QLDC's potentially pointless $15 million gift to Lakeview developers

Analysis

Mayor Glyn Lewers loves a good ribbon cutting ceremony. In his mind it celebrates a positive move forward for the community as a new building, bridge or road is officially opened. But when the $15 million, strangely isolated, part of the arterial road (Stage 3) was opened two weeks ago there was no pomp or ceremony.

This section of Thompson Street has been rebuilt so that it is in fact the first part of Stage 3 of the arterial road, but there's a very real risk that the remainder of Stage 3 won't ever get off the drawing board. To add to the paradox of this project, the upgraded section of Thompson Street is right in the middle of the Stage 3 plan leaving it connected at both ends to the existing lower quality roads. 

Of course, like the over-budget $128 million Stage 1 upgrade, there were already roads in place where the massively over-budget arterial project is getting built - albeit with a tricky gap in the case of Stage 1.

So - why did the QLDC, without any funding from NZTA, spend $15 million of ratepayers money on a 300 metre section of upgraded road right outside the entrance to what will eventually be the $2 billion Lakeview luxury development?

In March 2020 QLDC councillors approved what was referred to as "some ancillary work to the lakeview infrastructure programme." The $15 million road project was justified then as follows:

"The justification for undertaking the ancillary projects concurrently with the subdivision infrastructure projects was saving future costs and/or averting works being done, in the short to medium term."

In other words the council decided to build part of the arterial road in advance in spite of there being considerable doubt as to whether Stages 2 and 3 of the arterial road would ever get the necessary NZTA financial support.

In another council report it's argued that the Thompson Street upgrade would facilitate bus services from Lakeview. It's doubtful though that the owners of say a $2.5 million Lakeview apartment or a $33 million penthouse, wll be hopping on the public bus service for a quick 100 metre jaunt into town.

The QLDC has further justified the cost of the road upgrade saying it will be covered "in the normal way" by development contributions from the Aussie Lakeview developers and rates. The rates part of the equation has already produced an extra increase in our rapidly rising rates bill but the development contributions are yet to be received. The council is eighteen months behind schedule in delivering the prepared development site to the developers. 

In any case the project is deeply under water in terms of the council's much hoped for profits. In fact Lakeview looks more like a massive loss making venture due to the speculative nature of the deal structure agreed under the sole delegated authority of council CEO Mike Theelen.

Mr Theelen has lost virtually every roll of the dice on Lakeview. He decided not to sell the Lakeview land, worth $42 million, to the developers instead opting to give them 20 years to pay for the land bundled in with a share of "super-profits" if those every occur. And then, to add insult to injury in terms of our local rates, Mr Theelen agreed to take on the full cost and risk of preparing the land for the developers, currently running at somewhere between $70 million and $100 million. The estimate was under $20 million before asbestos was discovered and other multiple surprises emerged.

A $33 million Lakeview penthouse - hardly the affordable housing that ratepayers were promised

The chances of the council ever recovering into positive financial territory from this highly risky deal look very slim indeed.

And the "affordable housing" argument used by Mr Theelen to justify the project to ratepayers seems like a distant, failed joke with the developers already having pocketed $100 million in advance Lakeview sales from mega-luxury apartments that may sit empty for much of the year.

The question has to be asked - was this just a clumsy and extremely expensive piece of council incompetence or is there a more complicated situation here that we still don't understand?