The Office of the Auditor-General announced today it is to investigate controversial investment activity by Dunedin City Council company Delta Utility Services.
A media statement said the Auditor-General has decided to carry out an inquiry into decisions in 2008 and 2009 by Delta, a council-controlled trading organisation, to invest in residential developments at Luggate, near Wanaka, and at Jacks Point, Queenstown.
The inquiry will examine the nature of the related decision-making process by the Delta board, including how it identified and managed conflicts of interest, the extent of its consultation with the council on the transactions, and its legislative compliance.
The Delta board has consistently declined to give details of the investments, in spite of intense questioning by Southland Times community newspaper in Dunedin, D Scene.
This latest scrutiny comes after a campaign by rebel Dunedin councillor Lee Vandervis during the past two months, following poor financial results from parent company, Dunedin City Holdings.
However, the Auditor-General's Office statement said this inquiry was sparked by a request by Dunedin Mayor Dave Cull.
It said Delta acquired a 50 per cent interest in a joint venture for residential property development at Luggate in 2008.
"In 2009, Delta acquired 9.4 hectares of land at Jacks Point, for the same purpose.
"The combined cost to Delta was $14.12 million (comprising Luggate joint venture at $5.3 million and Jacks Point land at $8.82 million).
"Delta had not previously been involved in property development, but the company expected to expand its core business activities in the Central Otago region by providing infrastructure services as the land was being developed
"There has been less demand for the residential sections than expected. In 2012, Delta reduced the value of the land in its financial statements by $7.5 million."
The statement noted a subsidiary of Delta, Newtons Coachways (1993) Ltd, was involved in the transactions. The company was re-named Delta Investments Ltd in July 2011, it said.
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