Christchurch city fathers move into investments

By Chris Hutching

Friday 21st June 2002

Favoured economic development projects in Canterbury will receive a boost from a $75 million endowment fund set up by Christchurch City Council to provide $1.6 million a year from the interest earned.

The $75 million in the Canterbury Economic Development Fund was allocated from the proceeds of local authority trading enterprise Orion's gas assets (former listed company Enerco) in April 2000.

The allocation will be administered by the Canterbury Development Corporation (CDC), which is advertising for applications.

A frontrunner is Central Plains Irrigation, a controversial proposed $200 million scheme to boost dairying by diverting water from the Rakaia and Waimakariri rivers.

The Canterbury Employers' Chamber of Commerce is an adviser to the CDC and its president, Doug Marsh, is also chairman of Central Plains Water.

The money is being set aside for pet projects when the council is overcommitted to enhancement ventures and councillors are balking at expenditure on wastewater and sewage treatment, with rates forecast to rise at least 5% in coming years to cover budget blowouts.

The money from the fund will be distributed in two rounds each year. To qualify, projects will generally have a budget of over $100,000, with applicants expected to fund about 50% of costs themselves. About 30% of the allocation will be to community projects like the Canterbury Museum redevelopment.

The $75 million is invested mainly in bank deposits until a full review of an investment strategy by investment adviser Frank Russell is considered.

Meanwhile, Westland District Council has become embroiled in controversy about investing money in development schemes and the auditor-general is investigating a recent $500,000 loan for repayment in two years to an untried plastic manufacturing company, F T Manufacturing. Westland district councillors also promised that its airport company would build a $1.25 million factory to lease to F T Manufacturing - a move being queried because councils cannot guarantee loans.

But there are many questions about the deal - such as why the company wants to set up a prototype manufacturing in Sydney over the next few weeks to test its manufacturing system. The company is understood to have little or no equity of its own but has a licence to manufacture the plastic, which Westland council general manager Robin Reeves said was a more durable product.

He said F T Manufacturing wanted to set up its prototype in Sydney to produce some products it could take to a trade fair in the US later this year. The proposed factory on the West Coast would be complete in October if plans went smoothly.

The principal of FT Manufacturing, a New Zealander who has lived in Australia for several years, changed his name to Soren Kierkegaard after the after the 19th century Danish existentialist philosopher.

The other director is an Australian, Wayne Donald, and shareholders are mainly Australians except for Fundamental Technology, another company associated with Mr Kierkegaard.

Westland District Council was in the news a few weeks ago for cashing up loss-making investments in international equities that were bought from part of the $120 million government fund compensating for the cessation of logging on the West Coast. In early 2000 the new Labour government gave $7 million each to the West Coast Regional Council and the Grey, Buller and Westland district councils.

The balance of the money was placed in the West Coast Development Trust.

Westland District Council, on advice from ASB, placed 60% of its money into equities, with the balance in cash and bonds.

After 22 months the council lost $885,000 because it cashed up a loss position. But Buller District Council increased its $7m by 1.7%, with half in New Zealand and half overseas in bonds and equities; the West Coast Regional Council increased its $7 million to $7.6m, in bank deposits, bonds and overseas equities; Grey District Council increased its $7 million to $7.8 million, all in bank deposits; the West Coast Development Trust increased its $92 million to $100 million with funds ($99 million) held in trading bank accounts.

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