Wednesday, August 1, 2012

Poison pill

Imagine that you're in NZ Central Government. And imagine that you believe that local government in Christchurch is kinda hopeless. You know local government has had an odd fascination with expensive legacy projects. The mayor wants a light rail system with his name on it. And Council, rather than being satisfied with a perfectly functional temporary stadium, wants to hike rates or go into debt to throw money at a bigger one.

You know the literature showing that light rail in a city like Christchurch isn't particularly viable. You know the literature showing that stadiums provide no real economic benefit and that Dunedin's has almost bankrupted the town. Moreover, you know that most people in Christchurch strongly resent that big spending on stadiums be put ahead of other priorities (at least if whatever polling National's doing roughly matches what shows up in the Press's polling).

So, what do you do? Put the stadium into the big central plan. Not just any stadium: the most expensive option of those under discussion - a huge covered venue able to seat just under 10% of the total city population. Say Council has to come up with the funding. Then lean on Christchurch that it cover its share of the overall rebuild costs (stadium and convention centre, among other things) by selling other assets rather than by just issuing debt or raising taxes. You know there isn't much that Christchurch Council hates more than the suggestion that it sell Council-held assets. Finally, put the stadium in a spot where you're guaranteed to get substantial local opposition because it'll mean tearing down a heritage building that a local couple have just re-opened after investing substantial amounts of time, effort and money: a couple that are clearly willing to fight hard to keep it because they love it. And not just any heritage building: an art gallery venue that only just finished hosting a pretty popular exhibit. Arts aficionados will overlap substantially with heritage buffs. We all found out in the last month that the city's main art gallery will be out of commission 'till the end of 2013 because they're entirely redoing the foundations to add in earthquake shock absorbers; the proposal would have one of the few galleries left torn down before the main one is back online. The kinds of art folks whose approbation the Mayor, and the Mayor's wife, might seek may not be entirely pleased with him for tearing down a heritage building art gallery in favour of a covered stadium.

Am I crazy for putting maybe a chance in 5 that this isn't National trying to force a stadium on Christchurch but is rather the dad coming across the 8 year old with a cigarette and forcing him to finish the pack to see how well he likes it?
So you think the stadium at Addington that you can't fill isn't good enough, eh? You want a bigger more expensive one? Sure. Have a really big and really expensive one. But you're going to pay for it. Not the easy way with debt that could add to the country's systemic risk. But by selling the things you seem to hold most dear and by earning the shame of those whose approbation you value. Go ahead. Have it. Go on. 
It's likely entirely too subtle a potential play.

As for compulsory acquisition of the Ng Gallery: you can make a decent argument in favour of compulsory acquisition in the face of strategic hold-out problems where individual owners might try to extract the value of the project by refusing to sell except at a high premium. It's not a great argument because buying options can do the same job without coercion, but it's defensible.

Maybe I'm easily duped, or maybe the owners are some of country's better actors, but I can't watch the Campbell Live interview and believe that they're doing any of this to try to force the government into paying them some exorbitant premium for the place. They seem rather to put very real and very high value on it. It's hard to imagine anybody putting that kind of work into an old building in Christchurch just for expected financial returns; it's a labour of love. Compulsory acquisition to get around owners who place real high personal value on a property isn't a fix to a strategic hold-out problem - it's more like theft. And a city that's rebuilt on theft hasn't very sound foundations.

Update: And see Sam Richardson on the stadium and convention centre.

Update 1.5: The Stadium also would knock out one of the new Casels & Sons bars.

Update2: NotPC's linking to a clip from The Castle is apposite. I'm going to steal his work in finding the clip and embed here, but do click back to Peter there.

7 comments:

  1. Didn't the council recently reject - albeit by a narrow 8-6 margin - a proposal for a covered stadium? What is going on?

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  2. That's one of the things that puts me to 20% instead of 10%: put a far-more-expensive-than-wanted stadium into the plan to set expectations, then tell them they have to slit their throats to pay for it.

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  3. You need to walk me through this a bit slower. If the council decided they didn't want a stadium, why would anyone want to raise it as an option again? Actually, much more than an option!

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  4. Council said they didn't want a covered one; they still were looking at still-expensive-but-less-expensive options.

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  5. Got it. I put the probability at much less given repeated statements by the Prime Minister about the desirability of such a statement.
    I think your hypothesis assumes central government politicians are smarter about these kinds of things than local government politicians!

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  6. http://dimpost.wordpress.com/2012/08/01/new-christchurch-convention-center-will-contain-sports-stadium-which-will-contain-convention-center/

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  7. Spot on. It is just part of Nationals ideology of flogging off public assets. When the plan came out I said "the Govt is saying you have to have these expensive white elephants because we have built up this public expectation and then they will say sorry boys and girls but you can't load that cost onto the rates you are going to have to flog off your top assets."

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