The real price to pay in the rebuild
At first glance, the news that the Christchurch City Council has found another $400 million hole in its finances as it confronts the post-quake rebuild might not seem such a blow.
It pushes the city's unfunded obligations out to perhaps $850m, but that figure is a worst case scenario and it includes $150m of "headroom" that its latest adviser - investment banker Cameron Partners - says is prudent to meet any further unexpected strains on the civic budget.
In a rebuild that's estimated to cost more than $40 billion, what's another billion-odd dollars?
Unfortunately for Christchurch ratepayers, the answer is: quite a bit. Most of that $40b is coming either from insurers or the Government. The city has to pay its whack from its own purse and faces a balance sheet crunch in 2019. That crunch could be all the worse if a little-noticed clause in its cost-sharing arrangements with the Government were to be invoked. This requires the city to meet its share of the costs of the city's flagship Anchor Projects "even its assumed insurance payouts are less than budgeted for".
This ticking timebomb, inserted in the detail of last June's agreement under the auspices of a previous mayor and a previous council chief executive, is very much exercising the new city council's mind.
Its options for dealing with these financial risks are either to raise rates "exponentially" (Mayor Lianne Dalziel's word), do less than it's committed to do, and drop or delay essential community facilities. Or, in the words of the Cameron report, it could "release capital" by selling a minority stake in strategic assets.
If it does none of those things, it risks losing its A+ credit rating with Standard & Poors and could breach debt limits enshrined in the Local Government Finance Act. Something's got to give.
On paper, higher rates are one option. Christchurch rates are lower than average. On the other hand, the city has substantial assets, valued at around $3.8b. To a businessperson, using the city's balance sheet to best effect is a no-brainer. However, the politics is less likely to be that easy.
That was clearly on Dalziel's mind as she unveiled the Cameron report last Friday.
She would have been pleased at Earthquake Recovery Minister Gerry Brownlee's public support for the thrust of the report, which appears to have helped elicit a vital public affirmation of the Government's willingness to revisit the budget for the rebuild.
However, the immediate reaction from Labour's Canterbury recovery spokeswoman, Ruth Dyson, played predictably on the widespread public negativity towards asset sales.
To win the argument for the capital release proposal, she will seek not only to convince ratepayers that it will give the city vital financial breathing room, but also that the city will remain the overwhelmingly controlling shareholder, and that new investors in the city's strategic assets will accelerate the city's recovery.