Christchurch Council Under Privatisation Pressure

- Marty Braithwaite

Marty Braithwaite is the NZ Council of Trade Unions’ spokesperson on Christchurch earthquake-related matters.

It is rare thing these days for Christchurch Mayor Bob Parker to have a unified Council, but on the issue of a sell off or partial privatisation of Council-owned assets the almost impossible has been achieved. Staff and elected Councillors have rejected any need to sell off Christchurch City Council properties or to sell down shareholding in Council-owned companies to fund the post-earthquake repair and rebuild of the earthquake ravaged city. And while that should be that, life is never quite that simple. Council-owned properties and assets are as vulnerable as the power companies, Air New Zealand and now, apparently, Kiwi Rail that John Key’s National government has decided to hock off.

Asset Sales On The Agenda

In Christchurch, business leaders and the Government are increasing their pressure on the City Council to sell, and that pressure should not be underestimated. As early as January 2012, the Canterbury Earthquake Recovery Authority (CERA), a department of central government, drafted confidential terms of reference for what it described as a Financial Capacity Development Programme for the Christchurch City Council (CCC), requesting Council to work with CERA, Treasury and the Department of Internal Affairs (DIA) to arrive at an earthquake recovery cost-sharing arrangement between CCC and the Crown. The terms of reference included reviewing asset ownership to investigate if investment is being maximised, looking at introducing user charges, identifying activities that could be run in a commercial manner, investigating the full spectrum of contracting possibilities, from contracting out to private public partnerships, and using Treasury Better Business Cases.

CERA called for the establishment of a steering group to “kick off” the work plan, including running an inception workshop to get feedback from stakeholders to inform its work. Capital structure review and commercialisation probabilities programmes were to have been scoped by 30 June, with work on asset utilisation and the development of a financial model to follow after 1 July. An Official Information Act request made on 21 May by the New Zealand Council of Trade Unions (NZCTU) for all information held by CERA in relation to the financial capacity development programme went unacknowledged until a follow up request was made in June. Delaying the process, CERA then exercised a statutory right to extend the time frame in which to provide the information. In July I received CERA’s response – they denied the request for anything substantive on the grounds of maintaining effective conduct of public affairs through the free and frank expression of opinion between Ministers of the Crown and others.

And so just who the steering group comprises or who the stakeholders are consulted as part of the inception workshop remains a mystery. One thing is for sure, it doesn’t include the NZCTU which represents over 50,000 workers in the city, nor does it include any of the Opposition Members of Parliament who represent the majority of residents. In the context of the well reported broader political tensions surrounding the relationship between the Government and CCC, the “request” that Council work with CERA, Treasury and DIA must be interpreted as a direction rather than a request. And an inescapable conclusion of this request is overtly an agenda of privatisation and contracting out based on an ideological framework rather than of one of any economic and/or social necessity.

If that sounds conspiratorial, let’s look at a few facts. In its Draft Annual Plan, CCC proposed to fund its share of the earthquake recovery costs largely through insurance (and that’s a whole other story in itself) and an increase in rates of around 7.5% of which 1.76% was to fund the loss of revenue following the 22 February 2011 earthquakes and a further 2% to rebuild major community facilities such as a convention centre, a replacement for the QEII Park complex, a new rugby stadium and repairing other facilities such as the Town Hall and Art Gallery. The overall increase was estimated to add around $100 a year to the average residential rates bill of approximately $1,400.

Earlier, CCC Chief Executive Tony Marryatt told a meeting of the Community Forum, a group of community representatives set up to give advice to Earthquake Recovery Minister Gerry Brownlee, that the Council had looked at the issue of asset sales and rejected it. The only assets proposed for sale in the Draft Annual Plan were minor, generally unneeded sections of roadway and pockets of land in total valued at around $1.3 million. The inevitable question is that, if CCC specifically considered and ruled out the need for asset sales and there was no financial need, why did the Government, through CERA, request CCC to work with it and Treasury to develop a financial recovery plan?

Those with long memories will recall the battles between the ideologues of Treasury and CCC in the 1990s when the city earned the moniker of “the People’s Republic of Christchurch” for resisting Treasury pressure to sell off its commercial holdings. Retaining those assets has proved valuable to the city and their commercial success has helped ensure that Christchurch rates have consistently been 20% below the national average for cities and even with the current increase will still be 16% below that average. The city also has among the lowest debt ratio of any local authority in the country.

Threat To Social Housing

Rekindling the debate in 2012 about asset sales was the Canterbury Employers Chamber of Commerce (CECC) which, probably for the first time ever and buoyed by CERA’s paper, went further than just targeting strategic and commercial assets. In a submission on the Draft Annual Plan, CECC Chief Executive Peter Townsend proposed that the Council investigate the potential to sell down assets to fund the rebuild (noting that CCC is the second largest property owner in New Zealand next to the Government) and explores the possibility of selling down shareholding in Council-controlled companies to provide cash for repair work. Townsend went on to say CECC wanted Council to have a close look at its property portfolio, concluding there would be winners and losers in the process, adding that was a price worth paying.

So just who would be the winners and losers? The Council’s property register includes 2,640 social housing units in 115 complexes, 740 parks and reserves, its libraries, sports and cultural facilities and civic offices and service centres, and public toilets. Of that portfolio, social housing is an obvious target and, although Townsend weakly protested during a Radio New Zealand interview that he hadn’t specifically identified social housing, it remains the most vulnerable for sale among Council properties.

While Townsend might have been coy in not specifically identifying social housing, his fellow travellers in the Central City Business Association and New Zealand Property Council took a bolder approach. One of their submitters to the Draft Annual Plan told Councillors a solution to any proposed rates increase was for CCC to withdraw its involvement in social housing. The submitter was a representative of Westfield, the transnational owners of Riccarton Mall which, incidentally, must have made a rather large fortune out of post-earthquake trading. That pressure to sell assets has increased with the Government’s announcement at the end of June that it expects the Council to stump up with at least $100 million to purchase red zoned properties in Christchurch’s affluent hill suburbs. The calls by the business lobby to sell has been trumpeted by the Press, part of the Fairfax newspaper stable and now part owned by mining magnate Gina Rinehart, the richest woman in the world.

Given that the Draft Annual Plan made provision for a fully funded earthquake recovery, such a strident call by business and property owners and the Government to sell off social housing, examine contracting out of such strategically important items as water management, to introduce user-pays and sell down shareholding in profitable, monopoly blue-chip investments such as the Port of Lyttelton, Christchurch International Airport and the power lines company, Orion, reinforces the view that this is an ideological push under the guise of earthquake management.

Disaster Capitalism

And if this still sounds conspiratorial, we need look no further than to New Orleans after Hurricane Katrina. Naomi Klein spelled it out in her book “The Shock Doctrine” (reviewed by Jeremy Agar in Watchdog 117, April 2008, Ed.), in which she coined the phrase “disaster capitalism”. She argued that disasters have become the preferred moments for advancing a vision of a ruthlessly divided world, one in which the very idea of a public sphere has no place at all. Every time a new crisis hits, the fear and disorientation that follow are harnessed for radical social and economic re-engineering. Each new shock is midwife to a new course of economic shock therapy. The end result is the same kind of unapologetic partition between the included and the excluded, the protected and the damned, Klein concludes.

Similarly, in her book “A Paradise Built In Hell: The Extraordinary Communities That Arise In Disaster”, author Rebecca Solnit contrasts the sense of community immediately after a disaster with perils of the longer term recovery. New Orleans after the 2005 Hurricane Katrina catastrophe, Solnit writes, was more abandonment and more privatisation, the school system reinvented as charter schools, public housing closing at a time when the need was desperate, a public hospital remained closed and public transport was cut by 80%. Some of these were fiscal decisions she said, but the desire to privatise the system and shut out the poor was an ideological choice. Sound familiar?

This was written before the July 2012 release of the blueprint for the Christchurch central business district by the Government’s Christchurch Central Development Unit. Immediately there was more pressure, both from Christchurch business leaders and Earthquake Recovery Minister, Gerry Brownlee, for the sale of Council-owned assets. Ed.

Fact File

  • Christchurch City Holdings Ltd is the commercial arm of the Christchurch City Council, and has shareholdings in eight subsidiary companies. Those companies own and run some of the city’s key infrastructure:
  • Orion, the power lines company, 89.3% ownership
  • Christchurch International Airport Ltd, 75%
  • City Care, construction and maintenance management, 100%
  • Lyttelton Port Company, 79.2%
  • Red Bus, public transport, 100%
  • Selwyn Plantation Board, 39.3%
  • Enable Services, a communications network provider, 100%
  • EcoCentral, refuse recycling, 100%
  • CCC’s equity in CCHL is valued at approximately $1.3 billion.
  • In 2011 CCHL made a group profit of $77 million of which $43 million was paid to the city as dividends.
  • But for the earthquakes CCHL would have made a profit of $100 million.
  • CCHL can make additional payments to CCC and did so in 2002 for example, with a special dividend of $184 million.


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