Andrew von Dadelszen Former Regional Councillor

Bay of Plenty Regional Council can be rightly proud of the way it has protected and grown its investments. However 99 per cent of this success can be directly attributed to its investment in the Port of Tauranga.

Quayside Holdings, the 100 per cent regional council-owned company that manages the council's investments – including the 54.96 per cent shareholding in the Port of Tauranga – last year boasted a surplus after tax of $39.886 million in its Annual Accounts to 30th June 2010.

However this is consolidated with the Port, which made $38.016 million – showing Quayside made less than $2 million from its other investments. These other investments include $54 million in share market investments, $20 million in direct property investments – Rangiuru and Tauriko – and another $4 million in 'other”.
So the bottom line last year was a $1.87 million profit on $78.4 million in assets – a return of just 2.38 per cent.

Looking at Quayside Holdings' cost structure – they are spending about $1 million on administration to produce this $1.87m profit. This includes – according to the 2010 annual report – $352,000 on director fees.

Michael Smith, the HOBEC lawyer, chairs the board as well as sitting as a director on the Port of Tauranga Board. Last year he received $87,000 as Chair of Quayside and a further $51,000 as a Port Director – $138,000 in total.

John Green, an independent director from Rotorua, received $75,000; Athole Herbert, independent director received $53,000, as did regional councillors Jane Nees and Jim Mansell. These fees are well above the fees that Port of Tauranga directors received and yet it is that company that makes all the money for Quayside.
Quayside directors will argue that they need rewarding for their fiduciary risk, but the reality is that Quayside pays directors Indemnity Insurance to protect them from this. It is interesting to note that John Green is also a director of Perpetual Capital Management Limited – a company that manages the investments for the Rotorua Energy Charitable Trust. He – and his three other directors – received $35,004 as his 2010 director fee for this – a figure that I would have thought was probably prudent and a guide to what Quayside should be paying.

Let me be clear – that while I was a director of Quayside between 2005 and 2008, all the figures quoted are from the published annual returns. Both Quayside and the Port of Tauranga will soon be reporting their 2011 annual returns and I will report on these once out.

I am not hopeful of any improvement for Quayside, however, as in 2010 they employed a full time chief executive who is probably costing them $250,000 a year and just adding to the overheads.

This all begs the question – is there a place for the regional council operating this CCO –Council Controlled Organisation – and the even bigger question as to whether councils should be owning and operating large infrastructural assets at all. Yes it subsidises our rates, but it also keeps the true costs of operating the council below the radar. This is a discussion for another day.

If you have a view on these or any other local government issues, I invite you to email me.

Email: andrew@vond.co.nz