A council property department report to the council’s finance, audit and risk committee this month shows that despite having sold all its remaining sections in two council-developed subdivisions
in 2007, the $2.21million the council netted in section sales over 10 years will not cover the $2.65million spent on the project.
The report said the $440,390 shortfall was due to a "lag in sales" after the global financial crisis and the resulting compounding interest on the loan used to fund the project. Council chief executive Michael Ross said the decision to buy land at the eastern end of the airfield in 2006 from Omarama farmer John Lory was "a direct response to avoid Mr Lory proceeding with a subdivision which he had submitted to council".
"Had that gone ahead, it would have meant the end to the Omarama airfield as we currently know it," he said.
"The only way that [Omarama Airfield Ltd] could raise their share of the money to buy the Lory land was to sell land to council.
"Council in turn decided to subdivide the land it had to purchase in order to recoup its additional invest in the airfield.
"Could the council have done anything different? Yes — we could have simply raised a loan and paid it off over time. However ... this would have cost us more than the route we took."
The council developed two subdivisions — Airport Drive and Cirrus Place. Airport Drive’s five large sections sold in 2007. In 2009, five of the smaller Cirrus Place sections sold, but only three more sections sold until this year, when the remaining 13 sections sold.
Council assets manager Neil Jorgensen said there were a few factors at play.
"We really wanted to get it off our books obviously, so we did put in a big effort, because the [loan] interest kept adding," he said.
"But with the way the market was going — Wanaka was filling up, Tekapo’s getting pretty expensive, Twizel’s getting quite challenging — people are moving, looking a bit further afield. So Omarama became a bit more viable for people, I think.
"The market was ready — and it was great to sell our sections.
"Unfortunately, the interest we had been accumulating is still here."
At the May 10 committee meeting, Cr Hugh Perkins said the episode showed commercial development was a "risky enterprise". Cr Guy Percival called the situation "really sad" and indicative of why councils should not be involved in commercial development.
Omarama Airfield Ltd is a council-controlled organisation.
