Six months ago, a council staffer said a blowout on Christchurch’s new stadium “shouldn’t occur”. This week, confirmation came that the budget had soared by a whopping $150 million. STEVEN WALTON reports on what went so wrong – and where to from here.
The email arrived early on December 3.
Christchurch City Council’s media manager was letting us know that the project lead for the city’s stadium, Alistair Pearson, wanted to clarify something.
The day before, Pearson had briefed Stuff about where things were at with the covered, 30,000-seat stadium. The preliminary design was done and on the $533m budget. “The word ‘blowout’ shouldn’t occur,” he said.
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But the media manager was emailing through a new quote.
In it, Pearson said he still remained confident the budget would be met, but it added an all-important caveat: “…provided there’s no further significant increases in the price of steel and shipping, or disruptions to the supply chain.”
It was ominous foreshadowing.
Officials revealed this week that escalating material costs and supply chain difficulties were the chief suspects for what the stadium project’s chairperson, Barry Bragg, called a “price shock”.
Christchurch City Council/Stuff
Will this 30,000-seat stadium ever get built? Councillors will decide next month, following public consultation.
That shock was that the stadium will now cost another $150m, taking the total budget to nearly $700m.
Those in the industry say prices are rising at unprecedented rates.
Mayor Lianne Dalziel said she gasped when she heard the figure. Writing in The Star newspaper this week, she said: “The truth is that although we expected costs to escalate, we did not expect this.
“No-one did.”
The last year
Christchurch was set on the path of a 30,000-seat covered stadium in August last year.
The initial idea was to go ahead with just 25,000 seats with a $483m budget – but that was a decision that led to a vocal backlash from the public, businesses and some councillors, upset at it being too small.
CHRIS SKELTON/Stuff
Advocates for a larger stadium make their voices heard at a Council debate in August 2021.
It soon emerged the stadium could get to 30,000 seats if Christchurch ratepayers underwrote another $50m. All councillors voted for the budget to be upped to $533m, bar two.
The council staff report back then warned the $50m was a “preliminary estimate” of what was needed. The project would not have certainty around its costs until its design work ended.
In December, the first preliminary design was completed, and the council remained confident in the budget.
By January, Bragg acknowledged there were very high risks – supply chains, material costs, labour shortages.
A few months later there was talk of enormous pressure on costs. Still, whenever questioned, figures or estimates were never offered.
KAI SCHWOERER/Stuff
This is the current state of the three city blocks where the stadium will be built.
That changed in early May, when Stuff revealed city councillors were privately told a blowout was coming – and that it would be at least $50m.
More certainty was soon expected. The stadium contractor was going to lock in and advise the final fixed price for the build by May 12. Then the deadline was missed.
Bragg’s stadium board met a few days later, on May 18, and still had no fixed price. They did predict the blowout could hit $75m, Bragg said, adding that he was starting to get nervous about what the number would be.
It is now easy to see why.
On Wednesday, a sombre Bragg walked into the mayor’s lounge and declared to the awaiting media that the blowout was now $150m.
“The news is not good,” he said. “We really need to understand what has happened.”
CHRIS SKELTON/Stuff
Barry Bragg, chairperson of the independent board governing the stadium, fronted media on Wednesday to reveal the $150 million blowout.
The worst time to be building
Often during city council meetings, Dalziel, a former Labour minister, disagrees with National-aligned councillor Sam MacDonald.
But when it comes to the stadium blowout, both say Covid-19, the war in Ukraine and lockdowns in China have contributed to a “perfect storm” for the budget.
“It is the worst time to be building anything,” MacDonald said.
One example of a price shock has been with coal, used to make the steel – one of the stadium’s key materials. The prices have jumped from $200 to $850 a tonne.
Peter Meecham/Stuff
Christchurch mayor Lianne Dalziel says she gasped when she heard the extent of the budget blowout.
Graham Burke, executive director of the Construction Industry Council, said it had been about 30 years since there were increases like this, and for years the industry had been working on fixed-price contracts.
Now, China’s lockdowns have left no surety on when goods and materials might arrive.
“Even product that might be manufactured onshore oftens relies on material or components coming from offshore,” he said.
The war in Ukraine has caused major disruption too. It has led to rising fuel prices and, as Burke puts it, everything is affected by transport.
“It’s unprecedented,” he said. “Certainly not something that we had predicted.”
Supplied
Construction Industry Council executive director Graham Burke says price increases in the construction sector at the moment have not been seen for 30 years.
Martin Bisset, a quantity surveyor from QV’s CostBuilder database, said the price of structural steel had increased 60% in the past year, while reinforced steel was up 30%.
“It is very hard to work out a cost for a building that is going to be built,” he said.
New Zealand-owned steel supplier, Steel and Tube, said in its March procurement update that there was only one surety in the 2022 market – extreme volatility.
Nickel was up 380% in just two months, aluminium had hit a record high, and in a single week, coal prices shot up 15%, the update said.
“It’s likely that market prices have yet to stabilise and are likely to substantially increase, as the extraordinary events of 2022 continue.”
Christchurch City Council/Supplied
This is the preliminary design of Christchurch’s stadium, released in December.
Still, these escalating costs are not the only reason for the stadium’s budget troubles.
New features – including a second goods lift, more broadcast cabling, and special lighting equipment – have been added, taking the budget up another $10m, the council said.
The land was also in a worse condition than expected, which has affected cost, but the council has not specified how much.
Tough choices ahead
Consultation with ratepayers on what to do next will likely begin at the end of next week.
Three options are on the table, each with its own pros and cons. All have significant ramifications. The council cannot build a high-end stadium with an ideal number of seats using the current money. Something has to give.
While the public will get their say, the results of the consultation are not binding.
KAI SCHWOERER/Stuff
The land where the stadium will go is currently little more than rubble, broken concrete and overgrown weeds.
The decision ultimately sits with the mayor and Christchurch’s 16 city councillors.
They will make the final decision in mid-July at what will likely be the most consequential meeting of the council’s term.
The stadium board will provide information to assist councillors in their decision-making, but the board will not recommend how to proceed.
So where to from here?
Option 1: Commit an extra $150m and get on with it
This is the quickest way to get the stadium built. Under this scenario, the planned opening date would be April 2026. It would also still have the 30,000 seats that were so sorely desired by some in mid-2021.
Committing the extra money would be a significant burden on Christchurch ratepayers.
Regardless of whether other backers are found, ratepayers will underwrite the costs. $50m was already underwritten last year and this option adds another $150m.
Christchurch City Council/Supplied
This is what it could look like inside the 30,000-seat covered stadium.
Council staff are still determining how this would affect other planned projects and people’s rates.
The biggest question mark is whether anyone else will help pay the costs.
There are calls for other Canterbury councils to open their pockets, but regional leaders were not all that enthusiastic this week.
There is no iron-clad guarantee they will contribute.
The Government has also ruled out more stumping up more money.
Labour’s Megan Woods, who would not comment this week, said last month: “[We’ve] been really clear that $220m for the stadium is a huge contribution, and it’s also the land that is a Crown contribution.”
ROBERT KITCHIN/Stuff
Labour’s Megan Woods says the Government has already made a “huge contribution” to Christchurch’s stadium.
Another mooted fundraiser is selling the temporary Orangetheory Stadium in Addington, which has a rateable value of $28.5m.
Council staff say 250 homes could be built on the land, but any sale would require consultation.
Option 2: Cut seats and features to slash costs
This would lead to design work beginning again, adding at least eight months to the timeline. The opening would be pushed back to the beginning of 2027.
Doing this may not be as straightforward as some may hope. Even cutting 5000 seats would still require extra money.
The current $533m budget is actually only enough to build a stadium with 17,000 permanent seats and 3000 temporary seats.
By comparison, Nelson’s Trafalgar Park hosted 21,000 spectators for a 2018 All Blacks match, while Dunedin’s Forsyth Barr stadium can seat 30,000.
STACY SQUIRES/Stuff
Megan Woods, Barry Bragg and Lianne Dalziel at the sod-turning for the stadium in early April, about two months before the $150 million blowout was confirmed.
A 20,000-seat stadium would likely struggle for those big All Blacks matches.
New Zealand Rugby told the council last year 25,000 seats would be too small for major rugby matches, unless a substantial incentive fee, understood to be about $1.2m, was paid.
Still, cutting seats is not the only way to cut costs.
About $35m could be saved if the middle section of the roof, which covers the pitch, is removed.
It is worth noting the 2019 investment case for the stadium did identify 25,000 as the minimum capacity and a roof as a must so that it could be a year-round venue.
Christchurch City Council/Supplied
To build this, councillors will have to agree to underwrite another $150m.
Option 3: Hit pause for now and wait for prices to come down
This option carries uncertainty on the timeline and costs.
The thinking is that the design work and site preparations can finish over the coming months, meaning construction is ready to go, but then the council should delay starting until materials costs come back down.
If prices do come down, then the amount of money needed to get 30,000 seats with a roof will be less.
But, the council says even a five-year halt would not completely fix the budget issues – suggesting that even by pausing, more money would have to be put up.
The question would be how much.
Mayoral candidate Phil Mauger has championed this idea, saying he wants to re-evaluate prices at Christmas or, in the worst-case scenario, this time next year.
He is adamant the stadium needs to be built.
The city council will own the design once it is finished, so it can choose at any time to reassess material costs and get started on construction.
When board chairperson Bragg fronted the media earlier this week, he was not able to put a timeframe on how long a pause could last.
Whether material prices will even come down is up for debate too.
Peter Nunns, economics director at the New Zealand Infrastructure Commission/Te Waihanga, said there was still “significant uncertainty” about whether global prices would continue escalating, or whether supply and demand pressures would ease, with construction prices rising rapidly across the Organisation for Economic Co-operation and Development.
