Should Council be selling non performing commercial assets?

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This argument always rears its head when rate increases are suggested.

Taking a hard nosed commercial approach there seems little sense in retaining non strategic assets which are only providing a low return on asset value. The largest council asset is Tauwhareparea Farms, valued at approximately $42M, it generates around a $1.5M profit or a 3.5% return.

The council is expecting to receive $1.25M from Gisborne Holdings Ltd (GHL) this financial year, this from a total net assets of  $73M, only a 1.7% return. The council is paying an average interest rate of 5.5% on its external debt of approximately $36M, unless the return on these assets is expected to improve significantly it would make financial sense to sell them.

The transfer of council’s commercial assets to GHL was primarily designed to increase non rate revenue, still early days but no sign of this happening yet. Council has argued that retaining the farms is prudent security management, that in the event of another Bola the farms could be sold if recovery funds are desperately required.

If the plan is to increase the current debt limit significantly should we not revisit the option of asset sales instead?

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