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John MacDonald: Should Christchurch sell its commercial assets?

John MacDonald,
Publish Date
Thu, 16 May 2024, 12:38pm
Photo / George Heard
Photo / George Heard

John MacDonald: Should Christchurch sell its commercial assets?

John MacDonald,
Publish Date
Thu, 16 May 2024, 12:38pm

Things are really packing a sad at Christchurch City Holdings Limited - the commercial outfit that looks after the city’s assets such as the airport, Orion electricity, and the port company.  

There are others as well, but the big ones are a 75% stake in Christchurch Airport, 89% of the Orion electricity distribution company, and 100% ownership of the Lyttelton Port Company. 

Four directors —including the chairperson— quit suddenly yesterday, saying the relationship between CCHL and the council has broken down because the politicians are sticking their noses into things they know nothing about. 

And those resignations were effective immediately. So, the organisation that is responsible for $6 billion of public assets in Christchurch has no chairperson and only half the number of people that normally sit around the board table. 

There are four left. Two independent directors and two city councillors who represent the council.  

So, a real hissy fit, if you want to call it that. But I’m not surprised, and I don’t blame these people for quitting, especially when you consider why CCHL exists. 

It was set-up in 1993, so more than 30 years ago. And the reason it came about in the first place was to create what CCHL itself describes as “an independent non-political buffer between the Council and the companies it owns”. 

As it says on its website, it ensures that a commercial approach is taken to managing the Council’s companies. 

So, what that essentially means is Christchurch City Holdings exists to make sure that there is no political interference in the running of the council’s commercial operations, and that the companies are left to do whatever they think needs to be done to make a profit and return a dividend to the council. 

But those good intentions appear to have become just weasel words, especially when you consider what Abby Foote —who, as of yesterday, is the former chair of the board— says in her resignation letter. Which I'll get to.  

But just so you know what’s behind the four board resignations, you might remember how late last year CCHL wanted to take a long-term view and look into ways it could reduce some of the debt it’s carrying. Which some interpreted as code for selling-off some of the assets to pay down some debt.  

I see Abbie Foote, in her letter to the mayor, pushes back a bit on that. But I think that’s definitely what we should be doing, whether they were thinking that or not. We need to sell some of these assets because it’s crazy how much debt CCHL is carrying. It’s a truckload of debt. $2.3 billion. 

So CCHL wanted to clear some of that debt. But a majority of city councillors felt differently and decided just before Christmas that, instead of paying off debt —instead of even thinking about selling any of these assets— it told CCHL to forget about that and just deliver higher dividends. Essentially, to make more money.    

And that is what led to what happened yesterday. With Abby Foote —speaking on behalf of herself and the other three directors who have quit— saying there has been a breakdown in the relationship between CCHL’s board —and its management— and the council.  

And here’s one of several stingers in the letter she wrote yesterday to the mayor. She says recent decisions by city councillors in terms of the direction CCHL should be heading have “caused us to lose confidence in Council’s ability to responsibly own core strategic infrastructure”. 

Now I would like to think that this is something that can be fixed, but I don’t think it can. Not with this current council, anyway. The council, by the way, that voted yesterday in favour of looking further into spending ratepayer money buying or leasing the earthquake-damaged Dux de Lux pub, for goodness sake. 

And the question I’ve got in my head is this.  

Knowing how politicians can’t keep their noses out of anything, even when most of them don’t have a business bone in their body, and even when there are structures in place like we have here with an independent outfit to prevent political interference in commercial decision-making, should local councils really be involved in running commercial entities? In particular, should the Christchurch council continue to be involved in running commercial entities? 

And my answer to that is, no they shouldn’t. 

And what I think we should be doing here is accepting what the now former head honcho at Christchurch City Holdings is saying, that the council is incapable of responsibly owning these kinds of assets, that it’s a hopeless business operator - and we should be getting rid of them. Because they are proving to be more trouble than they are worth. 

What I think we should be doing is following the lead of Auckland, which is looking at selling its shares in Auckland Airport to create an investment fund.  

That makes much more sense than what we have at the moment, which is an outfit that exists to prevent political interference in commercial decision-making about billions of dollars of council commercial assets, being stymied by the thing it’s supposed to prevent - political interference. 

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