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DCC Statement Re Dunedin Railways

Mayor of Dunedin Aaron Hawkins says the Dunedin City Council has agreed to financially support the mothballing of Dunedin Railways’ track and equipment so future options can be explored, as an alternative to fully closing the council controlled company.

Mr Hawkins says the Council’s decision came in the wake of Dunedin Railways’ revenue being slashed as a result of the Covid-19 pandemic and existing financial challenges at the company.

“Mothballing the company was the only realistic alternative to full closure. However, this still a heart-breaking outcome because under the proposal a number of jobs would be lost, which is devastating for those impacted and their families,” Mr Hawkins says.

“It is also a significant blow to an iconic and long-standing tourist attraction. Dunedin Railways, and particularly the Taieri Gorge Railway, is much loved by the Dunedin and wider Otago community.”

Dunedin Railways operates a tourist train on the Taieri Gorge and Pacific Coastal railway lines and provides other train services, mainly for charters and excursions. The services are particularly popular with visiting cruise ship passengers and international tourists.

However, with the business already facing some financial challenges, international borders closed for the foreseeable future and the cruise industry unlikely to recover until at least 2021/2, Dunedin Railways’ passenger numbers will be significantly reduced even post the Covid-19 national lockdown.

Dunedin City Holdings Limited (DCHL) provides leadership and oversight of Dunedin Railways and the other council controlled companies on behalf of the DCC.

DCHL advised the Council that continuing to run Dunedin Railways would cost approximately $750,000 per quarter ongoing through winter, with little hope of any significant revenue for at least another 18 months. The company is not able to sustain these costs and would quickly become insolvent without a significant contribution from its shareholders.

Mr Hawkins says the Council has therefore agreed to financially support mothballing the company’s assets to allow exploration of new and sustainable tourism offerings, rather than seeing the business close completely.

It is expected a small number of Dunedin Railways staff will be retained to maintain the company’s assets while in mothball. Another DCC controlled organisation, Dunedin Venues Management Ltd, will lead work to explore future options for tourism offerings based on DRL’s assets, given their experience in entertainment, marketing and tourism.

“The Council has asked for a report to come in advance of the Long Term Plan next year that will present future options for the railway operation, including restarting the business. The DCC and DCHL will then make decisions on initiatives and any proposed investment,” Mr Hawkins says.

In the meantime, the DCC has agreed to meet up to $1.05m of the ongoing costs of mothballing Dunedin Railways from 30 June 2020. These costs include the retention of a small number of staff and the storage and maintenance of key assets such as locomotives, carriages and power vans.

 

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