Cost higher than risk?

March 7, 2013

Proposals for changes to the system for dealing with earthquake-prone buildings have caused consternation among councils.

The proposals set out a consistent national approach to dealing with these buildings.

Essentially the proposals would require all non-residential and multi-unit, multi-storey residential buildings to have a seismic capacity assessment done within five years. Owners of buildings identified as earthquake-prone would then have up to 10 years to strengthen or demolish these buildings. . .

That might have looked feasible on a drawing board in Wellington but it’s not regarded as affordable or necessary by provincial councils.

The Government’s proposals to deal with earthquake-prone buildings place too much emphasis on the earthquake risk, at substantial cost, in comparison to other risks (both natural and other) that individuals and local communities face, the Dunedin City Council says. . .

The consultation document contains proposals to improve the earthquake-prone building system, in response to the recommendations of the Canterbury Earthquakes Royal Commission.

The proposals include substantial changes to local systems that could cost $1.8 billion in the southern South Island, according to an assessment commissioned by local councils.

They include a much greater role for local authorities in assessing buildings and much shorter time frames for either upgrading or demolishing earthquake-prone buildings. . .

The plan has also met with outrage from some civic leaders and landlords.

Dunedin Mayor Dave Cull, Otorohanga Mayor Dale Williams and Hastings Mayor Lawrence Yule, who is also president of Local Government NZ, have spoken out against the proposals, saying provincial towns and rural communities would be financially ruined.

Timaru Mayor Janie Annear has described the proposals as devastating. . . .

Waimate mayor John Coles says if the proposals are implemented his town’s main street could be flattened.

. . . “Already some organisations, such as churches, have chosen to vacate their buildings because of assessments showing the building’s strength is well under the current level,” he said.

“It is my fear that organisations and businesses forced to find alternative buildings because of their own policies may not find suitable accommodation and have to leave town.” . . .

The Waitaki District Council describes the proposals as ‘‘inflexible, unworkable and unaffordable”.

It has been estimated it will cost the council $2.5 million – 2% of total rates it collects – to assess at-risk buildings and the community or building owners $178 million to upgrade them.

Those details will be included in a submission the council will make on the Government’s proposed changes to earthquake prone buildings, a draft of which was outlined to councillors earlier this week.

The submission makes it clear the changes, as proposed, will place a heavy level of compliance and cost on the council and community.

Overall, the council wants to see greater flexibility, rather than a ”one size fits all” approach, with the community able to decide what level of risk is acceptable.

While agreeing improvements can be made in the light of what happened in the Christchurch earthquakes, the council has concerns with many of the proposals and timeframes, which may prove unaffordable for the Waitaki community.

It says too much emphasis is being placed on the earthquake risk, at a substantial cost, in comparison to other risks communities faced.

Ultimately, the solutions must be risk-based, workable and affordable for both New Zealand and local communities. . .

The Christchurch earthquakes have changed the way we regard earthquake risk and the government has to address issues raised by the Royal Commission.

However, risk and cost must be balanced, especially in smaller, less populated areas.

The proposals are only proposals and are open for submissions until tomorrow.


Some old mayors some new in south

October 9, 2010

Two southern mayors lost their seats in the local body elections.

Central Otago District elected Tony Lepper, with sitting mayor Malcolm MacPherson coming in third place behind another challenger Jeff Hill.

Clutha District’s new mayor is Bryan Cadogan who beat the incumbent Juno Hayes who was seeking a fifth term.

Queenstown Lakes District has its first female mayor – Vanessa van Uden . Sitting mayor Clive Geddes didn’t seek re-election.

Waitaki District re-elected Alex Familton with a majority of 1183 over the only serious challenger and former Deputy mayor, Gary Kircher.

Invercargill people gave Tim Shadbolt a majority of more than 11,000 over challenger Suzanne Prentice.

Southland mayor Frano Cardno was returned for her seventh term.

Gore mayor Tracy Hicks was not challenged.

Timaru returned sitting mayor Janie Annear for a third term.

Mackenzie District elected Claire Barlow as its new mayor by only 30 votes.

Further north I’m delighted Christchurch voters returned Bob Parker as mayor – and not just because he defeated Jim Anderton.

Len Brown beat John Banks to be first mayor of the new Auckland council. Voters also delivered a left-leaning council which disproves accusations from the left that uniting Auckland was a right-wing plot.

I think this means Robert Guyton, a regular commenter here, won a seat on the Southland Regional Council. If so, congratulations.


It’s not north saving south, urban paying rural

September 2, 2010

The government’s honouring the Deposit Guarantee Scheme which will return funds to people who lent money to South Canterbury Finance has unleashed a nasty stream of north vs south, urban vs rural vitriol.

It’s not supported by the facts and it may be partially fuelled by a failure to differentiate between depositors and borrowers.

The people who are getting their money back are the  depositors, the ones who invested funds in SCF. They came from all around New Zealand and overseas.

Timaru District Mayor Janie Annear said the guarantee had provided relief nationwide not just South Canterbury.

“South Canterbury Finance is a business which is much wider that just South Canterbury. The Government’s prompt response has minimised the impact of New Zealand’s shaky post-recession recovery.

“All investors, irrespective of where they live, will be pleased that the Government guarantee scheme has worked as promised.”

SCF chief executive Sandy Maier said only about a quarter of the investors were from South Canterbury and the rest of the country had benefited from the scheme.

“`Fifty five per cent [of the investors] are spread through the South Island, and around 40 per cent in the North Island and the rest in Australia and Fiji.

“Undoubtedly this has been a massive decision for the Government to pay the guarantee out and it will have let a lot of people, including those in South Canterbury, breathe easier. I am hugely thankful as well.”

If one group is likely to be under-represented among investors it is farmers. They don’t usually have much cash to  spare and if they do they generally put it back into their farms.

Then there’s the borrowers. They’re the ones who got loans from SCF. They too came from all over New Zealand and in an ODT interview  CEO Sandy Maier said:

South Canterbury was largely caught out by increasing its lending to property developers during boom time.

Many of those debts were never repaid, and it ended up booking losses of about $200 million.

Property development isn’t usually f arming. It’s much more likely to have been urban than rural and some of it was in the North Island, including Auckland.

In an interview with Interest.co.nz Maier said:

Speaking to interest.co.nz after SCF’s receivership was announced yesterday, Maier said he still believed the best value in SCF was as one. This includes its “Bad Bank” which holds about NZ$700 million worth of loans, and its “Good Bank” which holds about NZ$900 million of small ticket rural lending. Then there’s Helicopters NZ, a 79.7% stake in Scales Corporation and 33% stake in Dairy Holdings which were tipped in by owner Allan Hubbard earlier this year.

If the small ticket rural lending is in the “Good Bank” those borrowers are paying their interest and are expected to be able to pay back what they’ve borrowed when their loans fall due.

The 33% stake in Dairy Holdings  is one of the assets which will be sold to help recoup some of the money the government is putting in to the company.

If farms are among the businesses with loans which turn sour the farmers will be treated like other debtors. Finance companies are always lenders of last resort . If the farms have to be sold the farmers will almost certainly lose any equity they had. 

Taxpayers should be grateful the campaign to prevent land sales to foreign owners hasn’t yet gained much traction because limiting sales to New Zealanders will depress the price and reduce the amount the receivers get back.

SCF was a victim of its own success as money poured in it moved from its traditional lending to more risky ventures.

South Island farmers weren’t  responsible for bad decisions made by the company and none will be getting anything from the taxpayer  unless they had deposits with the company. In that case they’ll be treated the same way as all other depositors.

This isn’t a case of the north saving the south, urban people paying for rural mistakes.

 It’s a business failure which won’t be quite as serious for the wider economy as it might have been. Depositors all over New Zealand and overseas will get their money back and an orderly sale of assets will realise more than the firesale which would have resulted had the company been left to fall over.


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