Asset sales on cards to raise needed cash
OPINION: Money - or the lack of it - will dominate the Christchurch City Council's agenda this week.
After months of behind-the-scenes work, the council will publicly release the findings of a high-level review of the council's assets and subsidiaries on Thursday.
The review has been conducted by Wellington corporate advisory firm Cameron Partners and has looked at how the council can generate more cash and capital from the assets it holds through its trading arm Christchurch City Holdings Ltd.
It will outline a number of options the council could take to improve its financial health and ensure it has enough money to fund its share of the city's multibillion-dollar rebuild.
It will add to the 27-page KordaMentha report, which council released in May.
That report concluded the council had a cost over-run of $534 million which could balloon further depending on how much money it manages to secure from its insurer for damaged council facilities.
The report coming out this week will outline what the council can do to improve that financial situation and reduce its reliance on borrowings.
In medical parlance the KordaMentha report provided the diagnosis - bad news I'm afraid, your tests reveal you have a bad case of lackofmoneyitis - while the Cameron report will outline the prognosis and treatment options.
Some of it may make for disturbing reading as the numbers will be scarily large, but it is important ratepayers get their heads around the council's financial position and the possible courses of action, because it is they who will suffer if the council does not take swift action to remedy its financial problems.
The risks are cutbacks to services and facilities or year after year of big rate rises.
Fortunately the council's strong asset base - CCHL holds assets worth around $2.5 billion - means it has options.
If the council sold its three biggest assets - Orion, Christchurch International Airport Ltd and Lyttelton Port - it could net around $1.4b but that option is likely to be politically unpalatable.
A partial sell-down of those assets could be considered. Interested buyers shouldn't be too hard to find and the council could raise some much needed cash while still retaining a controlling interest.
While the council will be reluctant to relinquish its big assets, parting with the likes of City Care and Red Bus Ltd may be easier as they don't hold any strategic value. So expect those to be the first to have the For Sale signs attached.
Inevitably there will be opposition to asset sales, particularly from those on the left of the political spectrum.
Knee-jerk political reactions won't help Christchurch in this critical period in its history. Rather than rushing to judgment, we need to have robust, healthy debate about what is going to be best for our city in the long run.
When it comes to tackling the city's huge financial challenges, head needs to come before heart.
- The Press
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