$147m budget blowout, Wellington Mayor Tory Whanau denies ‘financial crisis’

Inside the auditorium of the Wellington Town Hall during construction last year. Photo / Mark Mitchell

ANALYSIS

Wellington Mayor Tory Whanau has denied the council is facing a financial crisis, despite the city’s Town Hall earthquake strengthening and redevelopment project suffering a major budget blowout.

This is not to mention the Opera House and the Michael Fowler Centre recently being deemed earthquake-prone or the work under way on the central library at a cost of $217 million.

Wellington City Council has a growing portfolio of earthquake-prone buildings, which is just one of many pressures on its budget.

The buildings are expensive to fix. The biggest capital spend in the council’s most recent annual budget was $76m towards strengthening and improving the library.

The second biggest spend was $46m towards the Town Hall.

Whanau held a press conference this afternoon to announce the final cost for the Town Hall upgrade could be as much as $329m. This is an eye-watering escalation considering just last year it was thought to cost $182m after a string of other blowouts.

But Whanau started her press conference on another, but arguably related, matter.

She wanted to address claims made by Councillor Diane Calvert that the council is facing a financial crisis. Calvert sought legal advice to reveal councillors were told in a confidential briefing they needed to cut tens of millions if not hundreds of millions of dollars in capital expenditure.

Whanau said strong investment was still being planned for the city and promised she would not propose removing or deeply cutting services unless that was something the community wanted.

It was “simply not true” that the city was facing a financial crisis, she said.

Asked by the Herald how she could say that given the Town Hall blowout and other earthquake-prone buildings on the council’s plate, Whanau said the 10-year budget process, including public consultation, will allow the council to plan for the level of investment required.

“That’s what we want to reassure Wellingtonians on: that we are keeping all of this in mind. Yes, we are dealing with some very costly projects much like the Wellington Town Hall but I have full confidence in our council and our financial team to be able to map that out.”

Wellington Mayor Tory Whanau says it is “simply not true” that the city is facing a financial crisis. Photo / Mark Mitchell

But Whanau said sacrifices will have to be made.

“I’m not willing to say what we’d cut and we still have to have those discussions with the council and I’m sure there will be disagreements.”

Whanau was clearly frustrated with the situation: “I don’t really want to be spending that amount of money on a building when we have all these other issues,” she said.

Wellington City Council chief executive Barbara McKerrow said despite the blowout, there is still significant capacity to invest in the city’s infrastructure.

This could be accommodated within the council’s self-imposed debt ceiling (debt-to-revenue ratio) of 225 per cent, she said.

The council’s last long-term plan was agreed to in the “build back better” phase of the Covid-19 pandemic, McKerrow said.

Since then, economic conditions have changed and councils across the country have been shifting gears.

“The council has an opportunity to determine what it prioritises, what it slows down, what it starts, what it might stop and that’s normal for every long-term plan a council undertakes,” McKerrow said.

Asked whether this most recent Town Hall blowout would be the last one, McKerrow said, as a chief executive, she would never say if something will be “it”.

But she said the council has undertaken an extensive independent review to try to identify every possible risk.

Ideally, projects were entered into with risks well known in advance meaning the council could negotiate a fixed price contract with a construction company, McKerrow said.

However, no construction company in the country was prepared to enter into such a contract for the Town Hall because of the age of the building and uncertainty about ground conditions on the reclaimed land.

“The council had no choice if it wished to upgrade the building, but to enter into a contract where the council itself carries those risks,” McKerrow said.

Asked whether this was a red flag at the time the decision was made to go ahead with the project, McKerrow said: “I can’t speak for what the council of three terms ago decided to do.”

Georgina Campbell is a Wellington-based reporter who has a particular interest in local government, transport, and seismic issues. She joined the Herald in 2019 after working as a broadcast journalist.