Potential of cost blowout ‘low’
An Invercargill City Council report says the risk of cost overruns and further financial burden on ratepayers, beyond the suggested $46 million city block investment, is ‘‘low’’.
Councillors will meet today to deliberate if the council should invest a further $16m into the proposed city block development.
The council already committed up to $30m but a funding shortfall prompted developers, Invercargill Central Ltd, to ask if the council would contribute a further $16m to take its overall investment to $46m.
Through the consultation phase, some submitters raised concerns of a potential budget blowout during con- struction which in turn could result in the ratepayers being asked for more money to complete the project.
A report from council’s strategy and policy manager Rhiannon Suter says the current budget is consistent with available funding.
‘‘Council has satisfied itself that at this stage the risk of there being cost overruns or a financial burden on council beyond that identified in the consultation process is low,’’ the report says.
Invercargill Central Ltd is only completing stages 1, 2, and 3 of the overall city block development. Those stages include car parks, retail outlets, and food and beverage precinct.
The report also says Covid-19 should not impact the project budget, despite the ramifications of the virus which has included delaying the tenancy recruitment for the block.
‘‘Council is satisfied that the two major impacts of Covid-19, reduced interest rates, and increased risk around tenancies at this stage do not make a material difference to the project budget.
‘‘Council will continue to monitor the tenancy programme as part of its ongoing management of the risks associated with this investment,’’ the report says.
The makeup of the current equity commitment for stages 1, 2, and 3 is;
■ Invercargill City Holdings Ltd (council) – $25m.
■ O’Donnell family – $25m.
■ Geoff Thomson- $4m.
■ Provincial Growth Fund – $9.5m.
The PGF has contributed a further $10m through a loan, while the Community Trust of Southland has also committed to a $20m loan.
Thompson was initially planning to commit $25m to the project but pulled out after becoming frustrated in dealing with the council.
He left the $4m he had already spent on the project but it still resulted in an equity shortfall of $21m.
Council is considering if it will repurpose its $5m design budget and also invest a further $16m to make up that $21m equity shortfall.
A bank loan of about $50m, will be accessed to make the remainder of the estimated $165m project.
An application has been made to the Government’s ‘‘Shovel Ready Fund’’ but the outcome is unknown at this stage.