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Residents fear Dunedin debt crisis


By Emma Mackie • Wed, 29 Jun 2011 2:45p.m.

Dunedin residents fear council debt of $360 million is pushing the city to financial crisis and the eight percent rate rise is just the start of worse to come.

Councillor Lee Vandervis was the only member to oppose the council’s annual plan underpinning the latest rate rise.

He says the “annual sham” misrepresents the true state of council finances and misleads the public with “unbelievably optimistic” information.

“Our debt has increased 10 fold in the last 10 years, from $32.5 million to $360 million…I believe the Dunedin City Council has lost the plot entirely.”

Borrowing a further $28 million to repay debt interest alone, the council has no chance of reducing the debt as the annual plan suggests, says Mr Vandervis.

Dunedin Mayor Dave Cull understands public concern and agrees the council has too much debt, but he says the rate rise is also due to increasing insurance costs following the Christchurch earthquakes.

“Nonetheless it’s too high ongoing and the big priority for the next budget will be to pull in costs in order to pull down the projected rate increase. The projected rate increase for next year is 9.2 percent but I’m determined it will not be 9.2 when we get to it…that is just too high.”

However, he says it is not as simple as drawing a line in the sand on spending and the way councils work is by “borrowing all the time and paying back all the time”.

“In principle I think we’ve borrowed enough, the debt levels are too high and it’s not so much the absolute debt levels, but our ability to service them and the fact that in some cases our companies are borrowing money to pay the interest.”

After selling Citibus earlier this year the mayor says the council need to consider all options when it comes to the sale of further assets.

“We need to look at all our assets and ask ourselves ‘what does this give us that liquidating them doesn’t?’”

However he says it is not just about money but also public service.

“There are some assets that you might say not only provide a dividend but also a public service.

“We need to ask the questions, ‘how do we run our council more efficiently so we deliver the same services to the community but do it more economically?’”

Pinehill resident and council critic Calvin Oaten, 76, says the rate rise is just the tip of the iceberg.

“Many would think that it’s not an outlandish figure but I think it’s only a lead up to the future. Our big problem is not our rates today, it’s what they will be tomorrow or the next day or year.”

Mr Oaten says since the “horrendous” $360 million debt was reported, the council have already added another $30 – 40 million with further spending intentions.

“I think the city’s facing the possibility in the future of default…we’re no better than Greece.

“Modern society is hung up on a culture of debt and entitlement. Nobody puts anything off now, they decide they want it, they have it, and they just debt fund it.

“The classic example here in Dunedin is our stadium, it’s a $200 million burden to the rate payers and it’s 100 percent debt funded. We’ve got no money to spend on anything but we keep spending.”

He says the stadium is an “absolute disaster” that will lose huge amounts of money every year.

Former ‘Stop the Stadium’ president and Dunedin resident, Bev Butler, says if the council had not capitalised the debt interest the rate rise could have been closer to 20 percent.

“Rates rises would be even higher but they’re hiding it by kicking the debt down the road even further.”

She blames a lack of financial understanding on the part of the councillors, but acting council chief executive Athol Stephens has confidence in his staff.

“I think there are some very capable councillors who understand the debt situation and are well able to explain it.”

Relative to other New Zealand cities, he says rates in Dunedin are “not too bad”.

“Beyond 2012-13 there is some more debt rising but not much at all. By 2015-16 our annual debt servicing requirement begins to decline a little.”

However, he says that does not preclude the community seeking ever improving services.

Auckland council are congratulating themselves on a smaller rate rise of 4 percent which they see as a win in financially hard times.