The cost of everything and the value of nothing

News and views from New Zealand – Dennis Dorney

Shaking up Dunedin

On June 2nd Dunedin had a 4.7 magnitude earthquake. Its epicentre was about 30km away so no damage was done or injuries caused. Nevertheless it counts as an earthquake statistic so, Dunedin having an expectancy of one earthquake in about 1700 years, can now relax for a while. I mention this because Dunedin has the largest number of heritage buildings per capita of any NZ city and we depend heavily on the tourists that our built environment attracts to keep us from poverty.

Genteel poverty was not always our lot; these fine heritage buildings were erected following the Dunedin gold rush of the 1860’s , when for a while, we became the greatest city of NZ.

The buildings are solidly built to last for centuries, earthquakes excepted, but with odds of 1700:1 who cares? The government, sadly.

Following the Christchurch earthquake (which incidentally has a much higher earthquake expectancy) the government has panicked and has produced new regulations requiring all existing buildings to be earthquake-proofed.

In the case of Dunedin’s fine old buildings the costs of retrofitting will run into millions. The imposing Law Courts building will face a bill of well over $10 million and so has been virtually abandoned. Can it be saved? Only if we can provide a “business case” to justify its continued existence. In such a mind set the fact that the building is quite stable and is loved by residents and visitors alike will count for nothing.

Any port in a storm

It matters little that the experience of the Christchurch earthquake doesn’t bear out the Governments draconian solutions. The vast majority of deaths were not caused by old buildings, which are only a few stories high. Most deaths were caused by jerry-built office blocks that collapsed like a pack of cards.

There is evidence that inadequate supervision of regulations was a major factor here. Ironically that was also the cause in the leaky-homes fiasco, which I have mentioned previously and will cost NZ ratepayers many billions.

What deaths occurred in Christchurch from old buildings were mostly from the failure of decorative balustrades that such buildings routinely have. Fixing these more securely would cost little.

And why should the government should panic over the spending of large amounts of money since they don’t intend to pay the incoming bills.

Following the earthquake the government took over the responsibility for the rebuild – as indeed it should – but the financing of that rebuild was largely left to the market, meaning the insurance companies, as a result of which people are still haggling to get settlement of their claims years after the event, in the meantime living in cars or in poverty and squalor.

The government has now walked away from Christchurch leaving the Council of the city with debts of $1.2 billion dollars, which conventional economic wisdom claims can only be resolved by a sale of its assets.

The Council has proposed selling assets worth up to $750 million from it’s commercial holding company, including the Lyttleton Port Company, and Christchurch International Airport.

I could make a good case for arguing that when the government took over the management of the earthquake rebuild, it never intended to help the city to be restored to sound economic health – it took over the city for the prime purpose of asset stripping.

Blood letting at the Health Board

The Southern Districts Health Board (SDHB) is the southernmost DHB in New Zealand and came into being on 1st May,2010 with the blessing of this Government, which believes that bigger is always better, by combining the Otago and Southland Health Boards.

Its funding is based 95% on the basis of population, as are all NZ Health Boards. Some allowance is made for population demographics such as age, density and remoteness from major hospital facil- ities, but that allowance appears to be inadequate.

Since the merger the HB has always run at a loss that grows yearly. The current annual loss is about $26 million and the projected loss for next year is expected to be $42 million. It is not as though the Board has been prodigal. It skimps at every opportunity, with the result that by every performance indicator it is the worst of any HB. To compound its woes, its main building leaks like a sieve and must be urgently rebuilt. Like every NZ HB, the SDHB is required to cover its losses and any capital works funding by raising the funds on the open market at the going interest rate.

It’s proposal to trim costs by 5% across the Board has caused uproar from those remote areas which will be affect- ed most, because any loss of local services must mean commuting to Dunedin, whose own services are already stretched to breaking point.

Across the region at public meetings 100s of outraged protestors are attending to vent their fury. The proposal is untenable. The SDHB risks being replaced by a Government Commissioner, as in Christchurch, except that the SDHB is a wholly government entity, so asset stripping is not an option.

Does the fault lie with an incompetent Board or a stingy Government? A bit of both, I suspect, but one certainty is that the government has, from the beginning, trumpeted that it will balance its budget as evidence of its economic competence. It has failed so far and the bets are that it will not succeed before the next election. With each annual failure it has cut into its expenditure on social services. With the various HB’s it has cut to the bone.

We have an ageing population. There are a lot of votes to be lost among the elderly. I can almost, (but not quite) feel sorry for any Government appointee to the SDHB.

Dennis Dorney is an ERA member living in New Zealand