Hamilton: Blow-out city - where the money went

By James Ihaka, Nikki Preston

The V8s cost an extra $30.4 million. Photo / Alan Gibson
The V8s cost an extra $30.4 million. Photo / Alan Gibson

Years of unexpected financial blowouts from large projects and events undertaken by the Hamilton City Council are taking a toll on budgets.

Ratepayers are now paying for council mistakes or oversights as the city takes a knife to its services and operational budgets to stop a debt of more than $400 million growing to $700 million in three years.

Hosting the V8 Supercars street-racing event is the largest cost blowout.

In 2006, the mayor at the tiime, Michael Redman, said the annual events would cost ratepayers $7 million over seven years.

In three years, hosting the V8s has cost the city $37.4 million.

Hamilton deputy mayor Gordon Chesterman is confident new systems being set up by mayor Julie Hardaker and chief executive Barry Harris in response to an Audit NZ report on the V8 event would ensure any future problems were picked up early on.

Mr Harris is investigating any other hidden costs or concerns over other projects, including the Claudelands Events Centre, the City Heart CBD upgrade and the Project Phoenix IT upgrade.

"Everyone makes mistakes - we are just human - but if mistakes are quickly identified you can get solutions and move forward," Mr Harris said.

He said reporting procedures related to the V8s were well below standard, but other council projects were on time and budget.

Examples he gave included Hamilton's $70.5 million ring-road upgrade and the completed $21.3 million Hukanui Rd to Tramway Rd Wairere Drive extension.

"With regard to other more high-profile projects such as Claudelands, the building of this came in only marginally over budget and on time.

"The city's ratepayers and stakeholders can be assured we are closely scrutinising the work of the council and looking after the city's business as they would expect us to."

Mr Chesterman pointed out not all projects had hiccups and said the $2.2 million hydrotherapy pool at Waterworld was a successful project that fell within budget.

Former Hamilton mayor Margaret Evans said there had been faulty or non-existent business cases paired with the council's excessive spending in the run-up to a recession.

Hamilton Citizens and Ratepayers Association president John Easto said he had little faith in the council's plans to turn the council around.

He believed that the council needed people with real business experience.

"If it had been a normal business rather than a bureaucratic organisation all of those senior managers would have been fired the very day the V8 audit came out."

V8s: Extra cost $30.4 millionHamilton secured the rights to the V8 Supercars street race in February 2006, and the first of a scheduled seven years of racing began in April 2008.

At the time, Mr Redman said an economic impact assessment for the race forecast a return in the order of $175 million over seven years.

He said the cost to ratepayers would be $7 million.

The Audit New Zealand report into the event, made public last month, showed the council spent more than $18 million on track infrastructure and host-city fees before signing the contract.

It showed that the full cost of the three events staged from 2008 to 2010 was $37.4 million.

Claudelands Events Centre: Extra cost at least $1.7 million The struggling $68.4 million Claudelands Events Centre revealed it was expecting to have an operating deficit of $1.7 million in its first year.

It had 168 bookings for the venue for the 2011-12 year - compared with its original target of 315.

The NZ Breakers basketball team said they wouldn't play pre-season matches there after tests showed "dead" spots in the centre's second-hand court.

The council was also asked to approve extra money for an air conditioning system in the exhibition halls and to upgrade older furnishings which had not been replaced.

Related costs, such as the carpark upgrade and power supply and drainage, were not included as part of the project cost.

The council staff said the car park and drainage needed to be upgraded anyway and the ventilation system had not cooled as expected.

Garden Place carpark: Loss $2.5 million and extra $200,000 for new entrance.The council stands to lose about $2.5 million on the Garden Place underground carpark in the central city, despite spending $3.5 million on reconfiguring it.

The city council bought the Garden Place carpark in 2009 for $9 million, financed by an interest-only loan, as a core part of the planned $3.7 million Garden Place upgrade aimed at revitalising the city's heart.

The council scaled back plans for its City Heart project after it unexpectedly had to install a large concrete slab estimated to cost $200,000 to $600,000 on Anglesea St to protect cables before the new entrance to the carpark could be built.

Waikato Stadium Lights: Extra cost $400,000 A mistake resulted in the council having to pay $410,000 for new floodlights at Waikato Stadium or risk losing its Rugby World Cup matches.

A council report said staff had mistakenly thought that a lighting strength of 1200 lux would meet RWC requirements, but 1500 lux was needed.

The oversight trebled the council's Rugby World Cup budgeted spending of $200,000 to more than $600,000.

Variation 21: Extra cost $227,000In October 2009, the city council proposed a planning change making it virtually impossible to build large retail and office developments outside its CBD.

But the Tainui iwi, one of the biggest landowners in Hamilton's CBD, took the matter to the High Court arguing that the council breached its duty to consult with it as the relevant iwi authority over the changes.

The council spent $227,000 of ratepayers' money defending the action, but the court found the city had failed to properly consult iwi. Tainui is seeking costs.

Waipa Delta: One of Hamilton's only river attractions ended business after a stoush with the council over the Waipa Delta's illegally-placed pontoons beside Memorial Park.

In May 2009, the council voted six to five to commit up to $300,000 to build a slipway at Horotiu, about 10km north of the city, to retain the steamer.

But its support was conditional on owner Mark Goudie removing the pontoons and also operating in the city for another five years.

Mr Goudie said none of his recommendations had been addressed and the Delta later set sail for dinner cruises on the Waitemata Harbour.

Project Phoenix: Extra cost $250,000 In May, the council changed a multi-million-dollar IT contract after the firm employed to do the work failed to meet its expectations.

The council and software company Civica had reduced, by about 80 per cent, its contract to lead Project Phoenix - one of the most significant projects the council had undertaken.

The change meant the council had to absorb $248,466 as part of its $12.8 million budget.

Hood St upgrade: Poor planning, project management, weather and incorrect supplies were blamed for the $5.13 million project finishing almost three months late.

- NZ Herald

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