FINANCIAL DISASTER AHEAD FOR WELLINGTON'S RATEPAYERS- BRYAN PEPPERELL SPEAKS OUT
Mayor Prendergast has recently stated .."The City has $5.8 billion worth of assets. Our debt is just 4 % of our total assets. Council has agreed to borrow up to $20 million a year to pay for new assets." This statement from Mayor Prendergast about the value of the city's assets in relationship to debt shows just why we are heading for a meltdown.
The Mayor has steadily sold off the city's performing assets, beginning with Capital Power and the parking buildings, and moving onto ground leases. Of the performing assets, only the Airport share is left, unless we sell Council housing and abandon our commitment to the poor and our pending agreement with the Labour Government to foot the badly needed revamp and modernisation of the housing stock.
It appears Mayor Prendergast hasn't understood the value of a performing asset as opposed the city's depreciating assets making up most of the 5.8 billion dollars of the city's book value.
This is not the first time I've been critical on the Mayor's spin on Council's debt but this week I wish to expand on what is a serious problem as I see it. I'm of the opinion that the real estate market is over valued up to 40 percent. That's a bubble, but added to that is the fact that many people, with the encouragement of the banks, have borrowed against their over valued properties and spent on consumer items such as cars, and white-ware, along with other home improvements, like a new kitchen. Its been a consumer boom that has been financed on credit. Credit based on an over valued real estate market.
The first speed wobbles came with the rates differential. The Mayor's trusted lieutenant Deputy Shaw called a halt to the wealth transfer, fearing electoral consequences. It would mean an 8 percent rise to the residents and a 2 percent rise to business. In the meantime murmurings were becoming louder over developers taking control of the Council.
A symbolic action was deemed necessary.Commercial mayhem would continue in the Central Business District as with subdivisions. The talk of an overheated residential property sector became louder and interest rates continued to climb.
With the help of an uncritical media sufficient consent could be manufactured to see the City through it's current crisis and unattended growing debt (currently at $290.775 million and leaping to $354.829 million gross borrowings in 2008/09). This is set against an unsustainable economy with climate change demanding less productivity.We are headed for a meltdown.