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Residents Assn says do not sell district’s assets

GISBORNE District Council will definitely be out of pocket by transferring the operation of the Waikanae Top 10 Holiday Park and vehicle testing station to Gisborne Holdings Ltd, says Tairawhiti Residents Association chairman Rick Thorpe.

Speaking at the public forum that preceded the transfer debate at yesterday’s council meeting, he said instead of locking up the holiday park in a 35-year lease, the council should consider mayoral candidate Geoff Milner’s suggestion of a city-to-sea tourist hub in the area.

Staff responses confusingMr Thorpe said he was confused by the staff response to the association’s submission on the proposal, which said the cost to the council of transferring these assets published in the Price Waterhouse Cooper report and attached to the public information released by the council was wrong.

“Those are your figures,” he said.

The association had asked four different councillors for background to the $14 million GHL loan and received four different answers. It was now clear that the $20 million loan raised back in 1996 was used to buy shares in its own holding company.

“Ratepayers have funded GHL to the tune of $20 million, not an asset for equity swap as is being proposed today,” he said.

'You are not transferring . . . you are selling'The Chamber of Commerce and others had been telling the council for more than a decade that it should not be involved in owning these commercial assets.

“Actually, let’s clear up one important point — you are not transferring those assets, you are selling them,” he said.

Under the terms of the statement of intent, GHL would be able to turn around and sell those assets whenever they liked with no obligation to notify the council.

Reduce costsThere was another way to keep rate increases down to 2 percent — reduce costs. That was what happened in the real world, where there was no appetite for price increases. Commercial assets might be profitable but they would not return more than the 5.5 percent cost of the council’s $33 million debt.

GHL was only forecasting a gross profit of $134,000 for the testing station and $152,000 for the holiday camp. The PWC report clearly pointed out that the council was going to be out of pocket by $570,000 a year or $6 million over 10 years as a result of selling these assets to GHL. These were the council’s figures, not his. Gisborne was the only council still owning a vehicle testing station.

GHL's management structureWith a board of four or five directors and an asset management team of three or four, GHL had a very top heavy, expensive management structure costing $600,000 to $700,000 a year. How would GHL compete against the 20 motel owner-operators and six or seven vehicle testing agents? Without skin in the game, it would not matter how good the commercial directors were. They could not compete with an owner-operator who would do 70 to 80 hours a week when they had to.

Even with these assets, GHL would still be primarily a farming business. All that was needed was a decent drought and they would struggle to pay a dividend, especially if they were going to be funding the new municipal building.

Entrepreneurial approachMr Thorpe said there were plenty of examples in which an entrepreneurial approach could create real opportunity and better outcomes for the community. Tourism promotion in the region needed a whole, new fresh approach.

Instead of locking up the holiday park in a 35-year lease for only $33,000 a year as a motor camp, the council could consider Mr Milner’s suggestion for a direct city-to-sea link which would provide a huge infrastructure boost to the tourism sector. It was the perfect spot to create a new tourism hub.

“Stop these asset sales and put some effort into exploring other options,” he said. “You have the responsibility as our elected representatives to find the best outcome for our community. Please do not delegate this asset sale to others, it is your responsibility,” said Mr Thorpe.

Is squirrelling away assets the right way to go?