Deferrals could have high cost

The Dunedin City Council faces a double whammy of lost revenue and community anger - at least from some sectors - if it defers some or all of a list of major capital projects in an effort to save money.

The proposal to consider staging or deferring work on planned upgrades of the Regent Theatre, Otago Settlers Museum and the Town Hall/Dunedin Centre was raised by deputy mayor Syd Brown during Thursday's council pre-draft annual plan meeting.

• Deferring depreciation saving for council

The aim was to make a multimillion-dollar cut to the council's capital works budget, particularly over the next three years, to save money and lower the forecast rates spike facing the community.

The pre-draft plan had forecast a rates increase of 7.3% in 2010-11, rising to 10.9% in 2011-12 before dropping to 6.6% in 2012-13.

The rises would be fuelled by large capital projects, although cost-cutting at Thursday's meeting reduced the 2010-11 rise to 6.4%.

However, Cr Brown called for a report on options relating to the large capital projects, together amounting to tens of millions of dollars of capital spending, for the next council meeting on February 1.

He also urged councillors to be prepared to "bite the bullet" at the next meeting and make "hard decisions".

Otago Theatre Trust chairman Michael Shield said, when contacted, yesterday Cr Brown's proposal was "very frustrating" and work on the Regent Theatre should proceed as scheduled.

The council was to provide $4.4 million towards the cost of the theatre's $6.4 million refurbishment in the 2010-11 year, with the trust to raise the other $2 million.

The 10-month project would begin in October.

With the construction "window" confirmed, the trust was turning away bookings for the theatre, which meant reduced revenue.

"If things are deferred, then everything we are planning to have once we open up again may have to be deferred.

"The potential is there to lose more revenue if we have to cancel other shows," he said.

"The longer that goes on, the bigger the risk of shows not coming back to us.

"That's a concern."

Work is also already under way on the $35 million, four-stage upgrade of the Otago Settlers Museum.

Council community life general manager Graeme Hall said $18 million of the project's budget was already committed, with stage one completed, work under way on stage two and design work being done for stage three.

A further $17 million budgeted for the project - due to be completed in 2012 - was not yet committed, he said.

Any delay to stage four would slow the redevelopment of the museum's entrance, reception and shop, causing a drop in revenue, while inflation could increase project costs, he said.

Cr Fliss Butcher, a member of the council's Town Hall/Dunedin Centre working party, believed that project should proceed as planned.

She blamed the decision to fund the Forsyth Barr Stadium for creating the pressure on council finances, and said she would be "very frustrated" if the Town Hall/Dunedin Centre project became a casualty.

Deferring part, or all, of the Town Hall/Dunedin Centre project would cost the council revenue, with new bookings having to be cancelled on top of those already lost with the existing construction timeframe, she said.

Bookings were also being lost because the venue was not adequate for some potential users' needs, she said.

"The longer we leave it, the more income we lose."

Cr Butcher said the council also risked provoking more anger among some community groups, having already annoyed some with bookings forced to shift their events to other venues when plans for the refurbishment were first confirmed.

"If we were to muck them around again, I could fully understand why they would be upset by that."

Cr Brown said he accepted any changes would be controversial in some sectors but insisted it was time to make "hard decisions that aren't palatable to some people".

"I would like to have them all, but it's a matter of having them in a timeframe we can afford."

The report would allow councillors to properly consider the options and implications, including lost revenue, other opportunity costs and legal implications, he said.

Acceptable savings could be found through changes to one project, or "it could be more than one", Cr Brown said.



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