Christchurch mayoral candidate Jim Anderton is promoting the idea of city council-issued bonds to help rebuild Canterbury.
He wants Christchurch City Council to issue Canterbury Earthquake Recovery Bonds to help rebuild the city. They would complement funding from central government and the Earthquake Commission.
“The burden of rebuilding our city will have to be shared by all New Zealanders.
This is a ‘no faults’ crisis and no one should be penalised under such circumstances.
Successive governments have allocated around $10 billion for Auckland’s motorway system. Rebuilding Christchurch’s water and sewerage systems, roads, character and heritage buildings is no less important than Auckland’s motorways.
“The second call on a New Zealand-wide pool of funds is the Earthquake Commission. The commission should be able to assist from its reserve funds. If it can’t do so under existing legislation, the act should be amended.”
But Mr Anderton said Canterbury would need more than central government and the commission together will provide. He said bonds should be issued to both the wholesale and retail (Kiwi mums and dads) markets to allow the people of Canterbury and the rest of New Zealand to invest in recovery, rebuilding and restoration.
“Backed by the rating base of the City of Christchurch, these bonds would be an attractive long-term investment option compared to some of the finance companies of recent times.”
A bond issue could be set up for $100 million with provision for oversubscription up to $200 million; Canterbury residents would have first preference for the issue; interest would be set at a competitive market rate and paid quarterly; they would mature after 10 or 20 years, with interest rates re-set after five years.
The bonds would be used to assist rebuilding of housing where soil conditions permit, restore the character and heritage of the city, and enhance damaged infrastructure.
About 25% of the brokerage fee could be donated to the Mayoral Welfare Fund – $250,000 for every $100 million raised, Mr Anderton suggested.
The main determinant of whether the bond idea would capture investors’ imagination would be the interest rate. The experience of World War II bond issues that were only inflation proofed meant that in subsequent years the value of returns failed to keep pace after tax was deducted.
Chris Hutching
Tue, 28 Sep 2010