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Jumping the gun on a $180m spend

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by Lindsay Shelton
Mayor Justin Lester jumped the gun when he announced last week that the city council is “gearing up for a sod-turning in 2019” for the $180m Cable Street building designed to house a convention centre and Peter Jackson’s movie museum.

He announced this in the same media release which told us that his council had ended its support for the movie museum which was to have occupied two thirds of the new building.

It was strange that the mayor wanted the council to go ahead with the building, without the major tenant for whom it had been designed.

The council has been enthusiastic about the movie museum/convention centre combination for almost three years, believing the museum would attract extra convention business and more tourists. It voted in December 2015 to pay for the new building, at a cost of $134million. Nine months later it was still excited, and voted to pay an increased cost of $150million. Then came silence. Negotiations between the Jackson group and the council were not, it seemed, going well. Last December Jackson said there were 55 unresolved issues. And last week came the news that the two sides hadn’t been able to agree, and the museum project was off.

Which immediately raised the question: why spend $180m on a building without anyone confirmed to occupy (and pay the rent for) two of its three floors?

There were more questions.

When the council announced it had agreed to pay $150million for the building, it said the deal was conditional on having an agreement with the movie museum.

Without such a deal, the council expenditure was not valid.

As for the cost of $180million, this doesn’t seem to have ever been approved by councillors – it emerged in a DomPost interview with the mayor.

The mayor’s intention to start constructing the building next year raised other issues, particularly when he talked about the idea of a possible partnership with Te Papa to use a 1500sqm exhibition space for “internationally significant exhibitions.” A Wellington.Scoop reader did the sums and wrote:

The proposed 3-storey building was to be 16,700sqm with a ~6000sqm convention centre [1 floor] on top. Meaning the Movie Museum was approximately 10,000sqm (2 floors). Now we are told the “exhibition space” will be 1500 sqm. So what is happening to the remaining 8500sqm? To put it in context, 8500sqm is roughly the size of the new exhibition hall at the ICC in Auckland, it’s a big area.

Another challenge to the mayor’s plan was how the council would cope with the loss of rent that would have been paid by the movie museum. The Taxpayers Union said the annual rent would have been $3million, and it said ratepayers would be footing the bill. (As well as the $180million construction cost…)

Financial issues, indeed, seem to be the most serious challenge against going ahead with the building.

Andy Foster has said there needs to be “a solid business and economic impact case” for the convention centre:

I struggle to imagine how we would not have to pretty much completely rethink a building when the proposed occupier of 2/3rds of it is no longer participating. A 1500 sq metre exhibition space is a far cry from a 10,000 sq metre film museum. That should also mean a completely different set of costings.

And later:

This (convention centre) is now a new project. It will need to stack up on its own two feet. It must need to be substantially redesigned …The cost should be much much lower. The economic benefits will also be much much lower.

When they announced that they were withdrawing from the building project, Peter Jackson and his colleagues said

“despite the best efforts of all parties, the economics of the Cable Street location proved to be a challenge for the movie museum.”

If money matters couldn’t be resolved to their satisfaction, then the council needs to recognise that the economics of the $180m building without the movie museum are too risky for the city. The idea of starting work next year needs to be given up.

10 comments:

  1. pablito, 21. August 2018, 10:01

    Perhaps Lester has other plans that he feels don’t need to be looked at too closely. I have zero faith in our council.

     
  2. Tony Jansen, 21. August 2018, 11:32

    Secret deal doomed to fail from the start. Convention centres are a dime a dozen and I struggle to see how we could possibly ever fill ours to make it profitable. It will be a huge financial loss for the city and the ratepayers. Much like the other big ticket project championed by the mayor – the runway extension.

     
  3. Citizen Joe, 21. August 2018, 13:44

    Not another Business Case done by a Big 4 Accountancy Company paid for by rate-payers! Just call for expressions of interest and say that no Council money will be spent on the Convention Centre.

     
  4. Concerned Wellingtonian, 21. August 2018, 17:08

    I am afraid the Mayor is out of touch with reality and with Wellingtonians.

     
  5. KB, 21. August 2018, 18:31

    Would seem to be a couple of other possible contenders for the space formerly allocated for movie museum: a dedicated National Art Gallery being an obvious one, and rehousing the Great War Exhibition being kicked out of Massey another (although might not make as much sense long term). Other than that – just having it as a large exhibition space able to be used for bigger & longer exhibitions than Te Papa can handle, directly adjacent to Te Papa, isn’t the worst idea in the world.

     
  6. Lindsay, 21. August 2018, 19:34

    KB: I don’t think Te Papa has any spare cash with which to set up another art exhibition space; they’ve just spent over $8million to create a 35% increase in the art space in their own building.
    The Great War Exhibition needed a substantial government subsidy to cover its costs – when that was spent, they started charging an entry fee, which resulted in a slump in attendances.
    So neither suggestion would seem to offer a solution to finding someone who can afford to pay the rent (and the overheads) in the empty space that the movie museum decided it couldn’t afford.

     
  7. Traveller, 21. August 2018, 21:47

    KD: Divide the total $180million cost by three – that’s $60million per floor, or $120million for the two empty floors that don’t have any purpose since the movie museum pulled out, having found the project was economically challenging. The city would be ill-advised to go ahead with such a spend – unless it was totally irresponsible, or until it found a user (not the ratepayers) willing and able to sign a contract to pay the price.

     
  8. Geoffrey Horne, 24. August 2018, 9:48

    It’s all about risk and potential benefit. Almost every week Aickland announces a new project that will underpin their city. I can’t remember when the last such project was announced and went ahead in Wellington. We seem to think of hundreds of reasons why not, but very few why. Think Shelly Bay, airport development, new small stadium, the list goes on. The mayor needs to show stronger leadership.

     
  9. Pauline, 25. August 2018, 11:47

    In a submission msde in March 2016 re a Convention centre I referred the council to an article by Patrick Smellie in The Listener February 26th 2015 where he quoted an article by Texan academic Heyward T Sanders where he says “how limited and elusive the returns from Convention Centre investments have proven to be in the USA, despite a kind of arms race among cities to build more of them.”
    In August 2014 we questioned the council what research had been done to show how many conventions with 1000 or more participants had been held in New Zealand and pointed out there is already so much on offer at the Michael Fowler Centre, the Town Hall (at last being restored) Opera House, St James, Te Papa, TSB Arena and Shed 6 and many Hotels.
    I agtree with Tony Jansen “It will be a huge financial loss for the city and the ratepayers.”

     
  10. Mac, 2. September 2018, 13:33

    Neither central nor local government elected officials are even pretending to listen to or actually represent the public. Bring back Madame La Guillotine. It worked in France!