Tuesday 7 August 2012

Christchurch Costs

The NBR's NZ Property Investor magazine has what may be a leak on estimated costs of some of the big ticket items in the proposed Christchurch plan. It's not online; I thank Hugh Pavletich for the tip. [Update: Hugh's been keeping track of all this kind of stuff at Cantabrians Unite].
But NBR NZPI has been supplied with figures by a reliable source who cannot be identified due to possible repercussions. The covered rugby stadium is tipped to cost  $506 million, the convention centre $460 million and the metro sports arena $227 million. Other elements of the plan make up the balance of the $1.6 billion.
By contrast the recent parallel city plan based on the "Share An Idea" programme with residents allocated about $200 million for a rugby centre, $150 million for a convention centre and $120 million for a metro arena.
According to NBR NZPI informant, the government has indicated it would come up with roughly half the money for the Rolls Royce plan. But subsequently there have been calls for the city sell assets to pay a greater share.
A community leader Reverend Mike Coleman described the scale of the plan as "bizarre."
"It's emporer's clothes stuff. To even talk seriously about a rugby stadium or convention centre at these prices is absurd. We are not a big city in the scheme of things, we are a large town of about 300,000 people. We don't want to end up stuck with millstones like the Dunedin stadium."
Pick up a copy at your local newsagent.

A city of a few more than 300,000 people is planning on building a stadium with capacity to seat about 10% of the city's population.

The Christchurch Star called last week asking for comment on how the cost for these sorts of things might be borne, and whether amalgamating the local councils might be a way of spreading the costs [yikes!]. I'd sent them this, but only got their voicemail requesting a shorter version after they'd hit the press deadline. So I'll put it here instead.

“It makes sense that Christchurch ratepayers, one way or another, contribute to the cost of enhancing facilities over what we had before the earthquake. Those costs should be met by a mix of longer term rates increases, debt issuance, and sales of existing assets that would have more value in the private sector than in the public sector. Trying to meet it all through current rate increases would unnecessarily penalize households, many of which are under reasonable fiscal distress where insurance is not enough to cover damages suffered. There are about 133,000 households in Christchurch; if Council is to be on the hook for $787 million [number the Star cited to me], the per-household cost is then just under $6,000; average rate increases on individual households would be less than that as rates paid by businesses would also increase substantially, but we should note that many of those businesses are also owned by local households.” 
“What is less clear is whether Council should really be spending large amounts of money on things like the planned Convention Centre or Stadium. The economic literature does not provide any strong support for that either kind of investment really provides any great benefit to a city, though you could make the case that that literature doesn’t typically look at cases where cities are trying to rebuild from earthquakes. I would hope that Council and the government might scale back their ambitions on both fronts. The plans for the Stadium depend on forced acquisition of property from people like the owners of Ng Gallery, who have been working very hard in their own way towards the Christchurch rebuild. When I take off my economist hat, I worry about the foundations of a city whose rebuild is based on something that’s awfully close to theft. And, when not hosting conventions, Convention Centres tend to be dead spaces. Wouldn’t it make more sense for Council to fund some overhead walkways connecting hotels that would want to be able to collaboratively host larger conferences than for Council to spend rather a large sum of money on a dedicated facility likely to be too large to meet typical future needs?” 
“I would also be very nervous about planned amalgamations of the local councils. Differences in regulations across the Councils seemed to help a lot in getting new residential construction going  after the earthquakes. Where Christchurch Council was too busy with other things to move particularly quickly to release more land for housing, Rolleston and Kaipoi were able to start expanding. Smothering that kind of ability for different areas to respond differently in the face of disasters removes some of our institutional robustness. Further, it only makes sense to spread any burden to Waimakariri and Selwyn to the extent that residents of both of those districts disproportionately make use of Christchurch-funded facilities; otherwise, any burden-spreading should come from the national government’s contribution to the rebuild. I would expect that simply having a higher fee-for-service in some of the new facilities for those not normally resident in Christchurch would make more sense than amalgamating the Councils.”


  1. I It is important for New Zealand and Christchurch people to see just how costly this political grandstand will be, so I linked this article to a facebook site, then across to blog site.

    Now this is tricky, because facebook is very possessive and precious, and je..sh, and they think they own everything that ever gets on to their site.Are we allowed to link to you, because I am not sure that you would be very pleased to know that Zuckerman facebook owns your work.It gets worser becuse everyone in Christchurch is going round sounding off aboutEconomics and when we get asked ' How do you know that' ; we just brush aside and say 'Eric Crampton my mate' and immediately we go from redneck idiot to suburban intellect.

  2. Ha! Thanks. The numbers there are from NBR's informant rather than from me. But if the numbers are right...yeesh.