Editorial: Valuable city assets

Local Government Minister Rodney Hide has given councils the clear message that they should stick to basic functions like roads, rubbish and waste water.

His views will resonate strongly with those who believe that councils should not be involved in business operations which the private sector could do more efficiently and may become a drain on ratepayers. But those who share this opinion should have a close look at the performance of Christchurch City Holdings and the contributions it has made over many years to the financial health of the city.

The companies owned fully or largely by CCHL on behalf of the Christchurch City Council include electricity lines firm Orion, port and airport companies, City Care, optic cable layer Enable Networks, and bus operator Red Bus. These are some of the most important infrastructural assets in the city.

Although some councils have been tempted to sell assets, Christchurch has done the opposite. Since its establishment in 1993, when it did not have the port or airport companies, CCHL's assets have risen in value from $170 million to today's figure of $2.2 billion.

Ratepayers receive tangible benefits from these assets. Despite the recession, CCHL made sufficient profits in the last year to pay dividends totalling $44.4m to the council, the bulk of which was generated by Orion.

CCHL says that the latest dividend helped to reduce the city's rates by around 15 per cent. Without this strong asset base, ratepayers, the people whom Hide's reforms are designed to help, would be worse off. Either that, or council services would have to be scaled back.

Undoubtedly as well, CCHL's holdings have been a factor in Christchurch's high credit rating from the international agencies.

For CCHL, Enable could be the key to even healthier profits and returns to the council in the future. In the last three years the company has laid 140 kilometres of high-speed fibre-optic cable in Christchurch.

Enable might now benefit from the Government's announcement of its $1.5 billion fibre-to-the-home policy, by becoming the regional broadband provider, and fulfil former mayor Garry Moore's prediction that it would be a half-billion-dollar company.

Advocates of leaner councils have been inclined to critically refer to the "people's republic of Christchurch", partly because of its imposing asset holdings. But the Papakura District Council is a prime example of how asset sales can backfire.

In the mid-1990s it sold $20m of its assets, and foolishly used half the proceeds to subsidise rates. That council quickly found itself in the position of having to add to its debt burden to help cover its basic operating costs.

Fortunately there are few signs in Christchurch that there is a groundswell of support for asset sales. Although the Selwyn Plantation is likely to be sold, this forestry operation could not be described as the sort of key infrastructural asset which should be retained.

It is noteworthy that in recent local body elections the council's strategic assets have not been a divisive issue and this is likely to continue in next year's campaign. This suggests that there is a broad consensus in the city not only that the assets produce a valuable return for ratepayers, but also that they should be retained to benefit future generations.

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