Manu's Memos

The debate on whether GDC should retain or sell TFL seems to go something like this:

FOR selling:  

• Council should not be in the business of running farms.
• The dividend expected for 2007 is only 50% of the $1.5m projected in the LTCCP.
• Freeing up the capital tied up in the farms could pay off Council debt which costs millions each year – and fund priority infrastructure developments (such as the waste-water upgrade).
• GDC debt levels are very close to the maximum allowed and should be brought down by sale of public assets.
• The farms may be worth over $40m and the level of return on the investment value are not commercially prudent. 
• If the original $25 million, which was the valuation at the time the council last considered selling the farm, had been invested in secured interest-bearing deposits earning 7.5 percent, the compound effect of this investment would have generated a fund today of $36 million, with interest earnings this year of $2.7 million.
• Any funds realised could be placed in an investment account or community trust to avoid being ‘frittered away’.
• TFL was ‘independently’ valued at $45.6m in 2006.

AGAINST selling: 

• The $750,000 dividend paid this year is in line with what was predicted in 2003 when the Farms were restrucutred.
• The farms cannot be sold until the Jodi F Millenium outcome is finalised.
• If they could be sold now the banks would demand the first cut so the actual amount available for investing in priority infrastructure developments would be a fraction of the gross amount realised from the sale.
• The farms only attracted bids of around $20m when tendered previously so the returns as a proportion of investment are actually not as bad as detractors claim.  
• Any money raised from the sales could be ‘frittered away’ by undisciplined Council decisions.

Another proposal is to sell a part of the farm asset – or break it up into smaller, but still viable farms. 

Here’s an article from 2003 detailing Bill Busby’s plans for Tauwhareparae Farms: www.country-wide.co.nz/article/748.html