Rates not impacted by Pacific Apartments $29m settlement payout

In 2019, repairs at the 68-unit block were estimated at $16 million. Photo / NZME

Tauranga ratepayers will not be footing the bill for an almost $30 million settlement to historical defective building claims at an apartment building in Mount Maunganui, the council has confirmed.

The Pacific Apartments building at 8 Maunganui Rd was built in 2006 and was later alleged to have problems with weather-tightness, as well as structural and passive fire issues.

In a written statement, the Tauranga City Council said it and other parties had settled with the owners for a confidential sum on December 4, avoiding the need for a 10-week trial, which had been scheduled to proceed next year.

In 2019, repairs at the 68-unit block were estimated at $16m.

Decisions from the High Court at Auckland and Court of Appeal revealed the scope of the litigation involving allegations of serious issues.

The appeal court heard the case in October 2019.
The owners sought to defer the trial until full repair costs were determined but parties including the council, represented by Amy Davison, opposed that.

Council chief executive Marty Grenfell yesterday told the Bay of Plenty Times the $29,435,000 payout would not directly impact the city's ratepayers.

In the council's Annual Plan 2022/23 indicative draft budget, presented earlier this month, general manager of corporate services Paul Davidson stated there had been a "redirection" of finances from the council's stormwater fund to address unfunded debt from weather-tightness claims.

Grenfell said the stormwater fund had been created from targeted rates and the reappropriation of it meant the payout would not affect rates.

This was despite the budget also signalling a likely increase from the 12 per cent rise in rates to 13 per cent.

"This has no impact directly on the sum we are rating. We've reappropriated another existing targeted rate to pay back the debt that we've incurred," Grenfell said.

"Rates will not go up as a result of this settlement."

The building continues to be occupied.

The settlement did not include legal and technical expert costs, which were yet to be finalised, Grenfell said.

The Pacific Apartments building was constructed by head contractor Watts and Hughes Construction Ltd. It was developed by Asia Pacific Management Ltd and Lincon Pacific Ltd, removed from the Companies Register.

The architect was Avery Team Architects Limited, and the project manager was MPM Projects (2003) Limited.

In the statement, Grenfell said councils around the country have had to face similar legacy liabilities relating to building deficiencies.

Because of their regulatory role as building consent authorities, and ability to fund such liabilities, councils were often left to pay a disproportionate share of claims which should be jointly funded by developers, constructors or professional service providers, he said.

"We've opted to resolve this matter through mediation, which provides certainty to apartment owners who have been dealing with this stressful situation for a number of years."

In the statement, he said the council's regulatory approach had fundamentally changed since the early 2000s.

"In 2005, consenting and inspection activities were outsourced. Those activities are now a core part of our in-house regulatory function."