Funding the earthquake recovery is one of Christchurch's greatest challenges because on it depends the survival of the city.
OPINION: The maze of the Earthquake Commission, insurance delays, TC3 doubts, still-unrepaired houses - all the day-to-day frustrations that Christchurch people endure - count for nothing compared with the need to secure drainage and water supply, smooth roads and a renewed central business district. Basic infrastructure is expensive.
The challenge is being debated by the Christchurch City Council and the Government. The outcome is uncertain. The finance minister has previously voiced the view he believes the council's financial strategy is flawed, to the point of rendering the city bankrupt, and the Canterbury earthquake recovery minister refuses to express confidence in it.
The council's chief executive, Tony Marryatt, is much more positive. In an interview with The Press, published on Saturday, he said the financial strategy was sound and no cause for concern. The earthquake recovery would be paid for by borrowing and insurance, a charge on rates and deferring expenditure on such things as replacement kerb and channelling. The sale of council CBD land to the Government for the Frame would produce a one-off boost for funds.
Marryatt concedes that the council's strategy has risks because it requires financial discipline from the present and future councils and assumes insurance payouts will come through and the Government will meet its substantial part of the rebuild bill.
But more risks than those mentioned by Marryatt exist, primary among them being the danger that rates revenue will continue to fall as people do not return to the suburbs, and that population decline will cut other sources of revenue, such as that from parking charges.
This is by no means an unlikely threat. Many citizens who at present plan to return to the city will be finding life elsewhere attractive and, once they have put down roots, they will have to have compelling reasons to return to Christchurch. The influx of labour required by the rebuild will be temporary and a failure to reignite the CBD would cut the large rate revenues derived from commercial buildings.
All financial plans are based on expectations, of course, and the impact of the quakes make the council's expectations particularly insecure. But from what is known, it has gone about planning as best it can.
The outcome of the Government's scrutiny of the plan will be vital in maintaining ratepayers' and investors' confidence in the city, and in securing the Government's share of the rebuild funds. If the plan does not get the Cabinet's tick, Christchurch will face its own financial cliff, with its budget unable to be met. A radical rethink would be needed and the prospects of delayed recovery would be dark on the horizon.
In giving its verdict, the Government needs to park any ideological wish that Christchurch sell the major part of its assets. That would provide a useful tranche of funds, but would likely be deeply unpopular and characterised as blackmail. Partial sales may be a more acceptable proposal.
Whatever the outcome of the discussions between the Government and the council, disciplined financial management will be necessary for the next few decades. Glory projects - those that boost councillors' popularity but are not vital - cannot be allowed to get on the books. The greatest legacy councillors can create is robust city finances.
- The Press