Following feedback I have received from the public I believe we can both take the Port's current $86.5 million of debt out of the equation, allowing the Port to pay for wharf 6 out of new borrowings and cash flow as they have intended, and at the same time not increasing rates. Let's call it option E.
We all know that when you borrow from the bank they require security and an ability to repay.
What if the debt were isolated on the Port's balance sheet and then secured by a guarantee over council's assets?
This would allow the Port's debt to asset ratio to remain at commercially acceptable levels. The guarantee would be the only risk the public of Hawke's Bay need to take on option E: the risk of the Port going belly-up and the guarantee being called upon.
As for cash flow to repay the debt, I was never really satisfied as to the explanations we were given on why the expansion could not be paid for on a "user pays" basis.
In the Port's 2017 annual report a record 290,000 20 foot container equivalents (TCEs) were shipped. Repayment of $86.5m of current Port debt over 10 years is $10.3m per year.
This means that if a wharf 6 development levy was charged on every TCE shipped, the cost to each TCE would be about $35.
Of course this figure would reduce if we charged all port users, such as cruise ships, just a little more as they are the ones who will reap the greater benefit.
So why would port users want to pay?
I would suggest it offers them more control over the level of service received from the Port, and to ensure that they are not price-gouged by any new potential owners who have worked that the cost of freight to another port is at around $1200 per TCE.
We could also offer them a seat on the board of the Port as they had historically, so that they can keep and eye an on their interests.
Finally, since $35 per TCE is only the price of a carton of apples, or a leg of lamb, to my mind it doesn't seem like much of an imposition.
Whilst this is all about the partial port sale, there are couple of other reasons put up as to why we need to sell that I would like to comment on.
Firstly there is the issue of vulnerability to natural disasters.
To my mind that vulnerability risk stays the same regardless of ownership so why worry about it? That's what insurance is for.
The second is that we don't have all our eggs invested in one basket. I agree that this is a fundamental rule of investing, however I also believe that this rule can and should be bent if it means we retain 100 per cent ownership of the Port.
There's also the fact that the Port got to this point without having to be partially sold, so do we really want to be the generation that didn't fight to keep it that way? This is something I think we should all be thinking about.
Finally, one of the main criticisms levelled at the dam was that council did not take any of the exit points on offer.
Following this consultation I would be disappointed if we were to go any further until the Port has gained all the necessary resource consents it needs, or before we gain a much greater level of comfort about the government's review of New Zealand's transport requirements - which would have to include ports.
So if you support option E I'd love to see you make a submission in support.
Just say you prefer wharf 6 to be user-pays funded.
I'd welcome people getting engaged, especially those port users who are liable to be affected. This is an important decision for us councillors to make and I'd really like to put a viable alternative to the partial sale up to them.
An option that they would be prepared to consider with an open mind, something which I'm pleased to say happens all the time.
