Richard Thomson, who retired from the DCHL board last month, said if the Dunedin City Council wanted to ease the financial burden for ratepayers, selling Aurora and setting up an investment fund would achieve that over both the short and long terms.
Council budgets showed the overall rates revenue required by the council would increase by $35.6 million next year — a 17.5% increase on this year.
A $500m diversified investment fund, which could realistically be created through the sale of the electricity distribution company, would be able to offer a $25m payout next year to offset the rates requirement, Mr Thomson said.
While doing so, 3% of the fund’s earnings could also be put back into it to make sure it did not fall behind inflation, he said.
There was a dividend projected for Aurora in the next two years, Mr Thomson said, "but it’s nothing like that sort of figure".
The council is considering selling Aurora and using the income to repay the company’s debt — expected to reach $576m by the middle of next year — and to establish an investment fund to generate income for the council.
The proposal has largely been panned by the public.
Mr Thomson, who was once also a Dunedin city councillor, said while the scale of the opposition had surprised him, the general sentiment had not.
"People have some real misconceptions about what a regulated company [such as Aurora] can and can’t do," he said.
"And I think that the other reason is that people don’t like selling the family silver.
"My argument would be you’re not actually selling the family silver, you’re swapping one asset for another.
"You’ve got to look at, ‘what does Dunedin need?’
"If you were selling it and planning to spend it on three more stadiums, I don’t know, I’d be in the opposition camp, but that’s not what’s happening."
An investment fund would outperform Aurora over the next 10 years.
But it would also outperform Aurora over the long term, he said.
Most lines companies were having to substantially reinvest in their networks — not because they were run down, but because they were growth assets.
"They’re assets that you have to keep ploughing money into.
"And they grow in value as a result, but the only way you can benefit from that value is to either sell it and bank the value ... or to borrow against that value to pay a dividend."
Aurora was no different.
"I think there’s a misconception that all of the investment that Aurora is doing is still catching up on the past.
"That’s largely done.
"This is actually the ‘new normal’ because of what’s happening with development through in Central Otago, with increased electrification — you’re just seeing massive amounts of capital having to go into developing those networks.
"It is unlikely that Aurora would be able to generate, without really significant extra borrowing, dividends of the same scale [as a fund]."
Mosgiel-Taieri Community Board chairman Andrew Simms is among those who have warned against selling Aurora.
Mr Simms said yesterday the option should be viewed as a "last resort".
There were other things the council needed to do at present, including a restructure and putting an end to spending beyond its means, he said.
Selling Aurora and getting rid of its debt would give the council the "headroom" it needed to continue borrowing hundreds of millions of dollars more, he said.
Additionally, the proposed sale deferred dealing with the "real problems" the city faced.
"The thing we really need to be concerned about here is that selling Aurora also postpones the need to restructure the DCC and to restructure DCHL so that it lives within its means.
"That really concerns me — and I think that really concerns a lot of ratepayers as well.
"I think a lot of ratepayers are very concerned that the DCC, and DCHL, continue to live beyond [their] means — and selling prime assets, which is Aurora, just defers that need to actually face the real problems that we’ve got as a city.
"That is that we are continuing to spend more money than we’re earning."
Mr Simms said there was concern that the people who promoted the sale "are the very people that have led us to the place that we are at, and who have a real incentive to avoid a restructure that I think is inevitable".
Selling Aurora should be the "absolute last resort" if everything else had failed.
"It’s like selling the house.
"You may get to a point where you have to sell your house to pay your debt, but that’s the absolute last resort."
