Asset sell-off preferred to higher rates
Asset sales should be considered to help fund the Christchurch rebuild, the city's leading business group says.
The Canterbury Employers' Chamber of Commerce says local officials should look at selling city assets, rather than a 7.5 per cent rates rise, to pay for the earthquake recovery.
The group has criticised the city council's insurance cover at the time of the quakes, describing it as "woefully inadequate".
The remarks are in a hard-hitting submission on the council's draft annual plan provided to The Press.
In the submission, Chamber of Commerce chief executive Peter Townsend said the council needed a "thorough investigation" of potential asset sales to help fund the rebuild, rather than a rates rise and increased council debt.
The council should also consider selling some shares in council-controlled companies or taking money out of the companies to provide funding, he said.
Townsend told The Press the council needed to explore all options.
"These are questions that need to be asked. The work may have been done, but if it has been, we certainly haven't heard about it."
The council should consider whether to reduce the number of properties it owned, given its status as the second-largest property owner in New Zealand, he said.
Townsend's submission questioned the council's insurance cover at the time of the quakes.
The submission said a $196 million shortfall for the city's underground infrastructure showed that the cover was "woefully inadequate".
The group also had concerns about the valuations that had been used to set cover for the council's buildings.
"Our analysis, which is confirmed by the council's own reporting, would indicate that these replacement insurance figures are grossly inadequate," the submission said.
Townsend told The Press the council should have been "right on top" of insurance and valuation issues to ensure they were covered.
"There is too much exposure for anyone to feel comfortable."
The risk report that was used to set the underground infrastructure cover was "very suspect".
The organisation had shared its concerns so the council and others would learn from its mistakes, he told The Press.
"We're not trying to bomb them from the outside. We need to learn what we need to learn, and we need to move on constructively," Townsend said.
Council chief executive Tony Marryatt said the issue of asset sales had been raised during the preparation of the council's central-city plan.
Councillors had decided against investigating the possibility during this year's annual plan process, but Marryatt said the assets would be reviewed as part of its long-term plan next year.
He believed the council had shown that it could fund the cost of the city's recovery without selling its assets, he said.
Marryatt said the insurance for underground infrastructure had been based on the best risk estimates available at the time, which did not account for the scale of the February 2011 earthquake.
"If I'd gone to the council and said, `Let's insure it for $980m', they would have laughed at me.
"You won't find anybody that was predicting the earthquake of February 22."
Differences with building valuations and repair costs were partly due to the new building codes introduced after the city's quakes.
Marryatt acknowledged that some of the valuations for council buildings were below what they should have been.
Earthquake Recovery Minister Gerry Brownlee was unavailable for comment, but has previously encouraged the council to ensure its assets are used "to their best advantage".