Finance audit confirms mayor's 'worst fears'

LOIS CAIRNS
Last updated 16:35 19/12/2013
Lianne Dalziel
Daniel Tobin

'WORST FEARS': Christchurch mayor Lianne Dalziel says an audit into the council's finances shows an expected rise in the total cost of the rebuild.

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The initial findings of an independent audit into the Christchurch City Council's financial position have confirmed some of mayor Lianne Dalziel's ''worst fears''.

KordaMentha, an advisory firm specialising in insolvencies and corporate recovery, was contracted to conduct an analysis of the council's financial position following Dalziel's pre-election pledge to ''open the books''.

In interim findings released this afternoon, it identified insurance as a big risk for the city and warned the costs of the rebuild could be higher than forecast.

KordaMentha also questioned the accuracy of some of the cost estimates contained in the Three Year Plan (TYP) and how the council would meet operating costs for anchor projects such as the new metro sports centre.

''The initial findings confirm some of the worst fears we had as an incoming council,'' Dalziel said.

''These include an expected rise in the total cost of the rebuild, along with uncertainty around the costs to repair our horizontal infrastructure and the amount we will receive from insurance for our damaged facilities.''

In the TYP the council assumed insurance claims would fund about $1 billion of the rebuild. So far it has been paid just under $300 million.

In the brief two-page interim report, KordaMentha described the council's insurance position as ''very complicated''.

It said there were a number of things council and its insurers did not agree on.

There were also disagreements between the council's insurer, Civic Assurance, and Civic's own insurers.

''The issues with the insurers need to be sorted out before council will know how much money it will get,'' KordaMentha noted. 

It said the amount council would get from insurance remained a ''big risk'', particularly as the council had to pay for some of the costs of building the anchor projects whether or not it got as much as it expected from insurance.

KordaMentha also said it was likely the costs for the rebuild would be higher than budgeted so the council would need to look at a number of things to make sure it was affordable, including how it could:

- Raise more money. It was already borrowing $1.6 billion so it could not borrow much more.

- Maximise the amount it got from its investments through Christchurch City Holdings Ltd.

- Re-prioritise spending to free-up money.

Dalziel said she hoped KordaMentha's final report, which she expected to get early in the new year, would propose some solutions to the serious challenges the council was facing.

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