Failed firm cost ratepayer $3.7m

CHBDC chief executive John Freeman confirms the loss it took when its investment went into liquidation. Photo / File

Ratepayers in Central Hawke's Bay lost almost $4 million when civil contracting company Infracon went belly-up in 2014.

At the time of the liquidation, the council was a 34 per cent shareholder of the company.

According to Earnest&Young Partner Stuart Mutch, who audited the Central Hawke's Bay District Council (CHBDC) for 2015, the local-government body wrote off its investment in Infracon last year due to the uncertainties associated with the recovery of funds.

Council chief executive John Freeman said as a result it lost its share of the company, which amounted to $3.7 million.

"At the end of the day it's a ratepayer loss because it was a ratepayer-owned company or our share of a ratepayer-owned company," he said.

Tararua District Council was also a shareholder at the time the company wound up.

Mr Freeman clarified that the loss to the ratepayer was the money the council would have got for the firm had it been sold.

"The reality is, from a cash point of view, they [the ratepayers] are no worse off than they were before," he said.

"It is just that that money was tied up in the investment so it was money that was already in there."

Mr Freeman explained that while the council did not go out of its way to invest in the company, Infracon, as a private entity, was borne essentially out of council's works division.

"It was a part of a council-owned entity - a council-owned works department," he said.

"Then it became a separate council-controlled organisation and then it became a separate company," said Mr Freeman.

A company the district council had a stake in.

"We actually haven't invested any money in it, it was money that was already there," said Mr Freeman.

"It was built up by a council-owned company over a three-year period, so we didn't go out and buy it, we already owned it."

Central Hawke's Bay Mayor Peter Butler reiterated the council started the company.

According to Infracon's website, the private company ceased trading in August 2014. Its assets and contracts were acquired and will be operated by the Higgins Group.