Treasury has warned Wellington's massive $6.4 billion transport plan is expected to cost significantly more than first thought, increasing the risk it may not be delivered in full.
Let's Get Wellington Moving (LGWM) was announced two years ago and includes doubling the Mt Victoria Tunnel, mass rapid transit from the city to the airport, as well as bus priority measures and better walking and cycling.
LGWM is a three-way partnership between Wellington City Council, Greater Wellington Regional Council, and Waka Kotahi NZTA.
The Budget Economic and Fiscal Update 2021, released today, said LGWM board partners
have indicated the indicative package is expected to cost significantly more than previously estimated.
This increased the risk the project may not be delivered in full, the document said.
"The ability to deliver LGWM in full also relies on local government providing its own share. Due to competing funding priorities of local councils, it is possible that central government is asked to contribute funding to LGWM."
Wellington City Council in particular is facing a heavy financial burden between its ageing three waters network, earthquake-prone buildings, and a $400 million social housing budget hole.
Greater Wellington Regional Council chairman Daran Ponter said the fiscal implications were real and there was no avoiding them.
"So we are either going to have to cut our cloth to the new fiscal reality, or we are going to have to find collectively between the three partners more money to reach the original objectives or design specs we had when we set out on this journey."
Ponter said that didn't necessarily mean projects would be axed in their entirety but it could include scaling them back.
He said land acquisition was contributing to cost pressures, with house prices skyrocketing.
"Just because we buy this stuff under the Public Works Act doesn't mean we're getting it for free."
Ponter is set to become the new LGWM Governance Reference Group chairman.
He will take over from current chairman Sir Brian Roche in a few weeks' time when the group next meets. The three LGWM partners have agreed to share the load over time.
In March, officials signalled LGWM was headed towards a budget blowout as they tried to get the troubled transport project back on track.
Transport Minister Michael Wood said today the Government remained committed to the programme, including its share of the investment needed to unlock Wellington.
"LGWM partners are yet to consider changes to costs and we expect to look at this when we receive the businesses cases for the rapid transit and state highway projects.
"Changes to the programme would need to be agreed by all partners."
In Wellington City Council's first briefing to Wood, as an incoming minister, the council said LGWM was unaffordable in its current form without new funding tools.
The document said the council wanted to talk to the Transport Minister urgently about LGWM's delivery and governance models, overall affordability, and potential new
funding tools to "decide whether any changes are required to ensure success."
A "health check" of LGWM, completed at the end of last year, revealed leadership problems, a detrimental culture, inadequate resourcing, and ultimately that it was at risk of failing.
These issues have started to be addressed though the creation of new roles and new staff.