Christchurch City Council has revealed today that it faces a funding black hole of up to $900 million to help rebuild the earthquake-wrecked city, and is set to start public consultation on "at least a partial" sale of its assets.
An independent probe into the council's coffers has found that if the rebuild is to continue at a satisfactory pace, and for it to meet its debt requirements over the next five years, the council needs more money.
It can't borrow any more, and today the council said the only way it could bridge the funding gap without hitting ratepayers with a 20 per cent rates rise is by "releasing capita" from its assets.
Mayor Lianne Dalziel said that after reviewing the Cameron Report, the second audit of the council's financial position, the local authority would look to release up to $400 million from its commercial arm, Christchurch City Holdings Ltd (CCHL).
The holding company has $2.6 billion of assets, including power company Orion, Christchurch International Airport and the Lyttelton Port Company.
Ms Dalziel said that while they needed to "look at all available option" to solve the shortfall, she vowed to "ensure the city maintains strategic control" of those key assets.
The mayor said that before any decision was made about releasing any capital from its assets, they would need public consultation - a process that will begin on September 4 - the fourth anniversary of the start of the devastating earthquake sequence.
"From the financial reports we have received, and subsequent analysis of those reports, we would be looking at releasing up to $400 million from CCHL," Ms Dalziel said.
"Measured against the $8.3 billion council balance sheet, we believe this is a moderate but prudent proposal."
The Cameron Partners report finds that the financial reasons for the council owning the majority of its commercial assets are "weak" and there is considerable scope for partial sale where the council retains control.
It further says forecasts show at least $256 million in extra funding is needed by 2019, which includes "headroom" of an extra $150 million to cover unexpected expenses, like further flooding.
Mayor Dalziel said swift action was needed.
"We can't afford to sit on the sidelines any longer. We need to make this happen," she said.
The report also warns of a coming rates rise, saying the currently rate levels are low compared to Auckland and Wellington.
The findings come in the second of two independent financial audits ordered by Ms Dalziel last year vowing to "open the books".
The first report, by Australian financial consultants KordaMentha, warned the council faced a $534 million rebuild funding shortfall.
That report suggested five options: reducing rebuild costs; negotiating with the Crown for more money; increasing council rates; cutting spending; improving the performance of investments or assets, or selling them off.
In a cost-sharing agreement put in place during the tenure of the previous council, the Government has already agreed to contribute $2.9 billion to the rebuild the council's share is $1.9 billion.
Today, the council's chief executive Karleen Edwards and chief financial officer Peter Gudsell said they would also need to work alongside the Government "as it is a major current and future funder and investor" in Christchurch.
"In the spirit of co-operation, we will be working closely with the Crown to ensure our budget processes and priorities are fully aligned and that they promote the regeneration of the city as a whole," Ms Dalziel said.