Infrastructure spending to get boost of billions in May Budget

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$812 million will go towards repairing State Highway 1 around Kaikoura.

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.”

Source:

  • Audrey Young
  • NZ Herald
  • Photo: Mark Mitchell
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SkyCity Convention Centre design unveiled

skydesign2It will be smaller, more expensive and have a reduced capacity – but those behind the International Convention Centre say it will return much the same economic benefits and provide even more jobs.

They also confirmed no new economic modelling has been done since a 2011 report which estimated a $90 million return to New Zealand.

Initial projections of benefits from the ICC were 800 jobs on completion, 1000 jobs during construction and $90 million of economic benefits to New Zealand.

A new design was released today by Economic Development minister Steven Joyce and SkyCity chief executive Nigel Morrison. Visually, it is one level lower than the previous design but the thrust of the changes is around a reduction in size and capacity.

It’s a different convention centre from the one SkyCity mooted in 2011 when it edged out four competing bids to build the centre, winning on the basis of a promise it would cost taxpayers nothing but a change to the gambling law.

The Government signed a deal in 2013 for a $402 million trade with SkyCity – the value of building the centre against the benefits derived from the gambling law change.

But it then found itself looking for a redesign after Mr Morrison said the centre could cost up to $530 million and might need an injection of public money, prompting the Prime Minister to express concerns over an “eyesore” if extra money wasn’t spent on it.

NZICC_HobsonStreetView_620x310Mr Joyce said this morning that the original benefits projected by the Government and SkyCity held true because they were based around a projections of incoming business which had not changed.

“We’re completely relaxed the numbers we have got in front of us today are able to accommodate the sizes that we’re estimated at the time. There is no material difference to the amount of business the centre is able to attract.

“There’s no substantial change to those metrics. From the Crown’s perspective those variations in cost have gone up and gone back but they don’t make a difference because we’re not paying for it. They certainly make a difference to SkyCity.”

In the time since SkyCity was selected, changes have included the value of the convention centre. It has risen from $350 million in July 2011 to the agreed $402m when the agreement was signed in June 2013, to an maximum $530 million earlier this year. It has now been pulled back to a minimum $430 million with a possible top end of $470 million, to be covered by SkyCity.

The size of the centre has also wandered from the 5000 sq m maximum, stated in a memo to then-minister David Carter in April 2011, to the 3500 sq m maximum in the June 2013 Heads of Agreement to the 2850 sq m in the revised design announced today. As well as conventions, the new design could accommodate 4200 people for a single event.

Other changes – which the Government and SkyCity said amounted to a maximum 10 per cent reduction – were a drop from the 10,000 sq m exhibition space heralded by SkyCity in its 2011 proposal Government to 8700 sq m and the eventual 8100 sq m in the latest design.

skydesignThe new design was captured in an updated Heads of Agreement between SkyCity and the Government, which has seen more authority over construction and design handed to the casino company – subject to a line in the sand drawn by Mr Joyce and officials.

“What we’ve done is said, ‘here is the benchmark now and everything will be measured against the benchmark’. The arrangement is SkyCity can’t depart in any material way from this design today. It shifts the balance slightly.”

This means SkyCity will now have to work to the minimum requirements laid out in the updated deal. It will reduce the company’s ability to renegotiate, as it has since the original agreement was signed.

Mr Morrison said design changes, including a laneway between the convention centre and the new hotel SkyCity is building, would lead to an overall increase in jobs, even if there was a slight change to initial projections.

“If it has changed, it’s 1 per cent. I think you’ll find the number of people employed overall will be increased. The jobs will be greater under this scheme than they were previously.”

On the economic benefits, he said if there was any change it was “nominal” and irrelevant.

He said there was a benefit in reaching the agreement announced. “Part of the savings is being able to get on with it and avoiding future escalation.”

The final hurdle for SkyCity is the resource consent, which was lodged with Auckland Council in December. The panel considering the application has the option of putting it out for public consultation – or approving it with its own authority.

Mr Morrision said it was SkyCity’s preference the resource consent not be publicly notified,. “To do this, we need to get on with this.” He said if the plan was put out for public consultation, it was difficult to know how long it would add to the completion date or how costs would change in that time.

Mr Morrison said it was still not possible to know when the convention centre would be finished because the resource consent had yet to be decided. Beyond that, there would be a three-year build period.

There were no current bookings, but about 60 firm expressions of interest had been made.

He said the shift in location for the hotel to land purchased from TVNZ had added to the value of the deal by $28 million, the current value of the land. The sections, on which SkyCity’s hotel will now be located, were bought from TVNZ for $10 million in 2013 for the building of the convention centre.

Told Mr Joyce had called the new design “handsome”, Mr Morrison said: “Better than eyesore,” a reference to John Key’s comments in February.

Mr Joyce said Mr Key had seen the design and was happy with it.

Source:

  • NZ Herald

Race for convention centre deadline

A_060713HOSSPLCONVENTION1_620x310SkyCity has unveiled an artist’s impression of the proposed Convention Centre, but no start has been been made on construction, and no consent applications have been lodged.

SkyCity’s international convention centre is facing a tough deadline with nothing built, no land cleared so it can be built and no consents applied for so building can start.

SkyCity and the Government have a September 2017 completion date for the centre and a three-year construction time.

The date is specified in the contract between the two parties, in which the casino company agreed to pay $402 million to build the convention centre in return for relaxing of gambling laws.

And even if it were met, long-term booking dates for conventions make it unlikely any will be booked before 2019.

Sticking points appear to be design wrangles between SkyCity and the Auckland Council. The council has objected to some aspects of the design, including the air bridge SkyCity wants to link the casino and convention centre.

Economic development minister Steven Joyce said the deadline was “challenging”.

“It all depends on the process it has to go through for the Resource Management Act consenting process. That depends a fair bit on the design and how it fits into the permitted envelope.”

He said the September 2017 date was still the goal.

Mr Joyce said there had been no change in SkyCity’s contribution or the Government’s concessions.

The contract with the Government shows the gambling concessions take effect when building starts. It also shows the casino company has a lot of room to move the 2017 deadline, with years of grace before it is in breach.

Auckland Council economic development manager Harvey Brookes said staff were working with SkyCity to “help ensure the facility meets Auckland Council’s design aspirations”.

He said no consent had been sought, and it was not possible to know whether it would have to be publicly notified until the application had been submitted.

Conventions and Incentives New Zealand chief executive Sue Sullivan said bookings for large conventions were made four to five years ahead.

There was “significant interest” in the SkyCity project, but bookings wouldn’t come until building started.

“No one will start talking about a venue until they have good, firm dates.

“When they get firm dates, and some have said when the first sod is turned, then they will be out.”

A year after signing the contract, SkyCity doesn’t have an executive with a permanent responsibility for the project. The “project director” who started last November has recently left. A SkyCity spokeswoman said a new director was being recruited.

She said the company hoped to put a resource consent application in before the end of the year.

“The date of project completion depends on when resource consent is approved. An opening date will become clearer once resource consent has been granted.”

Source:

NZ Herald

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