Chch door open for asset sales
The door for sales of Christchurch's $2 billion-plus swag of council companies has been left open in Canterbury's earthquake legislation.
A legal loophole means city ratepayers' stakes in Christchurch City Holdings Ltd's (CCHL) assets – including electricity company Orion New Zealand, Christchurch International Airport Ltd, Lyttelton Port Co, Red Bus and City Care – could be sold to help pay for the estimated more than $20b rebuild of the central business district.
Hundreds of millions of dollars in dividends from the six trading companies the Christchurch City Council (CCC) either owns or has majority shareholdings in have kept Christchurch rates at least 15 per cent lower than they would otherwise have been.
The Labour Party fears Earthquake Recovery Minister Gerry Brownlee's special powers under the hastily passed Canterbury Earthquake Recovery Act and the Government's plans for state-owned asset sales if it is re-elected may ratchet up pressure on the CCC to consider asset sales too.
Brownlee says it is an idea he would reject, despite the Act saying he can "amend or replace" the city's recovery plan at any time and also the dismissal of a Labour amendment that would have protected the council's strategic assets.
Labour Christchurch Central MP Brendon Burns pushed for an amendment that the council "must not propose the full or partial sale of any assets which it or any of its subsidiaries hold" because the legislation did not already stipulate that. "This is an oversight," Burns said.
"The sale of the council's assets must be legislated against in order to protect those assets held on behalf of the people of greater Christchurch from sale, which are important to the long-term recovery of the city."
Brownlee told The Press he had not discussed asset sales with the council. "It's an idea I would reject, absolutely."
The amendment had been thrown out because in the act the Government had "tried to pre-empt every situation that we can foresee".
Brownlee would not expand on that. "I don't foresee the council having to sell any assets, though in the end that will be their choice," he said.
"I would suspect that Treasury have had a look at the city council's balance sheet, given that we are going to have to take a whole lot of debt onto our [the Government's] balance sheet.
"It's only natural we would have a look at what the council can stand [to pay].
"Yes, there is provision in this legislation for Cera [Canterbury Earthquake Recovery Authority] to suggest to council that they might need to sell something.
"The accusation is that Treasury have been looking at council assets with a view to what the council will sell. That is, I think, completely erroneous.
"But I have no doubt they have had a good look at the balance sheet to get an exact idea of what their [council's financial] position is."
Burns said Brownlee's comments were "as reassuring as unreinforced masonry".
"We deserve to have some certainty over whether Christchurch's assets will be sold. Mr Brownlee, as a Christchurch MP, might not personally favour such a sell-down, but his government supports asset sales as a philosophy, and his legislation enables the sale of Christchurch assets. It's the pass-the-parcel game," Burns said.
"His comments suggest [Finance Minister] Bill English has Treasury assessing the options. I think most Cantabrians would also be aghast."
Council chief executive Tony Marryatt said the council could consider selling assets at any time, although any such proposals would need to follow a special consultative process.
"It is far too early to speculate on the options council has available to fund its share of recovery costs.
"We have still to finalise both the estimates of expenditure and level of government/insurance contributions to our share of the recovery costs."
CCHL director Cr Sue Wells said the council and Cera would work co-operatively, but any hint of moving away from that and "the whole thing would fall to custard". The council might want the freedom to sell land around the Orion site or the Red Bus site, she said.
"We have to have the room to manoeuvre. But if you're talking about a wholesale sell-down of Orion, though, no ... no, no, no."
Cr Jamie Gough said city asset sales held little appeal.
"Thank goodness Christchurch hasn't made the short-sighted decision to flick the family silver in the past. We need to take a long-term outlook to the rebuild of Christchurch and in my view ensuring future dividends, which can be directly reinvested back into our city, is absolutely critical to this."
In the past 10 years more than $600 million of dividends has been paid to the council from the companies.
Christchurch City Holdings Ltd (CCHL) is the commercial and investment arm of the Christchurch City Council. CCHL manages the ratepayers' investment in these seven fully or partly-owned council-controlled trading organisations: Orion New Zealand Ltd – 89.3 per cent shareholding. Christchurch International Airport Ltd – 75 per cent. Lyttelton Port Company Ltd – 78.9 per cent. Christchurch City Networks Ltd (trading as Enable Networks) – 100 per cent. Red Bus Ltd – 100 per cent. City Care Ltd – 100 per cent. Selwyn Plantation Board Ltd – 39.3 per cent.