How can we sign off to pay for half if we don’t know how much it will really cost?

Open Blog by Guardians of the Bays

In light of the looming Long Term Plan submissions due today Friday, April 17, our citizens group the Guardians of the Bays have kept delving deeper into the various questions we would have liked answered before the Council decides to sign us up to huge generational debt, rate hikes and asset sales.

A large chunk of these hikes (33%, or $90m of the WCC share in the proposed LTP increase, with another $60m coming from other regional councils) seems to benefit a private company (Infratil who owns the 66% of the airport shares not owned by the Council), who admits the extension is ‘not economic’ and thus not worth putting their 2/3 share of the money into. In fact, a recent article suggests that the commercial value of the extension is worth only $50m over the next 40 years and that the airport would need $50m a year in taxes alone from the airlines to pay for it!

With the Mayors in the whole Wellington Region now coming out (without going through proper Council consultation processes) in support to pay at least half ($150 million) of the proposed extension, it is an issue not just for the Eastern Bay residents, but for all of Wellington. The Council claims it will get a ‘mandate’ if the projects are approved for inclusion in the Long Term Plan. However, we dispute this so-called ‘mandate’ as it is based on a whole set of ‘overly optimistic’ assumptions or incomplete evidence.

To recap the main questions we would have liked answers to (see our first blog):

• What is the actual cost going to be?
• Who will pay for this?
• Which airline has committed to fly here long-haul?
• What is the problem we are trying to solve – why do we need another long-haul airport in New Zealand?
• How is the long-term economic viability of this project assessed and how likely is it to succeed?
• What are the specific risks of this project?

We have received lots of support for raising these questions from the public, as well as some ad hominen attacks by people unwilling to engage transparently in an open debate. Alas, so far, not a single of these questions has been addressed in a comprehensive way by the Council or Airport. Yet we are meant to sign off on a Long Term Plan which will hike rates by almost 50% in the next ten years and come up with $700m in what Councillor Helene Ritchie so rightly calls ‘badly-costed slush funds’.

So, let’s concentrate on the important question of ‘What will the actual cost be?’. We could not, despite some digging, find out exactly when this number first reared its ugly head, but it has been around at least since 2011. It stayed the same for extensions between 100-500m, to the North and the South, using road fill, or taking down the Miramar Hill, or even with highly sophisticated Japanese steel pylons. The magic number doesn’t seem to waiver, although in the last two weeks it has inexplicably blown out to $350m (for an extra 50m runway, which was suddenly thrown into the mix).

Now this raises one of the biggest red flags to us – we are not economists but we know how precise you have to be in your costings in order to get Treasury sign-off for large budgets (and rightfully so, seeing it is taxpayer money). In the world of the Council, however, such precision and clarity does not seem to be required before committing large amounts of ratepayer money both in terms of rate hikes and loans, with associated interest. This for a project which has, as BARNZ (the association representing the 20 major international airlines in New Zealand) called it ‘overstated the benefits whilst overlooking the costs’. Even the Chamber of Commerce, Fran Wilde, and National Government Ministers (all normally big fans of large, controversial infrastructure projects) – from John Key, to Simon Bridges and Steven Joyce – have said they would need to see a clear and valid business case and the commitment of at least one long-haul airline to actually fly here before agreeing to a funding package. Otherwise, Wellington rate payers will be left with, what John Key describes as, a ‘White Elephant’.

In fact, there is a suspicion that the $300m number came from a back of the envelope calculation based loosely on how much it costs to build a meter of motorway ($1m for 1m). Contrast this with Hong Kong Airport, also built on reclaimed land into the sea, where each 1m costs more like $5m. If both the Council and the Airport stick to this number – hoping to sign us up to this endeavour so when cost blow-outs invariably occur we’ll be told ‘it’s too late, we can’t stop now’ – who do you think will be paying for the increased costs? The figure has already suddenly increased to $350m without an explanation, so how do we know that the intention wasn’t always to expand it to 500m but the Council and Airport knew that ratepayers would balk at the half a billion dollar, or higher price tag?

The region’s elected officials are asking us to blindly sign off on $150 million dollars when the chances that this runway will cost ‘only’ $300m are close to nil – as it will be built into the extremely wild and hydroactive Cook Strait, involving significant reclamation to depths of more than 12m. Each, increasingly frequent southerly storm will wash away large parts of any clean fill dumped there (most likely along the marine reserve, and the Lyall Bay surf beach). A ‘massive breakwater’ to be built around the extension (not currently shown in any of the mocked up photos) would be an extremely difficult engineering feat, cause significant, irreversable damage to large parts of the South Coast and would very likely double the costs.

Treasury would never sign off on a business case where so little robust analysis has gone into what is a major infrastructure investment. Let’s not be chumps and give them our hard-earned rate money to wash out into the Cook Strait, before a comprehensive, independently peer-reviewed business case has been developed. If you would like to make a submission against this, or at least asking for answers to some of these questions before signing us up to a $90 million, and likely much higher, debt for a white elephant, put in your online submission here or email it to: longtermplan@wcc.govt.nz

Deadline is this TODAY. If you have any further questions or comments, please email us at guardiansofthebays@gmail.com