Council property sales ‘cupboard’ seen as pretty bare

Wednesday, 8 November 2023

City council staff are considering building and land sales that could reduce Hamilton’s debt but senior councillors say the “cupboard” of possible sites is pretty bare.

The potential for asset sales has been in the spotlight partly due to the council’s difficult financial position, which has led to warnings of significant rate rises.

Asset sales prospects generally are due to be discussed at a long term plan workshop on Wednesday.

The Waikato Times asked the council for a list of property holdings.

It provided a list of more than 50 significant buildings on council-owned land, most used for operational purposes. There was also leased commercial space on Victoria St and some residential dwellings.

All up the council said there were about 5900 parcels of land owned by the council across Hamilton, much of it used for the likes of roads and reserves, and community facilities.

The council was also asked whether there was scope for sales to help address operating expenditure (opex) deficits.

Strategic property manager Nicolas Wells said staff, as a “normal” process, are reviewing holdings as part of the 2024-34 long term plan process to see if any are suitable for sale.

But the council wouldn’t release, at this stage, a list of properties that councillors could consider selling.

“Some of these properties are already intended for sale and are either being developed to achieve future strategic outcomes before they’re sold or are being held for strategic development in the future,” Wells said.

He also noted a big asset sales programme in 2013 had already raised $38 million.

Wells stressed the council’s policy is that the sale of property assets generally must be used to retire debt, not offset or fund opex, although the reason for this isn’t spelt out in the policy.

However, finance and monitoring committee chairperson Maxine van Oosten and economic development committee chairperson Ewan Wilson agreed asset sales could help reduce the council’s debt to revenue ratio and therefore give greater freedom to borrow to cover opex deficits.

Wilson said debt reduction could also reduce opex through saved interest payments

Yet both think the potential for sales is limited.

“We haven’t got a huge war chest of things to sell,” van Oosten said on Tuesday.

There could be an argument to lift Hamilton’s current ratio of debt not exceeding 285% of revenue - part of a Local Government Financing Agency covenant - which she said could potentially act as an “artificial constraint”

A shift could give the city greater confidence when it came to borrowing to support substantial growth.

Another factor to consider was what would ultimately happen with Three Waters under the new government, as councils having to retain assets would add significantly to costs, she said.

Revising debt to revenue limits or taking Three Waters operations off the balance sheet for when the ratio was calculated were options.

“Solutions need to be discussed and found,” van Oosten said.

Wilson agreed “there are only a few left in the cupboard” when it came to potential asset sales.

Possibilities included the Opoia Pā car park site, land behind ArtsPost on Victoria St. land near the Claudelands Events Centre, land in Rototuna, and land on the other side of the Waikato River from the wastewater treatment plant.

But “all of them are complicated”, he said.

Wilson has previously said a sale of some of the council’s shares in the airport - worth well over $100 million - was worth considering.

But on Tuesday he noted recent advice was that it could be better to hold off selling for at least five years because of an expected rise in value.