Calvin Oaten runs the ruler over the last year's Dunedin City Holdings accounts.
Councillor Paul Hudson, in his capacity as chairman of directors of Dunedin City Holdings Ltd, announcing the financial results of the group for the year ending June 30, 2008, said that the group and the parent company were in very good order.
Is this so, and should we, the ratepayer stakeholders be happy to accept his assurances on the matter?
The group of companies consists of a grab bag of disparate operations, some consistently trading well, some not so.
Are they well managed? Probably yes.
There does, however, seem to be a problem with the governance of the group.
By this I mean the policy direction, and more particularly the influence of the main shareholder, the Dunedin City Council.
Let's look at the results.
Revenue of the group was $199 million, up 8.3% from the previous year while the profit was down from $22.6 million to $8.638 million.
However, DCHL paid to the DCC interest of $9.514 million plus a dividend of $11.210 million, a total of $20.724 million.
Bearing in mind that the interest came out before the profit was arrived at, there is a shortfall of $2.572 million.
How do you justify paying out more than you earn? Simple, you borrow it.
This is a process which DCHL has pursued for at least the past three years, starting with the special, one-off extra dividend of $10 million in 2005-06 to mitigate what would have been a rate increase of some 12% at the time, down to 5%.
How do you do it? You strengthen your balance sheet by revaluing your assets and then borrow against those increases.
In the past two years, City Forests' standing trees have been increased in value by over $8 million, when who knows what they will realise at market over the years? See what I mean.
The group's balance sheet shows debt increased from $244.724 million to $304.155 million.
Does this not suggest a deepening hole? Why do you do it? You do it to satisfy the voracious appetite for money from the DCC.
Successive LTCCPs produced by the council administration, agreed to, and signed off by the elected council, have shown the debt spending increasing from some $40 million to $360 million in the past eight years.
Without the ever increasing dividends from DCHL, this debt would either be much higher, or our rates would be very significantly increased.
It is not rocket science.
This brings up the question of governance.
Does a conglomerate with a modest combined revenue of $199 million need 36 directorships? Councillor and DCHL chairman Paul Hudson would say yes.
Taieri Gorge Railway Ltd, with a turnover of $4.307 million, and a surplus of just $59,000, has six directors paid $46,165.
The balance of 30 positions is shared by just seven people, one of whom received $147,292.
Mr Hudson received $105,013.
The total fees paid was $649,036, an increase from the previous year of $30,000.
With the exception of Mr Hudson, none of these people is elected.
So what, many would say.
But with DCHL's burgeoning debt at $304 million and the city's at $360 million, why don't these many shameless directors say to the DCC, enough? It is not right that this company should be so blatantly exploited, when at the end of the day, it belongs to the same people, the ratepayers.
With the world in its present parlous financial state, now, more than ever, we need prudent leadership, not the prevailing spend and be damned culture, aided and abetted by the delinquent governance currently displayed by both DCHL and the elected mayor and council.
A time for serious reflection, perhaps.
• Calvin Oaten is a Dunedin ratepayer.
