Finance Minister Steven Joyce will lift infrastructure spending by $4 billion more in the May Budget than previously indicated and an extra $7b in the following three Budgets. Of the $4b extra in next month’s Budget $812 million will go towards repairing State Highway 1 north and south of Kaikoura, which was damaged in the November earthquake.
Details of how the rest will be spent will have to wait until May 25, Joyce said in a formal pre-Budget speech to the Wellington Chamber of Commerce today. However, he announced a new debt target for the Government, to reduce net debt to between 10 per cent and 15 per cent of gross domestic product (GDP) by 2025. The current target is to reduce net debt to about 20 per cent of GDP by 2020; it is expected to settle at 24.3 per cent by the end of June.
On the issues of tax cuts, Joyce said the Government remained committed to reducing the tax burden “and in particular the impact of marginal tax rates on lower and middle income earners, when we have the room to do so.” Joyce also hinted at greater use of public-private partnerships (PPPs). Joyce said that the boost to capital expenditure would represent the biggest addition to the Government’s capital spending in decades.
“To put that into context, the net new capital allocated in the last four Budgets was $4.8 billion, of which $4.1 billion was funded through the proceeds of the mixed ownership model programme.” In between Budget 2016, the Government was forecasting just $3.6b in new capital spending between Budget 2017 and Budget 2020, which would now be $11b in new capital spending.
“If you add the Government’s budgeted new capital investment together with the investment made through baselines and through the National Land Transport Fund, the total is around $23 billion over the next four years, or an average of nearly $6 billion per year.” And we want to extend that further, with greater use of public-private partnerships, and joint ventures between central and local government and private investors.”
Joyce said New Zealand’s stronger economic performance flowed through to the Government books. For the first eight months of the current financial year, tax revenue was nearly 4 per cent ahead of predictions in Budget 2016. “Our surplus in the eight months to February was $1.4 billion. That’s more than $900 million more than was predicted in the [December] half-year update. “A growing and more resilient economy allows us to meet some of the pressing needs that the Government is faced with from time to time.”
But he said one of the biggest risks to the New Zealand economy were the “more insular” economic policies being pushed overseas and by the government’s political opponents domestically. “Many politicians, even those in New Zealand, want to be more protective on trade, slash immigration, reduce foreign investment, institute radical new environmental regulation, centralise wage bargaining, blow up our R&D [research and development] incentive system or stop much needed roading being built, and increase taxes. “That’s the opposite of a recipe for growth. That’s a recipe for stalling growth.”
Auckland is preparing for a new housing boom on the rural fringes of the city that will result in small towns like Warkworth, Pukekohe and Kumeu becoming mini cities. The city’s new Unitary Plan has prompted Auckland Council to lay out a new timetable for greenfield development costing $20 billion and, for the first time, a breakdown of infrastructure problems holding housing back. Today, the council’s planning committee will consider a report to allow for 120,000 new homes at six main locations in the north, north-west and south of the city. It is expected to be approved for public consultation between March 29 and April 18.
“It would be prohibitively expensive to invest in all future urban areas concurrently,” says an officers’ report about the need to provide transport, water, wastewater, stormwater, parks and community facilities over the 30-year-plan. Auckland needs about 400,000 new homes by 2041, many of which will be smaller townhouses and apartments built within the current urban footprint, close to public transport and existing amenities.
The Unitary Plan has increased rural land for housing from 11,000ha to 15,000ha, including “live zoning” some land earmarked for urban development in the future. This has led Auckland Council to rethink the sequencing of land for housing. Factors, like the completion of the Puhoi to Warkworth motorway in 2021, have brought forward housing plans in Warkworth, and soil testing at Takanini has pushed back 5000 new homes.
Planning committee chairman Chris Darby said the plan made it feasible to build 120,000 new homes but to make it real it has to be funded, which is a challenge for council, central government and Aucklanders. Darby said the council had to grapple with huge infrastructure costs – some of which was budgeted for, but not all. One idea in Mayor Phil Goff’s first budget is to target new residential developments with higher rates to cover the council’s heavy infrastructure burden.
Borrowing more money is not an option because the council is already up against debt levels which could cost it its AA credit rating and higher repayments. The Government, a critic of Auckland Council’s land supply pipeline for new housing, last month announced plans for locally controlled urban development authorities(UDAs) with compulsory land acquisition powers and fast-tracked resource consent processes.
Building and Construction Minister Nick Smith said the goal was to ensure enough urban land is available for housing, saying the UDAs need the powers to assemble parcels of land, develop plans, reconfigure infrastructure and build housing.
Darby said there had never been a plan for new housing in “greenfield” areas like the latest council plan. It made the timing of new developments clearer to owners of rural land and infrastructure providers and “probably put a lid on quick buck land speculation”, he said.
The six main rural areas identified for new housing are Warkworth and Silverdale/Wainui/Dairy Flat in the north, Kumeu/Huapai/Riverhead in the north-west and Takanini/Puhinui, Drury/Opaheke/Hingaia and Pukekohe/Paerata in the south. About two-thirds of the new houses are planned in the north and north-west and one-third in the south. The council is also sequencing new housing at a number of rural and community settlements from Wellsford in the north to Glenbrook Beach in the south. Other settlements include Albany Village, Hatfields Beach, Helensville, Maraetai and Clarks Beach. Water and wastewater are the main constraints holding back more housing.
In Kumeu/Haupai where the council already has plans in place for 1400 new homes – but plans for a further 6600 homes have been pushed back until after 2028 – Rodney councillor Greg Sayers is calling for an immediate start to a structure plan to cope with the changes occurring. Otherwise, he said, developers could introduce private plan changes and override where schools and other key infrastructure should be located for the community. Sayers supports the idea of running diesel trains to Huapai, saying the community desperately want a train service as an alternative to “horrific” traffic on State Highway 16.
Auckland’s latest plan to turn rural land into housing
Areas brought forward
Areas put back
Whenuapai (stage 2)
Drury West (stage 2)
Red Hills North
Warkworth North East
What’s planned and needed in the way of infrastructure
2012-2017 – Warkworth North (business)
2018-2022 – Warkworth North( 2300 houses)
2028-2032 – Warkworth South (3700 houses)
2033-2037 – Warkworth Northeast (1500 houses)
A new wastewater plant needs to be built at Snells Beach to service development in Warkworth North. Expected to take five-to-six years. Later sequencing of Warkworth South provides for the efficient staging of wastewater infrastructure. The Puhoi to Warkworth motorway is due for completion in 2021 and associated upgrades of local roads align with the sequencing of Warkworth North. Warkworth North-East occurs later to allow connections to the town centre.
2012-2017 – Wainui East (4500 houses)
2018-2022 – Silverdale West/Dairy Flat (business)
2033-2037 – Silverdale/Dairy Flat (20,400 houses), Wainui East (7400 houses)
Interim water and wastewater solutions can provide capacity in the short-term to service the live zoned area at Wainui East where there is a cap of 2000 dwellings at the Special Housing Area. Sequencing of remaining areas reflects the need for significant water and wastewater infrastructure, including a new water main from Albany and additional wastewater capacity at Army Bay. The proposed business area in Silverdale-Dairy Flat has been brought forward to provide local jobs, address transport issues and structure planning for this area is likely occur in 2017-2018 to live zone some business land in the short-term.
2012-2017 – Kumeu/Huapai (1400 houses), Whenuapai (1150 houses), Scott Points (2600 houses), Red hills (10,650 houses)
2018-2022 – Whenuapai Stage 1 (6000 houses)
2028-2032 – Kumeu/Huapai/Riverhead (6600 houses), Whenuapai Stage 2 (11,600 houses), Red Hills North (1400 houses)
The sequencing of work in the north-west is dependent on completion of a new $538 million ‘Northern Interceptor’ wastewater pipe to handle growth in this area. Interim solutions can meet the wastewater needs for the live zoned area of Red hills and the first stage of Whenuapai until the Northern Interceptor is completed in about 2026. Kumeu, Huapai and Riverhead have been put back to align with safety and capacity issues on State Highway 16, and completion of the Northern Interceptor.
2012-2017 – Walters Rd, Takanini (300 houses), Puhinui (business)
2028-2032 – Puhinui (business)
2038-2042 – Takanini (5000 houses)
The future urban zone is subject to significant flooding hazards and geotechnical constraints due to peat soils. Stormwater costs are high and further work is required to understand the viability of development in this area in the medium to long-term. It is proposed to put back development from 2027-2031 to 2038-2042.
2012-2017 – Hingaia (3070 houses), Drury South (1000 houses), Bremner Rd, Drury West (1350 houses), Bellfield Rd, Opaheke (300 houses)
2018-2022 – Drury West Stage 1 (4200 houses)
2028-2032 – Drury West Stage 2 (5700 houses), Opaheke Drury (7900 houses)
Proposed interim solutions provide wastewater capacity for initial development in Hingaia, Drury West special housing area(now live zoned), Drury West Stage 1 and Drury South. In the longer term, augmentation of the South and Southwestern interceptors is required to provide wastewater capacity for the full build-out of these areas, including Drury West Stage 2 and Opaheke-Drury. The later sequencing of Drury West Stage 2 allows for a new expressway between Drury, Paerata and Pukekohe, needed to alleviate capacity and safety issues on State Highway 22. Opaheke-Drury has been brought forward slightly as a result of developer interest, but a solution is needed to flooding constraints in combination with the completion of wastewater infrastructure before comprehensive development can occur.
2012-2017 – Wesley, Paerata (4550 houses), Belmont, Pukekohe (720 houses)
2018-2022- Paerata (1800 houses), Pukekohe (7200 houses)
No infrastructure or sequencing considerations given in council report.
Smaller rural and community settlements
Further geotech testing required due to instability in some areas. A new water source will be required to service the Future Urban Zone areas. These areas will also require an upgrade to the wastewater plan, which is likely to take until the early 2020s.
Upgrade to the wastewater outfall pipe is necessary to service new connections outside the existing service area.
Full build out of the Future Urban area will require new water services capacity and road upgrading.
Wastewater upgrades are necessary to service new developments and likely to take until the early 2020s. With limited water supply, large scale development will require new transmission lines from Albany, which is likely to take 10 years following commencement of design.
Further geotech investigation needed to manage slope stability issues and ensure effective drainage to overland flow paths and streams. The wastewater plant has recently been upgraded and can accommodate about 6000 people. This is sufficient for existing urban zoned areas and part of the Future Urban zone area. The Helensville State 1 areas is the closest Future Urban area to the wastewater plant. Watercare will monitor growth and review additional upgrade options when population nears the plant’s capacity.
The wastewater treatment plant will be upgraded as required in order to maintain discharge compliance and to accommodate growth.
The area has sufficient water and wastewater capacity. Structure planning will need to take cultural heritage and landscape values into account, consistent with the Mangere Gateway Project.
The remaining Future Urban zone is not anticipated to be development ready until 2030 due to transport constraints and market readiness.
A new wastewater outfall at Clarks Beach will be required to service new development, subject to a sub-regional wastewater discharge consent which has been applied for.
New development will depend on the new Clarks Beach wastewater outfall, and structure planning for the new area to be developed as a gateway to the village.
2018-2028 – $6.7b(North $2b, North-West $2.2b, South $2.5b)
2029-2038 – $9.7b(North $3.5b, North-West $2.8b, South $3.4b)
2039-2048 – $3.3b(North $1.3b, North-West $700m, South $1.3b)
This week contractors began the lengthy process of jet grouting the quakedamaged building’s foundations. They are using three grout machines that have been imported from Germany for the work, during which more than 1000 large concrete piles will be injected eight metres into the ground.
In the February 2011 earthquake the land beneath and around the Town Hall was severely damaged. Although the building itself fared relatively well, significant strengthening of its foundations is needed. Jet grouting has been identified as the most effective repair solution to address the land issues underneath the building.
‘‘Grout and water is injected into the ground at high velocity to create columns of soilcrete, which is soil cemented with grout. The columns will overlap and interlock to create an earthquake resistant underground wall of columns that will protect the building from soil movements,’’ said Project Manager Paul Youngman.
A total of 27,000 cubic metres of jet-grout concrete – which would fill 270 average family swimming pools, 37,500 bath tubs or 200 buses – will be used during the process.
A thick concrete slab will be laid over the concrete columns once the jet-grout work is complete, which will help to bring the Town Hall up to 100 per cent of New Building Standard.
Contractors have spent five months preparing the site for the jet-grouting work, which is expected to be completed in June next year. It is the first stage in the $127.5 million repair of the Town Hall.
Christchurch City Council anchor projects unit manager Liam Nolan said the restoration work would ensure the Town Hall could continue to be enjoyed by Christchurch residents for the next 50 years and beyond.
‘‘The Town Hall is one of the city’s most treasured civic and heritage buildings and this restoration work will ensure it is better and stronger than it was pre-earthquake. Starting on the Town Hall foundations marks the culmination of four years of work. This has included engineering assessments, going through a tender process and appointing a contractor to undertake the restoration work,’’ Nolan said.
‘‘By the time we’ve finished work on foundations, the ground underneath the building will be significantly stabilised, ensuring we can get on with the rest of the work needed to restore this building to a world-class facility that can be used for many years to come.’’ .
The restoration of the Town Hall, which also includes a significant upgrade and refurbishment of the facility, is due to be completed in 2018.
Construction activity in Christchurch may well have plateaued, but rumours of the demise of the earthquake-induced construction boom have been greatly exaggerated, says Hugh De Lacy. You can’t drop $40 billion in insurance and government money on a region of fewer than half a million people without creating a construction boom, even if initially most of the money is spent on urgent demolition and repairs. Once those two phases were completed, new construction would continue to drive the regional economy for years to come.
That would seem to be the wisdom derived from Canterbury’s recovery from the earthquakes of 2010-2011, and rumours that the reconstruction phase has run its course and there’s a rapid wind-down in effect simply can’t be substantiated. The fact is that while most of the demolition of buildings, and the repair and reconstruction of infrastructure are well advanced, and despite Fletcher Earthquake Recovery (EQR) winding up its $4 billion residential repairs programme at the end of this year, construction is still booming in Christchurch and throughout the Canterbury region.
That’s not to say there isn’t a shakedown under way, and that a lot of smaller companies are dropping out of the game, especially in the painting and decorating niches of the building construction sector. But according to John Ombler, acting chief executive of the Christchurch Earthquake Recovery Authority (CERA), there’s still growth in overall rebuild construction.
“The forecasts tell us that we can expect peak activity in construction through to about 2017, before an easing expected in 2018,” Ombler told Contractor. There are, however, variations in the level of activity of the various construction sectors.
“For example, EQC’s [the Earthquake Commission’s] Canterbury home repair programme is largely complete [but] at the same time there is still considerable repair and rebuild happening, and a huge amount of public sector work still in the pipeline.” This includes schools, tertiary institutions, health facilities like Christchurch hospital, the Metro Sports Facility and the East Frame residential neighbourhood. “We have just seen the opening of Christchurch’s new $53 million Bus Interchange, and work on the Justice and Emergency Precinct is well progressed.” Ombler said that overall building consent figures are on “a steady upward trend that we have seen every year since 2012”.
He noted that SCIRT, the Stronger Christchurch Infrastructure Rebuild Team of leading contractors charged with the rebuild of the city horizontal infrastructure, is 70 percent of the way through its work programme. “Indicators such as economic growth and employment continue to show Canterbury leading the performance of major centres in New Zealand,” Ombler says. That may well be the case overall, but at the lower end of the food chain there are persistent reports of smaller entities falling over or copping out.
Paul Robertson, the principal of mid-sized construction and earthworks company Civil and Land, based in Amberley, North Canterbury, reckons there’s a slump in the work available for companies like his, which has a permanent workforce of about 20.He cites the case of the Hurunui District Council, the northernmost of the three districts and the city affected by the quakes, tendering out a five to 10 year road maintenance contract. “I’ve never seen so many contractors apply for it: you usually only get two or three, but 12 main contractors have applied for this one – which just shows there’s no confidence in the rebuild because contractors are now looking for work in the longer term,” Robertson said.
However, he did cite meeting health and safety (H&S) and compliance measures as a major burden for smaller firms. Fletcher EQR’s arrival on the local residential scene turned it upside down with its insistence on big-company H&S and compliance standards, and its assigning work to only those contractors and subcontractors who had passed through its induction process. Even in things like traffic management, small companies are struggling to get employees formally qualified to put out traffic cones, just so they’re entitled to tick the appropriate boxes on the paperwork. “Everything is bits of paper today, and if you don’t pull your bits of paper out you don’t get started,” Robertson says.
But while painters and decorators might be abandoning Christchurch for the fairer fields of Auckland residential construction, they’re not flooding car yards with second-hand ex-leased utes at Christchurch Airport as one rumour has it. David Crawford, chief executive of the Motor Industry Association of New Zealand, was quite upbeat when contacted by Contractor.
Sales figures of light commercials are still “staggering” nationwide, having gone up 25 percent in 2013, 19 percent in 2014, and 14 percent in the year to date. Crawford says luxury vehicle sales, the lead indicator of demand changes for new vehicles – which forewarned of the 2008 Global Financial Crisis by slumping 12 months before it, and afterwards began to recover about 10 months before the rest of the market – were still going strong, up “very slightly” this year compared to last.
And Dion Jones, general manager of Turners Auctions, the country’s biggest motor vehicle auction house, said repossessions and arrears in the light commercial sector were “as low as they’ve ever been”. This was despite companies “discounting the pants” off new vehicles to encourage buyers to ante up the extra couple of thousand dollars for a new vehicle rather than a used one.
So the shape of the Christchurch rebuild may be changing, and there may be challenges for small companies to adapt to the paperwork requirements of H&S and other forms of compliance, but the volume of work remains high. Brian Warren, chief executive of Christchurch’s Isaac Construction, summed it up by saying there may have been a drop-off in demand, “but it’s not as if it’s come to the top of a steep curve and dropped off the other side in a steep curve either. “That said, we certainly noticed a drop-off at the beginning of this calendar year. It’s come back a little bit now, but certainly it’s less than it was 12 months ago.”
That most telling barometer of economic activity, employment, bears Warren’s assessment out: Canterbury added 11,900 new jobs in the latest March year, though this was down from a peak of 34,000 added in the year to the end of last September, with most of those increases coming in the construction and food services industries.
An independent review into the cost of fixing the city’s horizontal infrastructure – the roads, footpaths, bridges and underground pipes – has concluded the $1.8 billion committed by the Government and the $1.14b from the Christchurch City Council should be enough to do the work required to restore functionality.
The cash-strapped council hoped the review by experienced Auckland civil engineer Elena Trout would support its view that more funding was needed.
The council estimated it would cost $3.2b to restore all the infrastructure, but Trout’s report has concluded it would cost $2.9b, $348m less.
Trout said the lower cost was a result of several factors including efficiencies gained from ‘‘changed and evolved’’ design standards for wastewater, water and storm water networks, better assessment of asset damage information, rebuild efficiencies obtained by Stronger Christchurch Infrastructure Rebuild Team (Scirt) and lower than forecast inflation of construction costs.
Trout said at the time the Cost Sharing Agreement was signed only 40 per cent of the assets had been assessed.
Christchurch Mayor Lianne Dalziel would not comment on the report until she had a chance to discuss it with Earthquake Recovery Minister Gerry Brownlee. No date had been confirmed for that meeting, a council spokeswoman said.
Brownlee would also not comment until he had met with Dalziel. The pair have had the report for several weeks, but have been unable to meet because Brownlee had been in Singapore, then Iraq. He then became ill.
He was hoping to meet with Dalziel in ‘‘the next week or so’’.
The council has previously said if it was not able to find more money, streets in west Christchurch could go without repairs for decades because money to fix the roads and pipes was running out. Scirt has been working from east to west, so it was likely the bulk of the unrepaired infrastructure would be in the west of the city.
Councillor Yani Johanson said the report meant the city’s infrastructure was not going to be fixed in a timeframe or to a standard acceptable to many people.
‘‘The message from this is – the expectation that things will be put back as they were is wrong. What it shows, because of the agreements signed, people have to put up with getting less back than what they had before the earthquakes.’’
Johanson said the council must have a good look at its infrastructure strategy in the next few months to see what it could afford to do. ‘‘What it means for people is their roads are not going to be fixed as they were.’’
One of the report’s conclusions included that applying a second coat of seal, which provided a thick durable layer over the road, was not eligible for funding against the Cost Sharing Agreement.
Brownlee has previously said the horizontal infrastructure network would be at least equal to what it was before the quakes, and rejected the claim the council would to be burdened with extra costs.
‘‘It will be a long, long time before they [the council] have to start providing for maintenance on any of the work that has been done as part of the Scirt programme,’’ he said in December.
Canterbury Employers’ Chamber of Commerce chief executive Peter Townsend said the council and the Government needed to come up with an option that would serve the best interests of the city. ‘‘We don’t want to be driving around on bumpy roads for the next 20 years.’’