Friday 9 May 2014

The way I know it's May

I know it's May when the Christchurch Press calls me seeking comment on Council asset sales. Georgina Stylianou quotes me in this morning's Press. Here's the full comment I'd sent her, not all of which could make it into her column.
“We’ve suffered from a lot of wishful thinking over the last three years. After the earthquakes, a lot of people really wanted to believe that we would have a sparkling new city funded by insurance payouts. And as each of us has had to come to grips with the difference between what we might have hoped our house insurance contracts covered and what the fine print actually says, the Council similarly has had to realise that it can’t budget based on wishful thinking about what they’d like to be owed in insurance payouts. Unfortunately, a lot of hopes were built up based on expectations of the larger payouts, and a lot of projects were mooted around those. It’s hard for politicians to step back from those, and doubly so when so many of us have had so many disappointments over the last three years. But where the real tradeoff is deciding between Council spending money on things like big stadiums or things like making sure we have overpasses and sewers that are safe and fit for purpose, well, I really hope we put more priority on the more boring core infrastructure.”

“Compounding the problem has been the regulatory and planning morass that has kept downtown from springing back to life. Vacant downtown lots do not return much to Council in terms of property tax.”

“I note that Minister Brownlee is questioning some of the figures in the report. I’m not an accountant and cannot vouch for the figures’ accuracy. But I do worry that things could yet be rather worse than the report suggests. The report explicitly notes that it makes no accounting for the costs that will be involved in fixing our now very flood-prone neighbourhoods. I doubt that Council will be able to avoid incurring pretty substantial costs in fixing places like the Flockton Basin and parts of Woolston.”

“The KordaMentha Report explains pretty reasonably what the Council’s options are. There’s little room to take on more debt, so we either have to spend less, increase tax revenue, or sell other assets. A mix of the three seems most appropriate. Sorting out the regulatory morass downtown so that we can again start having reasonable property tax revenues from downtown would be rather helpful on the revenue side. I think we should be considering cancelling the new stadium rather than just delaying it: too many property owners have to sit in limbo, under threat of expropriation, not knowing when or whether their businesses will be taken from them to make room for the stadium. And, again, we should be considering selling some of Council’s assets. Every May since the earthquakes we have talked about Council asset sales. And every year we’ve failed to do it. Council should be fully divesting itself of assets that are at least as well managed by the private sector in order that the funds can be put towards those things that are really important, like fixing our roads and drainage system. I worry that, if we do not sell assets like the Lyttelton Port of Christchurch, Council’s substantial financial pressures will instead squeeze excess dividends from those assets and run down their capital stock. And, in a decade’s time, we will have substantial problems arising from deferred maintenance and poor investment. Selling these assets off now may be the best way of ensuring their future. Selling the family silver so you can afford to re-pile your foundations and avoid having the house fall over is sad but sometimes necessary. What use is silverware if your house has fallen down?”
See this post for the general arguments around Council asset sales, and for the May 2011, May 2012, and May 2013 Press discussions around asset sales.

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