Another huge budget blowout for Queenstown arterial road

Queenstown Lakes District councillors are being asked to approve almost $18 million more spending to complete the already blown-out Queenstown CBD bypass road.

The latest increase brings the total budget for stage one of the project - linking Frankton Road to Gorge Road via Melbourne and Henry Streets - to $128 million.

While $50 million of that has been taken care of by the Government's shovel-ready fund, the contribution from ratepayers now sits at close to $80 million, $43.5 million more than the $36.5 million it had been planning to provide when the project begun.

Councillors are being asked to approve the budget increase at Thursday's full council meeting.

However the agreement entered into with Wellington to deliver this first stage of the arterial road places responsibility for funding budget shortfalls for the project on the council, and it leaves little room for councillors to move.

If they choose not to OK the latest required cash injection, and deliver a partially-competed road instead, central government funding could be suspended or even re-called. 

In a report to councillors, council staff say funding for the additional borrowing needed to cover the unexpected costs would mostly come from the Wakatipu Roading Rate - approximately 80 percent - with the balance coming from the Wakatipu Stormwater Rate, and the Queenstown Water Supply and Wastewater Rates.

The report warns this may not be the last budget revision for the project.

It says assumptions made by various parties when cost estimates were originally established "materially under-estimated the extent and complexity of the eventual works".

In general it blames Covid-19 related supply chain pressures, extreme staff shortages, and interest rates and construction cost escalation "not seen for decades" for the spiralling costs.

But complex construction methods, unforeseen risks and changes in specification for temporary traffic management are also noted in the report as contributors to the most recent bump to budget bottom-lines.

The project is being delivered by Kā Huanui a Tāhuna (the Whakatipu Transport Programme Alliance) comprising the QLDC, the New Zealand Transport Agency, Beca, Downer, Fulton Hogan and WSP.

The first stage of the bypass is expected to be open before Christmas, subject to council approving the latest spending increase.

There is no funding currently allocated for stages two and three, which would involve the demolition of the Queenstown Memorial Centre.

The full report and supporting documents related to Thursday's budgeting decision are available on the QLDC website here, while general details on the arterial road project are available here.

'I acknowledge how challenging that is for councillors': QLDC infrastructure boss

In a media statement this afternoon, QLDC infrastructure and property manager Tony Avery says staff are pushing for councillors to continue as planned with the project, despite the complications.

"I acknowledge how challenging that is for councillors in the current climate of uncertainty and funding constraints."

Mr Avery says the project partners have been focused on cutting costs where they can.

“A number of cost savings have already been implemented including rationalising the stormwater network and changing concrete footpaths to asphalt. We will continue to work together to look for further opportunities as construction continues."

Council chief executive Mike Theelen says stage one has "proven to be incredibly complex, against a backdrop of escalating costs affecting the entire construction industry". 

Just ten months ago, councillors approved a $21-million jump in costs.

Main image (Crux file image taken in 2023): Construction work on stage one of the Queenstown arterial route.