In this missive I share my thoughts on, if I was still at the Council table, what questions would I have over how to vote on the Stadium. It’s always pleased me when people in Christchurch are arguing about an issue. It means they are engaged. This is healthy.
When such a significant issue as the stadium is being debated the sums involved are of such magnitude it is essential that the elected Council members proceed with great caution.
This is not an issue of left or right. It’s not about those who see the Stadium as a black and white issue. It’s not “if you want it then build it” regardless of the price. Or if you’re against it you will die in a ditch to stop it.
It’s an essential piece of infrastructure in a city the size of Christchurch. It goes without saying that many complex elements must be weighed up with such an important decision. There’s been a huge response to the citizens ideas on the build. I am disappointed that there has not been a proper random survey on the issue. That would be a good check on whether the submissions properly reflect all the population.
Despite the large feedback, at the end of the day, it is a financial and legal debate.
I sent a submission to CCC. I wrote it imagining that if I were still Mayor what would be the issues that I would need answered before I placed my vote one way or the other. Some of the advocates for this project can only be considered fiscally irresponsible. Promoting the expansion of the stadium by 5000 seats pushed Christchurch City Council’s finances into a new orbit.
Here is my submission and an explanation for each item:
I support the Te Kaha arena with the following provisos:
1. That peer reviews of the financial business case must be undertaken by a professional body reporting directly to the elected members of Christchurch City Council. The board of Te Kaha will have had peer reviews but has the Council had them as well.
An essence of projects, especially of this size, is to overestimate costs and heavily discount benefits. I would expect to see this applied to 20,000, 25,000 and 30,000 seat arenas. Public decision making is essentially about rationing. Money does not grow on trees, and we must have a facility which will keep Christchurch’s pride intact. Councillors must balance this stadium considering CCC’s ability to be still able to supply the sort of facilities needed elsewhere, like water, roads, footpaths, libraries and parks.
When we rebuilt our house after the earthquake, we had the funds which the insurance company had supplied, and we built within that budget. A budget was set for the stadium and was subsequently ignored. Why?
The CEO at CCC must be prepared to stand up at the meeting next Thursday and say that she has consulted with Chartered Accountants and Economists who are independent of CCC and who have confirmed the numbers which have been presented by the Stadium board.
This independent opinion must be written by a person, or persons, who do not depend on CCC for future work. Too often opinions are written by supposed professionals supplying a report which is what they think the requestee wants them to say. This type of behaviour is exactly what brings the accounting profession into disrepute. Once a decision is made seldom do institutions go back and check on the accuracy of the advice they acted on.
2. Has the contract for construction been peer reviewed by external lawyers who have reported directly to the elected members of Christchurch City Council?
This is possibly the most important question. I asked Rod Cameron who worked as a Civil Engineer in Sydney for 20 years for his opinion on this stadium build. Here is what he wrote to me:
These notes are a reflection on the proposed stadium, made in the current (July 2022) circumstances of projected substantial increases in costs. They are put forward without any prejudice as to the range of options currently facing the funders, future owners, and operators, but are focused on the contractual and design situation that should be acknowledged and understood before decisions are made.
The reflections are made from fifty years of employment in the construction sector, in design, construction and project management, including twenty years in the eastern seaboard of Australia, including large projects.
Eastern Australia is characterised by generally high levels of activity including several projects each year similar or greater size and difficulty than the stadium. With a wealth of construction expertise available to clients, designers and contractors take pride in reputation. Future workload even depends on it. That reputation includes proposing, selecting, and delivering best options on time and to budget, accommodating change and solving problems rather than passing them to the client.
Council should be aware such an attitude might not be present in Christchurch, where repeat business of large-scale complex projects will be highly unlikely.
Another feature of the stadium is its staged evolution, with each step dependent on prior design development and option selections.
Therefore, the contractual situation on which decisions are to be based will be very complex, requiring experienced interpretation and evaluation. The size of the project and its complexity will not have been experienced by more than a handful of contractors, designers and lawyers within New Zealand, let alone in the South Island.
None of the preceding is concerned with the very difficult assessment and prediction of usage, income, and costs of the facility, which exist in a period of substantial change in New Zealand and the world generally, from societal, economic and climate changes which are being experienced and predicted to continue with unknown boundaries.
For all these reasons, it is strongly recommended that Council take independent, specialist advice in defining options and making decisions about what to do with this project, at this stage. Nothing concerning this stadium is simple or stable. Councillors should proceed with more caution than the city has ever used within the last hundred years.
I have highlighted the part of Rod’s submission which demonstrates where the complexity of the contract rests.
New Zealand has had bitter experience with Australian construction firms. Just think of Transmission Gully which had a $850m budget which cost $1.25b. After it was completed “experts” said that they did not think that it would come in at the original price. Where were they when the public debate took place? Let that not happen in Christchurch. https://www.rnz.co.nz/news/national/440825/transmission-gully-never-likely-to-hit-initial-cost-estimates-review.
Closer to home. Te Pae, the Convention Centre, was supposed to cost $284m and instead cost officially $475m but I am reliably informed from sources that a decent sum can be added to that. An Aussie construction firm project.
These Aussies have turned NZ into mugs. We must be careful of them. Again, I say get a lawyer who does not depend on CCC for income to carefully scrutinise every line of the contract and to report directly to the elected reps.
The CEO at CCC should be able to put her hand on her heart and say she has obtained independent legal advice (not just the independent advice to the Stadium board) and she is satisfied that there are no clauses in the contract over which the Council will incur costs, or liability, which has not already been brought to their attention.
3. What are the contingency clauses in the proposed contract and what impact could these have on the rate level for Christchurch?
I believe at the Metro Sports facility the firm constructing the building has a full-time team working on variations. This is where contracting firms make their money. Adding additional costs. For those of us who have built houses, or commercial buildings, in the past few years, this has often been a budget killer.
I would expect the board responsible for the stadium will have built in contingencies as will the contractor. My question would be is it enough and what escape clauses have the contractors written in to protect their financial welfare? They aren’t in business to run a welfare agency. Are Councillors aware of these figures? Are they satisfied that they understand any potential cost over-runs?
- Which CCC projects would be abandoned if the stadium went:
- $50m over.
- $100m over
- $150m over
- $200m over
In the event of costs increasing what will have to be slashed at CCC to maintain financial equilibrium. It is important that this test be applied at the time the decision is made to either proceed, to pause or to stop.
2. What absolute guarantee would CCC have that any of 4 above scenarios would not occur.
3. What impact does this project either at the proposed level or increased levels have on the financial headroom for CCC and has this been externally verified
“Headroom” is how much borrowing capacity CCC must have available for any financial emergency. We needed this in the past decade with a major earthquake. When I left CCC we were in a net debt free position. That ensured we were able to weather the financial storm which followed, even if the insurance company was changed after my time and we subsequently ended up underinsured by a massive amount.
This test must also be externally verified, and the CEO should be able to say that they are satisfied that this has been undertaken.
If I were at the Council table and was not satisfied that with the answers to the questions I have raised above I would vote to pause the project. If I was satisfied that I had all the answers I would vote for the project to proceed.
It’s often said that comedians can often give better advice that supposed experts. Make a cup of tea sit back and watch what John Oliver once said about Stadiums. It’s a sobering watch.
Good luck, Stadium directors, Mayor and Councillors and CEO of CCC and her staff. Think beyond the chants and the lobbyists. We need a stadium. This city needs you to be all clear headed about the issue. For the good of the city ensure that you have your head and your heart connected.