22 May 2015

Council could be further burdened

5:27 pm on 22 May 2015

The Government is being accused of short changing the Christchurch City Council by refusing to pay anything towards a $400 million cost over-run on repairs to quake damaged pipes and roads.

A quake-damaged storm drain in Christchurch.

A quake-damaged storm drain in Christchurch. Photo: Wikicommons

The extra expense has been the subject of a Government ordered review.

Radio New Zealand understands that review has been completed and has found there is no cost over-run, and the extra money being claimed by the council is for improvements, rather than quake damage.

The council entered into a cost sharing agreement with the Government two years ago under which it pays $1.1 billion for the quake damage and the Government stumps up $1.8 billion.

The cash strapped council was pinning its hopes on the Government lifting its contribution to meet the $400 million cost over-run which came to light when the rebuild reached the halfway stage.

Insurance expert and lawyer Duncan Webb said it was unfair for the review to decide the Government should only be liable for replacing like for like.

"So the mere fact you're fixing 50 year-old pipes and ending up with new pipes, sure it's betterment, but you can't put back old pipes. So it's a real cost and it's a cost that must be met and it's a bit disingenuous for the Government to say well it's betterment and therefore in some way the council can avoid that cost."

Duncan Webb said almost every insurance policy made allowances for the extra cost involved in replacing old for new.

"Because you can't just expect a home owner, or any other insured party or the council to bear the burden of what can be very, very significant costs of replacing old for new because you simply can't replace old for old."

Labour's Earthquake Recovery spokesperson Ruth Dyson said following the quakes the Government made a promise to the people of Christchurch to help with the cost of rebuilding essential infrastructure.

"So if the Government is now saying 'we're not going to pay our fair share', I've think they've broken their promise and commitment to us, they've let us down and it's really unfair."

Ruth Dyson said the current council was handed a hospital pass by its predecessors.

"The previous council said 'we'll pay for whatever the Government doesn't pay for and actually we don't know what we're going to get in insurance or how much the damage is'. I think that was quite irresponsible to do."

The cost over-run represents a third of the $1.2 billion budget shortfall the council is trying to tackle via huge rates' rises and asset sales.

Green Party earthquake recovery spokesperson Eugenie Sage said leaving the council to come up with the extra money for its infrastructure was a deliberate strategy.

"The Government has deliberately boxed the council into a corner by declining to provide additional funding for horizontal infrastructure. It wants the council to sell assets, it's consistent with its asset sales programme at a national level."

Eugenie Sage said instead of selling assets the council should save money by refusing to pay for a new stadium.

The council and the Government declined requests for interviews.