INVERCARGILL City Council chief executive Clare Hadley says ratepayers should rest easy that there will not be a repeat of the Don St budget blowout as an inner city overhaul looms.
Mrs Hadley revealed this week that completing the ICC-owned business house development in Don St would cost ratepayers $4.5 million more than initially budgeted.
The Don St development was 100% ICC-owned.
The cost blowout was largely the result of the construction of a bigger building than was initially planned.
The council has also only managed 66% occupancy, in regards to tenants, despite budgeting for a 100% occupancy.
Mrs Hadley labelled the approval of a budget which had 100% occupancy as “naive”.
The council originally approved $11.9 million for the complex, which was officially opened in October last year.
The development has a cafe – the Auction House – and is home to various businesses, including McCulloch and Partners, Cruickshank Pryde, Craigs Investment Partners, Vodafone and Media Works.
Ratepayers now have an unexpected bill of $4.5m to deal with over the coming years as council prepares to find room in the budget to pay for it.
The news surfaced at a time when ICC was involved in another major property venture, in the form of the CBD redevelopment between Esk St and Tay St, bordered by Kelvin St and Dee St.
ICC had teamed up with the Richardson Group to form HWCP Limited, which planned to almost entirely demolish an inner city block and build a new $200m retail precinct.
Mrs Hadley said the budget blowout attached to Don St was a much different situation than compared to the HWCP Ltd setup.
Mrs Hadley said the council had strayed from its core business by taking the sole lead on the Don St property development and it had learned a valuable lesson as a result.
“We need to be very careful when we get involved in things the private sector is very good at doing.”
She said partnering with the private sector ensured the required skills would be in place.
“I don’t want to down play that the budget has been overspent [at Don St] and the tenancy is underperforming and there is going to be some ratepayer subsidy for a time.
“It won’t break even until 2021, and even then that is not really enough to be funding much of the debt repayments.
“But HWCP is a very different kettle of fish. Your readers can rest assured that we will be engaging the best and brightest to ensure the project management is superb,” she said.
Mrs Hadley started to uncover the extent of the Don St budget blowout soon after she started as ICC chief executive in March.
She also became aware that the added cost had not been explained to councillors in reports in 2015, 2016 and 2017.
“There is no apparent record of [councillors] approving either the increase in the size of the building or the increase in budget to construct it,” she said.
She said there needed to be more reliable and consistent reporting, as well as more robust monitoring when it came to council projects in the future. The Don St revelation this week coincided with confirmation council had another embarrassing budget blowout to deal with, in the form of the Chinese Garden at Queens Park.
The cost of the Chinese Garden project had risen from $600,000 to $882,000.