Daily Archives: August 5, 2017

DCC v LGNZ : questions about junkets and 2x dipping

Should Dunedin ratepayers and residents be worried about lack of performance at home.

****

Message received.
Sat, 5 Aug 2017 at 8:04 p.m.

[begins]
Ratepayers of Dunedin must have mixed feelings now that their Mayor has been elected to the position of President of Local Government New Zealand. Mixed, as some estimates of the time necessary to undertake this onerous role seem to indicate about 3 days a week. Representing more than 70 local authorities certainly would seem to take that time at least, and much of that time will be out of Dunedin in lobbying central government. Some of the ratepayers may think that it might not be a bad thing to have the Mayor paying attention to matters out of Dunedin, but some may be thinking that he should be in Dunedin as much as possible to undertake what has been, and should be, a full-time role.  It’s not that there aren’t pressing matters to deal with. The crumbled Aurora network and the resultant huge borrowing by the DCC company to bring the network up to an acceptable standard, the sad state of much of the infrastructure which now includes the Taieri Plain, the problems of not having dividend payments from DCHL, the prospect of another ratepayer funded swimming pool at Mosgiel when the private funding dissipates, the issue of the hospital – the list goes on and on and on.

Many mayors of much smaller local governments view their role as a full-time one and some may even wonder if the previous President of Local Government, Lawrence Yule, had been paying a bit more attention to local matters then the horrific situation whereby his local ratepayers were supplied with dangerous drinking water could have been avoided. Who knows, but we do know that Mr Yule not only had the Presidency of Local Government in his mind, but he was also eyeing up ending up in central government as the local National Party member.

All those things aside some practical questions arise.

If the Mayor is now also working as a President of LGNZ for say, 3 days a week, does his remuneration as Mayor of the DCC get reduced on a pro-rata basis? Does the position of President of LGNZ also attract an honorarium?  If so, should a pro rata proportion of that be paid to the DCC to offset the lack of availability of the Mayor to attend to his DCC duties? Or does the Mayor simply add any honorarium of the LGNZ role to his income as Mayor? And what of the role of the Deputy Mayor of the DCC? Does increased responsibilities to this role because of the absence of the Mayor lead to an increased honorarium?

I do note that the Mayor intends embarking on a national road show/tour to introduce himself to the 70+ local government authorities that he now heads up. Let us hope that this showcasing of the Mayor’s profile is done at a time when it is convenient and appropriate to those that are paying his wages. And I wonder what advice and guidance he will be giving to Mayor Dalziel now that the pro-rugby lobby is winding up to provide a covered stadium in Christchurch? What interesting times we live in.

[ends]

****

The Dunedin City Council Annual Plan 2017/18 indicates the Council will borrow an extra $100M during the next LTP period; this debt borrowing is fully separate to the Aurora Energy debt borrowing – and is not at all explained to the Ratepayers.

It was Cr Lee Vandervis who highlighted this massive extra borrowing at the full council meeting on 27 June 2017, when the council signed off (item 20) the 2017/18 Annual Plan. This query received No credible response from the mayor and councillors; or examination by the ODT reporter present.

Posted by Elizabeth Kerr

This post is offered in the public interest.

Advertisements

5 Comments

Filed under DCC, Democracy, Dunedin, Economics, Geography, Hot air, LGNZ, Name, New Zealand, OAG, Ombudsman, Politics, Public interest, Travesty, What stadium

Apartment hotel proposal has FATAL Flaws : ODT offers Flimsy Poll

Updated post.
Tue, 7 Aug 2017 at 2:58 p.m.

We (Dunedin) are confronted by a poorly detailed, plonk-down apartment building proposal that we suspect is fronted by an agent for Asian developers –it would not be unusual for such a proposal to be offered on the strength of tainted money looking for safe haven in the South Pacific.

Our gullible country.
The gullible shiny pants Grow Dunedin partnership.
Our ever so gullible city council under the leadership of cull-cat Cull.

A massively over-height apartment building with a frilly hard-to-read podium base is proposed —a building that may never see a five star hotel as the anchor tenant (never believe unquantified/unqualified pitches from used car salesmen, if all they offer is a Price plucked from the air).

Not so long ago large tracts of New Zealand land were bought and sold for glass beads and muskets.

A lot can happen between resource consent being granted and a deathly, failing, improperly costed build.

Is Dunedin City Council about to find out.

Beware the gift horse.
It turned out Dunedin disliked the hocks of the last one (41 Wharf St), ridden by a little cardigan-wearer. The local suits were paid to make the waterfront tower seem generous, rousing and necessary. Ha-haaa.

At ALL times, the Dunedin City Council MUST stay acutely awake despite its needful dependence on independent commissioners and independent professional advisors – the latter advisors, along with some council staff, appear to have greatly missed the Fact that the minimal concept plans presented for 143-193 Moray Place DO NOT provide a workable building; or a building compliant with district plan objectives, policies, rules, and anticipated environmental results ….or prevailing traffic standards.

Oh dear. ‘So much’ [$$$] for the independent advice. Yes, expensive use of expert and staff time to massage the applicant dream – to no convincing or winning effect.

Further, Dunedin City Council MUST be prepared to APPEAL the outcome of the decision-making process should it wish to AVOID being left with another expensive DEBT VEHICLE in the form of one unfinished and or leaky building …..as the collapsed companies, and dusty heels of run-away developers and construction personnel disappear back to Asian shores, far away from Lake Tekapo ….. dangerously constructed, whole or in part, as a further burden on beleaguered Ratepayers of this fair city.

“What a stupid thing to assume!” you thunder.
“How? On what grounds?”, you chide.
“Dunedin NEEDS a five star hotel!”, imperiously.

You think it’s that simple ??
You’re about to be done over, Buds.

The inference being, oh great apartment hotel supporters, that all that glistens in green-tinted glass is gold, or might be a five star hotel. Yeah right.

It never was. The gold, I mean.
The five star hotel, I mean.
A hoover-up of NZ cash to offshore parties who remain anonymous throughout planning and consenting, and construction and building operation; all supported by the errant notion of immigrant labour and (imperfect) imported materials.

You might as well ask now, How MUCH will the Dunedin economy make ($$$) on this “slap in the face” to the community owned district plan (statutory), and the (strategic) spatial and the central city plans which are publicly consulted policy directions informing the city council’s annual and long term plans.

Not much.

****

During five days of evidence and submissions, one knowledgeable submitter, Mr Russell Lund – well up on construction management, hotel building costs, the visitor accommodation market and investment patterns, and the risk and liability to local authorities in consequence – carefully outlined the quandaries which for various councils around New Zealand have become money-losing Unalterable Fact.

In the original written submission for himself and Suzanne Lund (affected property owners), Mr Lund asserted:

The “assessment of effects” is hollow and of no substance. Under the Act, the assessment of effects is required to be just that, an assessment of effects on the affected properties and tenants. Incredibly, the assessment makes no attempt to examine the effects on all the affected parties.

This, of course, is echoed in independently written and voiced submissions by many opposing the application; and curiously, it is underlined in evidence given by Mr Don Anderson (planning consultant) and Mr David Compton-Moen (urban design, visual amenity consultant), for the applicant.

My own submission to hearing states:

We can’t take what is offered [from the applicant] on trust, because it is incomplete and imprecise; therefore the assessment of effects is difficult to pin down to anything concrete and remains unhelpfully superficial – this was “the work” the applicant was to table for us, we thought, to generously persuade us that moving beyond the ‘norms’ of height in this Dunedin location has measurable benefits against other sites or, through strong honest examination of design alternatives for this site.

I am open to being persuaded. It is expensive to do that persuading. However, it has to happen in other city centres in this country. For an expensive building, isn’t it worth doing the budgeting for preparation of your case – to get the result you want, which is consent to subdivide and build. These are open questions but they lie at the heart of A for architecture as the practical art and science of building economics and professional practice. Behind and in front of the commercial facades, that must have depth of delivery. […] And so I come to the white building model here [a 3D-printed solid plastic model of the proposed building, of hand-held size, put into evidence by Christchurch architect Thom Craig], and the drawings presented by the applicant. There appears to have been too much time spent on merely diagrammatic ‘entreaties’ to architectural form and texture without hacking into 3D investigation. There is not one clear drawing of the way the podium can work for the public or the ‘retailers’ or ‘exhibitors’ – or indeed the people staying at the hotel, servicing the building functions and or using vehicles on site. We get an idea ‘about it’, a not convincing one, there is too much guesswork to do. And so the commissioners’ questions have been rather intense.

****

Now, back to the points the Lunds are making. In their original submission on the application, Mr Lund says:

7. I have serious concerns about the expertise and amount of resource that has gone into assessing the feasibility of the project. In the last year, the Otago Daily Times advised the developer, Mr Tosswill of Horizon Hospitality, had indicated that the cost of the project, which was then 200 rooms and 52 apartments was $50-75M. The proposal now is for 210 rooms and 66 apartments, which is not substantially different. The car parking and front of house areas are similar to the original application. The application confirms the hotel has a gross floor area of 20,835 m2.
In my opinion this hotel will be not built for anything less than around $100M, and this casts serious doubts over the viability of the scheme.
Evidence of this is found for the building costs of the much simpler 200 room 4 star Novotel Hotel being built at Christchurch airport after a competitive tender process (and utilising an Asian fabricated structural steel structure). It is well known in the building industry that the tender costs received for that very regular and efficient 7 level hotel were $4,500-5,000 per m2. The Novotel is a filing cabinet design, that is, it is a completely regular rectangular structure which provides the most efficient floorplates and the best wall to floor ratio, ie the least amount of exterior wall enclosing the maximum possible amount of interior space. The Novotel has no balconies.
The applicant’s proposal is far less efficient, and therefore more costly per m2, as it is effectively three blocks grouped around a central core, but the blocks themselves are not rectangular, but have recesses, and there is a significant amount of extra cost with most rooms having screened “smokers” balconies, which entails effectively, 2 exterior systems, one for the rooms, and another enclosing the balconies.

8. The application confirms there are 16,136 m2 of above ground (habitable or hospitality space) and 4,687 m2 of below ground, back of house / car park space. At a cost of $2,200-2,500 per m2 for the below ground floors, and $5,500 per m2 for the above ground space, the proposal has a construction cost of over $100m, excluding land, furnishings, design marketing, et al. The total budget excluding GST will be around $130M. A feasibility study will typically have to include a development margin of at least 20 %, preferably 25 %, if any sort of lender is involved. This means the end value of the project will need to be at or over $160M. If the best case scenario is adopted and Mr Tosswill is able to convince Chinese or other overseas investors to pay the current market value in Queenstown for premium, new managed hotel rooms and apartments of $10,000 per m2 – for a hotel with an unproven demand in Dunedin, it is still not enough.
Selling all the apartments and hotel rooms will yield about $90M, which is a long, long way from the $160M end value needed. The parking and lower public floor spaces on a yield basis will have a value of around $10M, that might get the project to $100M. Mr Tosswill in earlier reports stated that the value was around $90M, so while there is broad agreement on the likely end value, the estimate of the cost is not close to reality. Mr Tosswill may be planning to bring in a Chinese construction company who will park a retired cruise ship at the waterfront for the duration of the project and have their workers stay there, but they will be subject to the same minimum wage laws, working conditions and health and safety requirements that local companies face, which will dramatically reduce any cost benefit from using overseas labour. (The idea of having a cruise ship accommodating Chinese workers is not fanciful – the Chinese government offered to repair the damaged sections of SH1 after last year’s Kaikoura earthquake using that same method, and did not require any New Zealand labour resources, but the Government decided that this was politically unacceptable). One hopes it would be also unacceptable to have a Council endorsed project built using essentially, forced labour.

9. There is sufficient doubt around the financial viability of the project that the applicant should provide some evidence that the entire scheme is not in fact fanciful, but makes economic sense, and provide details about the proposed ownership model, which is highly relevant to Council, in light of their liability which is discussed below.

10. Mr Tosswill may think he is able to make savings from current building costs by utilising Chinese products, but many Local Authorities around New Zealand are very wary of various untested products as there have been many failures for which Local Authorities ultimately end up bearing the cost of.
This raises another issue which is the massive liability that the building control division of the Dunedin City Council will be exposed to, in relation to its building consent approval and compliance monitoring. The experience of the QLDC in recent years is extremely relevant : A large number of hotel and apartments have been built in Queenstown and the individual hotel rooms and apartments are sold off individually. A body corporate is then responsible for repairs and maintenance. The developer has no long term or permanent stake in the completed structure, and therefore no incentive to specify materials and pay for quality standards with the long term in mind. As Warren Buffet has said, “show me the incentive and I will show you the result”, and the result for QLDC has been an ongoing series of legal actions brought by Body Corporates against Council, alleging that Council was at fault in some form, and as they are the “last man standing”, the Council have inevitably had to pay substantial figures. [I have] experience of several of these, having repaired one major complex in Queenstown at a cost of several million dollars, and provided cost evidence in regard to two others, also in Queenstown in the last year. It should be remembered that QLDC has a 7 metre height limit, but despite this, on complexes less than a quarter of the size of the proposed hotels, the cost to repair has run to millions. QLDC has advised this year in the Otago Daily Times that it has now completely drained its reserve fund for remedial building work, and any further costs will need to come directly from ratepayers. It has spent $3.6M just on legal fees for remedial building liability cases, which will rise to close to $4M by the end of this year.

11. At the Hearing, in submission, some proposals will be presented to show how the design liability and weathertightness risk to Council and ratepayers can be mitigated in the unlikely event that the proposal is given consent and such consent is upheld in the Environment Court.

Proposal 1 : A bond be posted with Council to cover sufficient funds to get the building to completed weathertight envelope and have the podium and all external works completed in the event the project is halted.

Proposal 2 : The applicant provide a Owners Protective Professional Indemnity, and have DCC named as an insured party on the policy. This is to protect indemnify the DCC against any claims brought against them in relation the building consent process, compliance monitoring or any matter for which they are liable for.

****

The applicant tabled NEW evidence at the hearing, from Infometrics. At its website, Infometrics (NZ) says it “provides industry, regional, and general economic analysis and forecasts that assist organisations in making their planning, policy, and strategic decisions”.

In the Lunds’ submission to hearing under the subheading ‘Dunedin Hotel Economic Impacts – Ongoing GDP Effects’, Mr Lund says:

….Infometrics assume that the 64 apartments will all be in the hotel pool, but acknowledge this is unclear. This significantly increases the GDP contribution as it raises the income of the hotel by around 40%, assuming conservative tariff rates of $250 per night and $350 per night per apartment. Infometrics also assume that there will be no “crowding out” of the existing activity, ie ALL guests would otherwise have not come to Dunedin had this hotel not been there. This is an unrealistic assumption.
In my opinion this report is an example of tailoring assumptions to achieve the desired outcome.
At Section 2, the “impact” of the construction phase is estimated at $45.6M in total, but based on the “key assumption” that there is capacity in the construction sector to build the hotel without crowding out other investment”. This appears to mean that if other projects are delayed, there is in fact no benefit at all because $63M of other projects will simply be displaced by the alleged $63M cost of this project. History shows that in Dunedin, Clients such as the DCC, University and some private clients keep a close eye on the state of the market. Many Ministry of Education projects have strict cost guidelines, and will not proceed if they are over budget. There have been examples of work deferred in Dunedin when the market is busy, and the Post Office Hotel is one of them. The Owner Mr Geoff Thompson, deferred the construction of the hotel for several years when he first owned the property citing the overheated construction market, due to the construction of the $220M Milton Prison project in 2005-2007.
At the present time, there is a high level of commercial construction activity at present, witnessed by the fact that there are main contractors from outside Dunedin performing the 2 largest projects in Dunedin (The Dental School and the University Science 3 project). There is every likelihood some projects will be delayed due to the high level of activity.
The report assumes that 21.1M of the $63M, or a third of the cost, will flow into the local Dunedin economy. This would be on the basis that local companies and suppliers are employed, but this is far from clear, given the estimated cost of $63M. The only way the cost could be anywhere near this level is if virtually all of the materials were low cost imports, and quite likely a proportion of the labour cost component.
The only significant material that will be made locally is concrete, and it is only the basement levels that will be predominantly a concrete structure. If out of region companies were employed for work to do such trades as painting and carpentry, as they were at the Forsyth Barr stadium, then that figure will not be accurate.
Infometrics then ascribe $16.1M to the “second round of economic effects” but acknowledge there is some “leakage of spending outside the city”. If an outside main contractor, or even an overseas contractor completes the work, they will very likely bring with them their out of town networks of subcontractors and suppliers and there will be much less than the $16.1M as the second round of effects. Having completed many projects out of Dunedin, I have first hand knowledge of the negligible economic effect of construction on the region concerned. Generally, goods and services are sourced from habitual suppliers with whom there is an ongoing relationship, and only the small consumables are sourced from local suppliers.
Mr Tosswill should clarify what the intention is regarding the construction of the hotel, and if that is not forthcoming, then he should at least confirm what type and form of construction contract will be used as that perhaps more than anything will determine whether there is the possibility of a meaningful local business component.

On ‘Construction Cost’, Mr Lund refers the commissioners to the Lunds’ original submission, continuing with:

Further facts about construction
Examples of risk from imported products
FCC (Fletcher) budgeted to use Chinese sourced bathrooms in the Novotel Christchurch projects. Did not work. Has cost FCC $2M extra (unbudgeted) to get prefab bathrooms built locally in Canterbury. The cost is $26,000 per bathroom.
Chinese steel : there are 2 major CBD projects underway in Christchurch that are steel structures using Chinese fabricated steel. On one project the steel is 12 weeks late and on the other it is 16 weeks late. The Chinese suppliers had committed to make the steel, then out-sourced it to another firm without advising the contractor, and the delays have resulted. On one of these projects there is now legal action between the Engineer and contractor because of the nature of the steel does not conform to the specification.
There is a further major dispute litigation on another major project now completed due to extreme delays with the steelwork and external cladding. The project was around 10 months late, and the Owner lost the anchor tenant (The Government) due to the delay. That project was tendered on the basis of using a large degree of imported materials from China in association with a large state run Chinese construction company, but the project was so disastrous (financially and in terms of market perception), involving a loss of 8-15M on a $50M project, it has caused the company to withdraw from large scale commercial construction and focus on project management.
External Cladding : There are only a very small number of NZ firms with the capability to design and build the curtain walling, and they have a huge backlog and extremely onerous business terms that will not be acceptable to any funder or main contractor, so the Owner will probably need to contract with them direct, and take on this risk.

These important matters aside, the legal submissions brought to hearing by Ms Lauren Semple (for Millenium & Copthorne Hotels) and Mr John Hardie (for Misbeary Holdings Ltd) blew the application out of the water; so did the transport evidence to hearing by Mr Andy Carr (for Millenium & Copthorne Hotels) to which Commissioner Mr Stephen Daysh responded by asking if the problems (such as summit points, swept paths, access to basement parking, onsite coach travel, and truck travel as well as loading access) pointed out by Mr Carr in his assessment of the proposed building’s perimeter road were “fatal flaws”? Yes, was the direct reply. Refer article: Traffic problems at hotel (ODT 3.8.17)

The hearing is adjourned until 17 August.

All ODT can do is offer a flimsy and inconsequential readers’ poll.
Not Based On Reality. Go ODT! LOL

█ All application documents, reports, evidence and submissions for 143-193 Moray Place – Non-complying activity – LUC-2017-48 & Sub-2017-26 at this link.

Related Posts and Comments:
● 11.7.17 “Fat” gawky Hotel and Apartment building : Questionable design even with 4 floors lopped off
● 14.5.17 RNZ reports July hearings for proposed hotel apartment building [comments by Mr Tosswill]
● 4.5.17 Submissions close 10 May : Proposed 17-storey, est. 62.5 metres-high Moray Place hotel/apartment building
● 7.4.17 Proposed hotel *height and design* —the very least of it #sellingoursouls
● 5.6.17 Application lodged for FIASCO Hotel by Tosswill #DunedinWrecks
● 18.12.16 DCC set to take away CBD car parks without Economic Impact research
● 15.10.16 Battle of the hotels : DCC meat in the sandwich (unedifying)
● 5.10.16 Dunedin bauble #votecatcher
● 4.10.16 The Demon Duck freak show of partial ‘Civic’ information! Before voting closes! #Dunedin
11.1.16 Un hôtel. Dunedin.
19.8.15 Hotels ? Business ? [DCC lost +++152 fleet vehicles] —Cull in charge of building chicken coops, why ?
1.4.14 HOTEL Town Hall… Another investment group, Daaave’s pals from the communist state?
25.3.14 Hotel We LIKE: Distinction Dunedin Hotel at former CPO

Posted by Elizabeth Kerr

This post is offered in the public interest.

█ The following images are taken from Appendix 6 – Consultant Urban Designer’s Report – Appendix plans (PDF, 1.5 MB).

They comprise
● 2 cross sections – originally provided as applicant evidence by Thom Craig Architects Ltd, and
● 7 photomontages of anticipated views – originally provided as applicant evidence by Paterson Pitts Group (surveying, planning, engineering)

– to which new height levels have been added in the evidence provided by independent Urban Design consultant Garth Falconer for Dunedin City Council.

[click to enlarge]








7 Comments

Filed under Architecture, Business, Construction, DCC, Democracy, Design, District Plan, Dunedin, Economics, Education, Events, Finance, Heritage, Hot air, Hotel, Housing, Infrastructure, Media, Name, New Zealand, People, Pet projects, Politics, Project management, Property, Proposed 2GP, Public interest, Resource management, Site, Structural engineering, Technology, Town planning, Transportation, Travesty, Urban design, What stadium