James made the comments after presenting the Marlborough Civic Theatre Trust\u2019s annual financial report to the Marlborough District Council\u2019s strategy and community partnerships committee on March 12. He was the trust\u2019s treasurer, but his accounting firm also had clients in the wine industry.<\/p>\n
Like last year, only the best fruit is expected to be picked from vineyards as wine companies try to rebalance supply with demand. Photo \/ Greg D Wass<\/p>\n
Just before leaving the council table, James offered his take on an Infometrics report about Marlborough\u2019s economy presented earlier in the meeting.<\/p>\n
The report wasn\u2019t \u201cgrim enough\u201d on what was Marlborough\u2019s largest industry, compared to what he was hearing from his clients, he told the councillors.<\/p>\n
\u201cSorry, this is not related to the trust, but it affects the trust,\u201d James said.<\/p>\n
\u201cThe next three years plus is going to be so dire.<\/p>\n
\u201cIf you\u2019re a grapegrower, you\u2019re not paying tax for the next five to six years. Because the losses you\u2019re making this year, next year, and the following year will take five years to unwind in terms of the prices they get per tonne and what they can produce.<\/p>\n
\u201cNo grapegrower can afford to spend money on anything extra, they\u2019ll be looking at how they can cut costs. That affects everything, every person in the economy.\u201d<\/p>\n
He said he would be interested in how upcoming rating valuations could impact his clients\u2019 rates bills, particularly if their properties were valued lower.<\/p>\n
Wine Marlborough general manager Marcus Pickens says it\u2019s no secret Marlborough\u2019s wine industry needs to rebalance supply with demand. Photo \/ LDR<\/p>\n
In the past few years their property values had nearly doubled, and they had been paying up to 40% more rates to the council as a result, James said.<\/p>\n
\u201cBut those land values are coming back 40% from what they were … without a doubt.\u201d<\/p>\n
James said if ratings values were not pared back, his clients would be \u201cdoomed\u201d and the impact on Marlborough\u2019s economy would be \u201cworse than after [the] GFC [Global Financial Crisis]\u201d.<\/p>\n
\u201cI don\u2019t know how you square that on the ratings things, I\u2019ll be very curious to see … that\u2019s your issue as councillors to work out.\u201d<\/p>\n
Civic Theatre Trust chairman Kevin Moseley quipped: \u201cI told you he was the Grim Reaper.\u201d<\/p>\n
Councillor Gerald Hope, who chaired the committee, thanked James for his comments.<\/p>\n
\u201cThis is the reality of what we\u2019re dealing with when we start to finalise our budgets,\u201d Hope said.<\/p>\n
Wine Marlborough general manager Marcus Pickens told Local Democracy Reporting on Wednesday the industry had been open with the council about its challenges.<\/p>\n
\u201cI would be surprised if anyone in that audience found anything that [James] said as a surprise,\u201d he said.<\/p>\n
\u201cThere\u2019s some challenges for us to rebalance that supply and demand.\u201d<\/p>\n
Pickens said he also expected ratings values on vineyard land would come down, but by how much would be up to the council.<\/p>\n
\u201cLand values are very closely tied to market performance and that is under pressure at the moment.<\/p>\n
\u201cWe\u2019ve been signalling this to council for a period of time as well because that rating model is based on land values.\u201d<\/p>\n
But the long-term outlook was positive, Pickens said.<\/p>\n
\u201cThere are signals that there is a lot of demand for New Zealand wine at the moment, which is great,\u201d he said.<\/p>\n
This year\u2019s harvest had benefited from good weather in the past month, he said.<\/p>\n
Similar to last harvest, grape growers would only harvest the best of the fruit as the industry strived for the \u201ccritical factor\u201d of rebalancing of supply with demand.<\/p>\n
\u201cThere\u2019s going to be a long road to restoring profitability, that is the big challenge. And that does take some time, to work through trying to rebalance, [and] remove unprofitable sales from the system.\u201d<\/p>\n
LDR is local body journalism co-funded by RNZ and NZ On Air.<\/p>\n