12 Aug 2013

Mayoral candidate floats bond idea for buildings

9:27 pm on 12 August 2013

Wellington City Council member John Morrison believes bonds could be the way to fund earthquake strengthening of the capital's oldest and riskiest buildings.

The Public Trust building in Wellington.

The Public Trust building in Wellington. Photo: RNZ

The proposal would enable building owners to generate money through bonds administered by the council.

Mr Morrison said on Monday the key areas he has in mind to save and strengthen are Cuba Street and the Public Trust Building on Lambton Quay.

"Mainly, probably big fund managers would invest. So they would have security over the building and also security from knowing that the fund is backed by the city council and possibly by Government."

He said the idea has garnered support from government ministers including Earthquake Recovery Minister Gerry Brownlee.

Mr Morrison, who is running for mayor of Wellington, said the bonds would be implemented early in his tenure, if elected.

But one of the country's largest fund managers, Grant Hassell of fixed income at AMP Capital New Zealand, believes there are risks to the idea.

"Whether it's the council doing the borrowing or it's a stand-alone entity that's going to be doing the borrowing, there's going to be up-front risk.

"If there's an earthquake, you're putting 100 of the riskiest buildings in Wellington into one vehicle and ... you've got a very high correlation - they're all likely to have some degree of damage."

Mr Hassell said the council may decide to use its own money to fund the bonds.