A CONTROVERSIAL investment by the Invercargill City Council which was originally planned to be sold, will now be kept.
A report by council strategy and policy manager Rhiannon Suter was presented to councillors during a performance, policy and partnerships committee meeting on Tuesday.
In the draft budget, a Don St investment property was forecast to be sold in the 2022-23 financial year. It was valued about $14.5 million, the report states.
However, following further analysis, she was now recommending the property be retained longer.
“The property is now fully let and is generating a net surplus of $0.6 million to council a year.
“Retaining the property would result in initial higher net debt balance due to reduced funds from the sale of $14.5 million.
“However, the surplus generated will reduce this amount over the time of the investment.”
The Don St development is 100% council-owned.
When it was built in 2018 it was reported as having had a $4.5 million budget blowout with a lack of appropriate reporting to the council in relation to the project.
A review was conducted at the time and, in 2019, the council accepted it needed to improve its governance on major projects.
During the meeting on Tuesday, deputy mayor Nobby Clark opposed the recommendation.
Mr Clark said if the council sold the building, the $14.5 million could be spent on another long-term plan project.
He also questioned if figures presented included about $2.3 million of debt the council incurred after remortgaging a property in lower Esk St as he believed this money was used to cover the costs of the Don St build.
Council finance and assurance manager Michael Day said he would seek more information about the remortgaging, but given interest rates were so low, it “made sense” to keep the property as an investment.
“At this point, if you were to remove it from your financial planning, from that perspective it would have a negative impact… and put a higher burden back on to the rates,” Mr Day said.
All councillors – except Cr Clark – voted in favour of keeping the building.
Councillors also agreed to impose a lower rates increase following feedback from the public.
The increase for 2021-22 will remain at 5% and the following three years 4% .
From then on there would be lower increases of between 2.5% and 3.75%.