Keep farms come hell or high water?

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

A titbit of information in the council’s draft estimates report for its three-year plan suggests it has chosen to ignore the urging of its trading arm Gisborne Holdings Ltd to consider a sale of its dominant asset Tauwhareparae Farms — along with almost all other assets — so GHL can develop a portfolio able to deliver the rising dividend stream the council wants, as well as become an investment partner in addressing the region’s significant challenges.

In what seems to be a decision that has yet to be adopted or explained at a public council meeting — which it surely can’t be, considering the Ombudsman’s clear direction on  these matters — the estimates report adopted at last week’s council meeting included references to not receiving dividends from GHL for three years and that it was raising a loan to smooth the impact of this; to be paid back from future dividends and/or any restructures, assumed at a minimum to be repaid in full within 10 years.

This from a council desperate for income to fund major recovery works over the next three years, and to offset demands on ratepayers now and into the future . . . it looks like a council that doesn’t want to sell the farms come hell or high water.

The background to this is that GHL undertook a comprehensive strategic review last year and delivered a five-year strategic plan to the council prior to GHL’s annual meeting at the end of September. In it, GHL proposed that the council review its ownership of all assets except the Top 10 Holiday Park (just 5 percent of its assets by value).

At the AGM we learned that GHL had decided it could not pay the remaining $2.5 million of its declared $2.7m distribution to the council due to the impacts of Cyclone Gabrielle on Tauwhareparae Farms. A year earlier at GHL’s 2022 AGM we were told that trying to keep the farm operating at an “appropriate” standard was a big challenge and would require significant investment, at least $10m according to its advisers — substantially more capital than it had available or was able to access.

It seems the council is open to a bit of a restructure but in the meantime is making space for GHL to spend the next few years investing in the farms.

The predicament at the centre of the strategic review was that GHL had an owner wanting rising dividends to limit demands on ratepayers, and a portfolio of assets worth $139m that was poorly suited to delivering this — especially the farms, with high capital requirements, lumpy profitability and overall a low return on equity.

This is a discussion that GHL wants the council and community to have. It has made clear that change is needed to deliver what its owner wants. At the outset, is the council taking a sale of Tauwhareparae Farms off the table?