The port (through its owner) does have the ability to fund any expansion out of working capital. If chosen, this option means that we retain 100 per cent ownership and all profits are retained in the region. The likelihood of us receiving a dividend for a decade or two, however, is remote, as profits will be used to service the debt required to fund the expansion.
The benefits of 100 per cent ownership also include an appreciating asset on the region's books, and eventually (hopefully) a growing dividend used to subsidise our HBRC rates as the port pays down debt and frees up capital to return to the shareholders (us). There are, however, three significant disadvantages.
A. Our rates will increase by around 45 per cent, or on average $144 a year as we lose the $10 million annual dividend currently paid by the port (and this doesn't include the planned 8 per cent increase needed to fund environmental and other key priorities).
B. The ability of the HBRC to invest in other projects (such as cleaning up our streams, rivers and lakes, research on our fisheries and an ambitious tree planting programme) is significantly diminished; and
C. Nearly all of our regional investment eggs are in one basket.
All three of these concern me.
House prices in the Bay are rising at record rates, which means that the cost of jumping on the home ownership ladder is becoming close to impossible for many. Any increase in fixed costs (for example HBRC rates) will possibly increase rents as landlords pass on these costs to their tenants or will further stretch households who are particularly stretched at the moment.
In recent years, the HBRC wasted $20m pursuing a dam that was always incredibly tenuous from a financial and ecological perspective. The cost of this folly was a neglect in investment in core, environmental outcomes. Lake Tutira is a smelly disgrace; we have allowed poor farming practices to degrade a number of our waterways; 10m tonnes of sediment flows into Hawke Bay every year, which is having a significant impact on our inshore fisheries; and we had the Havelock North water debacle which was a failure of regional governance on a huge scale.
The new CEO has returned the Council to its core mandate of enhancing the environment and cleaning up the mess left by the previous regime. Without the funds from any port sale, the current council's ambitious plans for environmental rejuvenation become extremely tenuous, and that would be a real shame.
There is an argument that having all our investment eggs in one basket - the port - increases financial risk. If there is another major earthquake or commercial disaster, the region is incredibly exposed. I do understand this argument, but those who seek to purchase a share of the port will also factor any such scenario into the price they are willing to pay, so for me this isn't a defining consideration, even though it is very real.
So, where do I stand on this incredibly important regional issue? If I thought that the people of Hawke's Bay could afford, and were willing to pay, for the port's expansion and to fund the HBRC's extremely ambitious environmental programme then I would emphatically support 100 per cent ownership.
I am aware, however, that such rate increases are beyond the reach of many, and that others will baulk at the demand for increased public funding of an asset that they feel has already been paid for by ratepayers.
I am very interested in your thoughts on this and whether you are also willing and able to pay more to retain 100 per cent ownership of the port while also having our council sort out our environment.
* Stuart Nash is MP for Napier
