Will council fall short on rebuild?
The Christchurch City Council may have to revisit its multibillion-dollar rebuild cost-share deal with the Crown because of overly-optimistic predictions about its earthquake insurance payouts.
Last night, Earthquake Recovery Minister Gerry Brownlee criticised the council's "appalling" insurance and warned any change to the cost-share agreement would be a serious matter.
When the council agreed in June to contribute $1.9 billion towards the rebuild of the damaged horizontal infrastructure and the construction of the anchor projects in the new central business district, it did so on the assumption it would get its full insurance entitlement on quake-damaged facilities including AMI Stadium and the Christchurch Central Library.
It was banking on using the insurance money it received to help pay its share of the costs.
However, it has yet to reach agreement with its insurer, Civic Assurance, on whether several of its key facilities - including AMI Stadium and the Christchurch Central Library - are repairs or rebuilds and the new council is concerned that the insurance assumptions in the council's budget were overly optimistic.
Council finance committee chairman Raf Manji yesterday admitted that the council might need to re-think aspects of the cost-share agreement or find money from elsewhere if the insurance pay-outs it received fell short of expectations.
"The cost-share agreement has been negotiated in good faith and if the assumptions underpinning it change, we may well have to have another look at it," Manji said.
Brownlee said it was well known that the council's insurance was "appalling", but the contract was signed. If the council was going to renege on the cost-share agreement that was a serious matter. The matters would have been settled by now if it was not for "stalling" at the council end, he said.
"It's very hard to make progress when you get these shifting sand proposals. I really thought we had got past that."
Prominent facilities the council is battling to reach an insurance settlement on include the Christchurch Central Library. The council believes the library has been damaged beyond repair and wants Civic Assurance to pay-out the full $27.4 million the Gloucester St building was insured for. But Civic Assurance's loss adjusters maintain the building can be repaired.
The library is to be demolished because it sits on land designated by the Crown for the city's new convention centre. The council has handed over the land to the Government as part of the cost-share agreement, but it has retained its insurance entitlements.
Council acting corporate services general manager Diane Brandish told the finance committee yesterday that the council was in the process of trying to prove the building was a write-off by getting steel from the library tested to show it had been weakened as a result of the quakes.
She said the council was also still disputing with its insurer whether AMI Stadium, which was insured for $130m, was a repair or a rebuild. Civic Assurance had received engineering advice that the stadium could be repaired, but the council was continuing to engage engineering company Beca to prove that the stadium was damaged beyond repair.
Brandish admitted yesterday that negotiations with Civic were "mind-bogglingly slow".
When asked by Cr Yani Johanson whether the directors of Civic Assurance had responded to a council letter asking for swift action on settling outstanding claims, Brandish admitted it had not. "We have another meeting [today] . . . but in essence there is not a lot of progress being made."
However, Brandish said she would be "loath to recommend" that the council negotiate a global settlement with Civic at this stage as it still did not know the full extent of the damage to its facilities.
- © Fairfax NZ News
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