Brownlee questions figures

03:43, May 08 2014
Mayor Lianne Dalziel and finance committee chairman Councillor Raf Manji,
FINANCIAL CHALLENGE: Mayor Lianne Dalziel and finance committee chairman Councillor Raf Manji, at the release of the KordaMentha report on the finances of the Christchurch City Council.

The Earthquake Recovery Minister believes there is only "a slim possibility" the Christchurch City Council's financial position is as weak as an independent audit claims.

Gerry Brownlee is questioning some of the figures used in the KordaMentha report released yesterday and has commissioned another company, Morrison Low, to review it.

He said yesterday he was disappointed the council had released the report when he believed that not all relevant information had been received.

There was a "slim possibility" the final shortfall could be close to the projected $534 million, but as a minister he had concerns about the accuracy of some of the information.

Constructive discussions had taken place between the Canterbury Earthquake Recovery Authority, Treasury and council officials on drafts of the KordaMentha report in Wellington and Christchurch in recent weeks. He had hoped the council and the Government could have presented a joint response to the final report.

The released report raised questions the Government was unable to answer at present.


Mayor Lianne Dalziel said the KordaMentha figures had been well signalled in the media. The headline figure was not a surprise to the council or the Crown.

She said given the extraordinary number of variables the previous council faced at the time the Three Year Plan was adopted - including the lack of certainty about the actual costs of mending the city's infrastructure and the council's insurance pay-out - it was not surprising there was potential for a significant budget shortfall.

"What we now know is that the Three Year Plan was based on an overly optimistic view of the future and did not provide enough headroom to allow for cost escalation or indeed for the sort of unexpected expenditure the city now faces as it ramps up land drainage recovery projects," Dalziel said.

Finance committee chairman Cr Raf Manji said the council would need to take decisive action to put itself on a sound financial footing for the future.

"We have a strong balance sheet to help us weather this kind of financial challenge. KordaMentha makes it clear that there is no single simple solution but rather a number of levers that will need to be be used.

"Hard choices will need to be made and we will be relying on the residents of the city to engage with the council as it makes these decisions and charts a prudent and sustainable course forward," Manji said.

Former mayor Bob Parker said the report focused on a "worst-case" scenario but he did not believe it was a "panic situation".

He felt commentary about the council being in financial strife was "alarmist" and an "overstatement".

"What's most alarming for me is that we are still having these debates around costs and to me it seems to be a degree of gamesmanship."

He was surprised the council did not discuss the report with the Government before releasing it publicly.

Green MP Eugenie Sage said it was time the council and the Crown renegotiated their earthquake rebuild cost-sharing agreement.

"It's clear that the Christchurch City Council is not in the financial position to pay all of its share for the big-ticket items being pursued by the Government, or to borrow more," said Sage.

Labour MP Ruth Dyson said the Government had to acknowledge the city's financial position had changed.

"We need a genuine partnership between central and local government if our recovery is going to be the best it possibly can be. We need to hear that commitment from John Key now."

Canterbury Employers' Chamber of Commerce chief executive Peter Townsend said there were no surprises in the report but its release marked the beginning of a "long process".

The council had borrowed as much as it could borrow and would have to do some "cold hard reckoning". Townsend did not believe increasing rates would be a viable option.

"The council has pushed hard enough on rates and any rates rises again would not be well regarded by the community," he said.

That left the council with potential asset sales, delaying projects and seeking more money from the Government.

The Press