Audit office looking at land deal

19:53, Nov 21 2012

Pressure to front about Lakes District property investments has come to bear on Dunedin ratepayer-owned Delta Utility Services Ltd. Wilma McCorkindale recaps the Delta land grab saga.

In 2008 - and again in 2009 - Dunedin City Council-owned company Delta bought land in the Central Otago Lakes District, at Luggate and Jack's Point.

The multi-million dollar investment was controversial.

Many questioned why Delta - a Dunedin company whose core business is designing, constructing, and managing and maintaining infrastructure - needed to buy land in Central.

Delta chiefs have remained tight-lipped on matters related to the purchases since D Scene broke the issue as front page news.

Three years ago D Scene put the following questions to then DCHL chairman Paul Hudson, Delta chief executive Grady Cameron, Delta chairman Ray Polson, and Delta director Mike Coburn (former director of the Jack's Point development):


Why did Delta get into the property market? What was the catalyst?

Who brokered the deals, signed them, and when?

What are the projected returns (based on what)?

Why did Delta not use the money it spent on the investment returning dividends to ratepayers to offset hiking rates?

All declined to respond, although Hudson stood by the purchases, saying they were tabled at the council. He did not see them as high risk.

D Scene is still to get the answers to those questions.

What do we know so far?

In 2008 a Delta subsidiary, Newtons Coachways (1993) Ltd - renamed Delta in 2011 - acquired a 50 per cent interest in a joint venture for residential property development at Luggate, spending $5.3 million in 2008.

In 2009, Newtons acquires 9.4ha of land at Jack's Point at $8.82m, for the same purpose.

In September this year, through DScene, Dunedin councillor Lee Vandervis posed more questions about the investments to DCHL directors. The response - to his dismay - was minimal, prompting him to call for the Audit Office to investigate.

Last month Delta released its financial statements, which revealed it had reduced the value of the Jack's Point/Luggate land by $7.5m, because there had been less demand for the residential sections than expected. New DCHL chairman Denham Shale said when Delta's board decided to buy the land, "it was thought by them to be beneficial". Announcing DCHL was writing down the value of that land, he said: "That writedown is predicated on the basis of value if a sale of those properties was forced to be made at this time.

"No actual loss has yet occurred, and will not, until the properties have actually been sold".

Around the same time, Dunedin mayor Dave Cull and chief executive Paul Orders contacted the office of the Auditor-General, which last week decided to launch an inquiry.

The Auditor-General's office said its inquiry into the purchases would examine:

The nature of the related decision-making process by the Delta board;

How the board identified and managed conflicts of interest;

The extent of its consultation with the council on the transactions; and

Its legislative compliance.

Cull welcomed news of the inquiry. "The decision to conduct an independent investigation is a necessary step," he said.

"Council companies operate within a framework of public sector accountability. It is essential therefore, that decisions made by council companies are able to withstand the rigorous public scrutiny that the Auditor-General represents," he said.

"Given the matter is now under investigation, no further comment will be made while the inquiry is under way."

No comment is a familiar refrain where this deal is concerned.

The Southland Times