.

Ms Dalziel highlighted the value of city assets of $8.3 billion, with $2.6 billion of that owned by the commercial arm, Christchurch City Holdings.

“But we also have reduced revenues as a result of the earthquakes, as well as unsustainably high debt levels. We can’t borrow any more.”

She says other options must be considered aside from reducing operational spending and government assistance.

Releasing capital is the only way the council can address uncertainty around its finances, she says.

Ms Dalziel says the council will be looking for options which ensure the city maintains strategic control of these assets, which may mean retaining 51% stakes.

Cameron Partners highlights current expenditure on council’s Canterbury Development Corporation and Christchurch, and Christchurch and Canterbury Tourism, which each take more than $5 million in annual funding; plus its events management company Vbase which has annual overheads of $9 million.

“From the financial reports we have received, and subsequent analysis of those reports, we would be looking at releasing up to $400 million from CCHL. Measured against the $8.3 billion Council balance sheet, we believe this is a moderate but prudent proposal.”

The Cameron Partners report says the council may need to find an additional $783 million to $883 million by 2019 – depending on the timing of delivering a convention centre and stadium, spending on infrastructure repairs, and the level of insurance recoveries. Options also include deferring anchor projects such as a proposed rugby stadium estimated to cost upwards of $500 million.

Options Cameron Partners proposed for closing the funding gap include increasing rates, borrowing more, maximising insurance payments, and freeing up capital from its commercial assets.

On current forecasts the council would breach local government lending thresholds if it continues to fund all projects without either “releasing capital”, massive rates rises.

Traditionally, residents and councillors have shunned the sale of the city’s stakes in Lyttelton Port, the airport, Orion lines company, City Care, and the bus company.

c.hutch@clear.net.nz