Staff misled council over trail cost, but it is in 'the past'

Steve Ruru.
Steve Ruru.
No council staff will be reprimanded despite a damning report that says some knew the  Around the Mountains Cycle Trail would cost more than the original $8 million figure put to councillors, the Southland district mayor and his chief executive say.

"There have been shortcomings in the organisation identified through this process. We will be learning the lessons and making improvements," chief executive Steve Ruru said.

"It’s not about individuals," Mayor Gary Tong said.

"There is the past and there is the future. Steve and I are well aware the public are going to give us what for over this, but we’ve been pretty transparent with where we’re at at the moment."

Neither man was at the council when planning for the cycle trail began in 2009.

Mr Tong was elected in 2013 and Mr Ruru was appointed in 2014 after former chief executive Dave Adamson went to the Christchurch City Council.

Gary Tong.
Gary Tong.
The cost of the 175km trail linking Kingston and Walter Peak Station has spiralled to more than $14 million and is likely to climb higher. Earlier this year the Southland District Council (SDC) commissioned Deloitte to review the financial management of the project. 

Its 37-page report, released yesterday, found  governance and management failures.

The report, which cost between $65,000 and $70,000, said some SDC staff knew the project was going to cost more than $8 million, as an engineer’s  report in 2009 estimated the cost at $11.4 million, excluding consultation, resource consent, design and construction supervision costs, or $13.7 million when a 20% contingency was added.

"It is clear from both the documents reviewed and the interviews completed that the council staff who were involved in the preparation of the budget believed that councillors would not approve a budgeted cost of more than $8 million, so reduced the budget to fit within this cap.

"It is not clear ... where the $8 million cap came from.

"It is not clear if there was ‘messaging’ from [councillors] that they would not approve more than $8 million, or if council staff formed this view in isolation."

The report said the $8 million budget was poorly constructed.

Other key failures  included inadequate financial reporting, poor project management and  a failure to pro-actively manage  risks.

Councillors came in for criticism too, with the report saying they ‘‘did not appear to challenge or test the robustness of the $8 million budget’’, and ‘‘did not sufficiently allow for or monitor’’ budget risks such as construction delays.

It criticised the SDC for not setting up an elected members’ governance group until 2015.

Stage one of the trail is finished and work has begun on stage two.

The SDC has resource consent to build about 30km of stage two trail through the Oreti Valley, but Fish & Game has appealed because the route would take cyclists past an internationally recognised brown trout fishery. It wants the trail to follow the neighbouring Mararoa Valley.

An appeal has been heard in the Environment Court but the decision has not been released yet.

So far, the SDC had spent $1.295 million on resource consent and legal costs.

The report said that, of the original budget, $4 million was contributed from central Government and the SDC had said it would obtain the rest from grants and other means, requiring no ratepayer funds to be spent.

However, by last year the SDC was expecting to contribute about $9 million.

Mr Ruru said only some of the $9 million had been used so far but the total would be taken from SDC reserves or borrowed and paid back over many years.

He said mistakes had been made.

"Council seems to have become so engrossed in trying to make the cycle trail happen that it has forgotten to follow some basic project management disciplines," he said.

Mr Tong said the blow-out and the issues highlighted in the report were  disappointing but he believed the intention of those concerned was always to make the project a success for Southland and  keep the costs down.

"However, many of the risks that could have happened, such as Environment Court appeals on the consent and property access issues, have happened, and the costs have ballooned."

Even before the review, the SDC had  recognised the need to strengthen in-house governance, project management and financial management, he said.

Deloitte said reviewers  examined almost 6300 documents and interviewed many staff members.

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