Vote to increase borrowing almost unanimous

The Dunedin City Council is ‘‘locked in’’ to lifting its group debt to almost $1billion, councillors have heard.

The comment came from Cr Lee Vandervis after council staff confirmed planned spending by Aurora — a key driver of the council’s group debt position — could not be reversed.

Council finance and commercial general manager David Tombs, in a report to yesterday’s meeting, recommended lifting the amount of money the council’s ability to borrow money to $975million.

The mechanism for doing so involved increasing the uncalled share capital for Dunedin City Holdings Ltd, which provided security for debt across the council and its companies.

Increased debt was already forecast to fund council projects already committed to, including the major upgrade of Aurora’s network and council capital projects.

However, at present the council group debt was limited to $850million, and spending was forecast to push debt beyond that by late next year, as it increased from $691million in June this year to $927million by 2022.

Increasing the limit would allow the council to deliver on planned spending, but also provide some ‘‘liquidity headroom’’, for example if a natural disaster struck, he said.

Cr Vandervis told the meeting he had heard similar assurances before, including when the council lifted its ability to borrow from $600million to $850million in 2010-11.

At the time, it was also said to provide headroom to cope with any natural disasters, but had since been ‘‘gobbled up’’ by another form of disaster — Aurora, he said.

‘‘I’m having a deja vu experience,’’ he said yesterday.

He pressed Mr Tombs, asking him whether Aurora was committed to spending on its network, and therefore increased debt, contributing to an almost $300million overall increase in group debt by 2022.

When Mr Tombs said Aurora could not perform a ‘‘U-turn’’ on its spending plans, Cr Vandervis said critics — including himself — had been proven right.

‘‘We are absolutely locked in. We do have to spend this money. Richard Healey’s predictions of $1 billion, and mine earlier this year, have come true.

‘‘We told you so.’’

Delta employee-turned-whistleblower Richard Healey had predicted Aurora’s neglected network would end up delivering a $1billion bill.

The mounting council group debt had funded a wider variety of projects, including everything from the Peninsula Connection upgrade to Forsyth Barr Stadium, as well as Aurora’s network upgrade.

Mr Tombs said lifting the ability to borrow was simply about delivering on previous spending decisions, and the council’s debt-to-equity ratio would still be at the lower end of the scale compared with other councils.

Cr Mike Lord said the debt picture had been clear for more than a year, ever since the council decided not to sell properties to offset debt, and he had no issue with it.

Cr Carmen Houlahan also ‘‘fully’’ supported the report, saying investment in infrastructure was key, while deputy mayor Christine Garey said the council and its companies were investing in the city at a fiscally advantageous time, when interest rates were low.

Cr Jim O’Malley also reminded councillors the level of risk was ‘‘negligible’’ when much of the debt was secured against company assets, like City Forests, which could be sold.

Cr Vandervis maintained the council would have been ‘‘hundreds of millions’’ of dollars better off it it had sold
Aurora years ago, but Cr Jules Radich said that would have led to the kind of price hikes seen in the private sector elsewhere.

Councillors voted 13-1 to increase the council’s ability to borrow, to $975 million, although any increase beyond $927million would require a specific council resolution.

chris.morris@odt.co.nz