The Christchurch City Council needs to think about selling assets to help pay for rebuilding the quake-hit city, the government says.
And councils around the country are being urged to look at funding options other than raising debt or rates.
Local Government Minister David Carter said on Sunday that while the decision to sell assets to pay for infrastructure and council services was for councils to make, not central government, he would support the Christchurch City Council doing so.
Prime Minister John Key said on Monday morning that councils needed to consider alternatives to ever-lasting rates rises. They might therefore want to consider changing the balance of the assets they owned, he said.
The government is now pressuring councils to raise rates in line with inflation and population growth after general annual rates rises across the country over 6% during the last decade.
It is introducing legislation to make councils only provide what they consider are core services, like infrastructure, and leave non-core services, like improving their region's NCEA results, to central government.
Strong balance sheet
Speaking on TV ONE's Q&A programme on Sunday, Carter, who took over the local government role from Nick Smith earlier this year, said the Christchurch City Council faced an extraordinary situation in terms of rebuilding costs. The council's balance sheet was strong with a number of assets.
"But from a ratepayer point of view, from a ministerial point of view, I think the Christchurch City Council needs to think carefully about rationalising some of those assets to help it meet its huge challenge with the rebuild of the city," Carter said.
"I think they’re in a very similar position to central government. If they find a way where they can sell down some of their assets to maintain the funding, to deliver some other infrastructure required within in their communities, in principle, I would support that. But having said that, it would still be a decision for local councils to make," he said.
"I think if you take a museum, for example, [a council] may decide that that is a fundamental asset that they need to keep for the benefits of their community. But if they had shares in an airport or shares in a port company, they may well decide they could sell down some of those shares to help them provide the infrastructure which their community’s demanding of them."
On TVNZ's Breakfast programme on Monday morning, Key said councils needed to look to alternatives to increasing debt or raising rates. Christchurch was a good example of where this could be done.
"They're in a very unusual situation of course, but they are going to be rebuilding that city. There'll be a huge number of significant assets they may want to completely own, or fund in a slightly different way. They might want to consider that balance of those assets," Key said.
"That doesn't mean they should change it, it just means they should have that conversation and be open to that," he said.
"I don't think it bothers the government so much. What it is, is a matter for the ratepayers. They need to decide whether they want to fully fund everything through debt. From our point of view - the government's point of view - we've got the mixed ownership model. We're wanting to sell down to a 51% majority stake from the government across those five assets because we don't want to raise a lot more debt."
Labour Party SOE spokesman and Christchurch-based MP Clayton Cosgrove said Carter's comments on Sunday "proved beyond doubt central government’s intention to see Canterbury’s assets sold off."
“This issue was raised over a year ago when the CERA legislation was before Parliament. This was not a part of the deal. The Minister’s rationale - that councils should sell down infrastructure to survive - is ludicrous," Cosgrove said.
“These are revenue generating assets which have sizable returns for the whole community. Selling these off to fulfil National’s agenda is foolish," he said.
"This is a nationwide issue. Selling revenue generating highly profitable assets which are providing a solid rate of return at a local level is about as logical as National’s plan to sell our revenue generating state-owned assets.
“Canterbury’s profitable assets have kept local rates in check. To hear the Minister say that he would rather give up that revenue stream to pay for the disaster that has befallen our City makes a mockery of the Government’s commitment to Canterbury’s recovery," Cosgrove said.