Missed chances with Christchurch rebuild

Ongoing co-ordination issues between the Crown and Christchurch City Council are leading to missed opportunities and infrastructure rebuild delays.

“Overall, the funding approach has been a bit haphazard and an opportunity to set a new financing framework was missed,” says Raf Manji, Chair of the Strategy and Finance Committee for the Christchurch City Council.

He has called for focused engagement from the Government, “otherwise things are likely to drag on and we will end up with a sub-optimal outcome“.

Carrying out a shared funding agreement to support the rebuild has been riddled with miscommunication — most notably an 18-month long disagreement revealed in a report by the Auditor-General earlier this year.

Under the Horizontal Infrastructure repair programme for the city’s roads and underground pipes — between the Crown, council, and NZTA — the council has seen its share of the bill spike.

“The numbers have changed over time and the final agreed bill saw the council give up $111m,” says Manji.

Opportunities to pursue innovative funding opportunities were also lost. One option on the table was infrastructure bonds, an idea also being investigated for Auckland (and included as a possibility in incoming Mayor Phil Goff’s fiscal plan).

This could have involved a Crown guarantee to generate lower capital costs, but ultimately didn’t eventuate.

“The Crown could also have looked at a QE (quantitative easing) type process to fund the infrastructure portion of the rebuild,” suggests Manji.

The lack of certainty in funding has translated into tangible construction delays. One example is the East Frame housing development, set to add housing for a further 2200 residents in the central city. That project was supposed to begin this month, but was last week delayed indefinitely by developer Fletcher Living.

Another project notable for its uncertain status is the construction of the Convention Centre Precinct, a Crown project which Treasury ranked “red” in 2015, the lowest possible confidence rating. In their latest Major Projects Report, the confidence rating was upgraded to “amber”.

“Some benefits, such as regional and national economic development, are on track to be realised as expected, as these are largely driven by the Convention Centre facility,” said the report.

“It is not yet clear how the benefits expected from the balance of precinct will be delivered.

“The Treasury expects a high-level approach to this to be outlined to Cabinet in November.”

Successful completion of this project could be crucial for the economic development in New Zealand’s thirdlargest city.

“Christchurch Airport remains very keen to see momentum in regards to the Convention Centre,” says Malcolm Johns, chief executive of Christchurch Airport. “Since the announcement to proceed with the convention centre we have seen a number of new hotel openings announced and we expect summer 17-18 to see a material step-change in the number of hotel rooms.”

Manji agrees: “Its success or failure will have a major impact on the city centre and is therefore of major interest to the city.”

However, he still rates the Convention Centre “a major risk”.

Despite these sizeable bumps in the road, the primary body responsible for the infrastructure rebuild, SCIRT (Stronger Christchurch Infrastructure Rebuild Team), is entering its final phase and its programme is said to be 95 per cent complete.

“If you ignore the original timetable, which was over-optimistic, the new city is slowly emerging,” says Manji.

“Commercial stock in the central cty is fully supplied, most of the underground infrastructure is in and there is a sense of optimism about the opportunities ahead.

“However, there is still much to do and many projects that need finalising.”

In addition to the East Frame development and Convention Centre precinct, outstanding projects include the stadium development, performing arts precinct, cruise berth, the Red Zone, and the Accessible City transport system upgrade. “They need to be sorted out within the next 3-6 months and still present a major risk to the city and the Government, if they continue to drift,” says Manji.

Though many funding plans have caused frustration, one avenue for lower-cost construction funding that has been made available by the Government is the launch of the Housing Infrastructure Fund.

This takes the form of a contestable fund available to councils in the country’s highest growth areas.

Speaking at the time of its launch, Finance Minister Bill English outlined the rationale behind the special purpose fund: “Councils have strict debt limits which means some lack the headroom to invest in infrastructure now and then wait for future development contributions to recover the costs. The fund will help provide more infrastructure, sooner, by aligning the cost to councils with the timing of revenue from development contributions.”

Though this will reduce financing costs, the borrowing of these funds will still represent a liability on council books. This means such investments still tend to worsen debt ratios.

“My advice on avoiding this problem is for the Crown to fund and own the infrastructure, until such time that Development Contributions start being received,” says Manji.

“At which point, ownership and liability could transfer to council.”