Law change needed to protect small city businesses from the effects of large scale infrastructure projects
Friday, 1 October 2021
Law change is needed so financial distress suffered by business owners near Auckland's City Rail Link construction site is not repeated on future infrastructure projects, the Government has been told.
It has taken public protests, a petition to Parliament, and Business owners unhappy City Rail Link put in charge of $12 million hardship fund
* Struggling Auckland barber was left paying for CRL workers' tea facilities
* Urgent hardship payments of $2500 to $10,000 from City Rail Link hardship fund
* Auckland plagued by graffiti at City Rail Link site, two more businesses shut
' title=''>stinging media coverage exposes to get a $12 million hardship fund set up to help businesses in the epicentre of the rail link (CRL) construction zone survive.
'It's been an absolute battle. These people are in a state of distress. Nobody should lose their livelihood or their health or their family over a public project,' Viv Beck, chief executive of the Heart of the City business association, told the Building Better Cities webinar event run by the Committee for Auckland on Wednesday.
Some businesses had seen their revenue fall 50 per cent or more to unsustainable levels, forcing some owners to shut up shop, affected businesses told Transport Minister Michael Wood.
**READ MORE:
* City Rail Link: Tunnel machine completes first 500 metres of Auckland's underground
* Auckland Council's $133 million plan to revitalise city's midtown unveiled
* Urgent hardship payments of $2500 to $10,000 from City Rail Link hardship fund
Beck called on Wood to lead law change to require financial support for business owners be built into the planning of future government infrastructure projects.
Woods says he’s “prepared to consider the merits of compensation on a case by case basis”.
“The best way to do this is to give consideration before works begin, so I expect project partners will work to develop up hardship schemes in the planning phase. As with the CRL scheme, new legislation won’t be needed.”
His expectation would only be for larger projects, as Wood, who has declined owners’ invitation to visit their shops and restaurants to experience the noise, dust and disruption they face on a daily basis, says he does not want to increase the cost building city infrastructure.
But Beck says the ministerial expectation is not enough.
“At the end of the day, at the moment, we’ve got an ‘expectation’ that this will be addressed in future projects, but I think actually it’s going to need some legislative change,” she says.
“We want to put the wrong right with City Rail Link, and we want these businesses to be looked after appropriately, but future projects have to managed appropriately.”
The $12m fund is not enough and local businesses are calling foul because it excludes compensation for businesses already driven to the wall, she says.
Restaurateur Andy Ariano is among those who wrote to Wood last week to protest the exclusion.
Ariano was forced to close his Da Vinci restaurant on Albert Street in July after a decade of successful trading.
“We have been suffocated by CRL. This project has profoundly impacted me and my family, in financially, psychologically, emotionally,” he says.
“We all work hard to create the jobs and contribute to the society. It’s totally not fair for us to be treated like a garbage, end up like this. I need some sort of financial compensation to heal the wound.”
It never had to be like this, experts from the United States and Australia told the Committee for Auckland webinar.
Exemplar rail projects overseas provided possible blueprints for the $4 billion CRL project, jointly owned and funded by the Government and Auckland Council.
Beck says the threat to local businesses was recognised in the planning stages, and the CRL resource consents required the careful management of adverse effects on local businesses.
The Seattle light rail project in the US between 2006 and 2009, which included a US$50m (NZ$73m) hardship fund, should have been the model for CRL, she says.
But in the planning phase of CRL no real priority was given to business owners, she says.
When businesses, and Heart of the City protested early on in the project, the attitude was that there would be no financial support.
Business owners, who were struggling to pay their rent, were told by CRL to hire lawyers and sue the Government for compensation under the Public Works Act, Beck told MPs when she petitioned Parliament in 2019.
A peer review done on CRL had damned that approach as “an abdication of responsibility”, she says.
“The reality is, this has not been dealt with appropriately,” Beck told the webinar. “We’ve had such a bad experience with City Rail Link.”
Beck says she thought she might have scored a victory, when in March last year, MPs on the Economic Development, Science and Innovation Committee recommended the Government move swiftly develop policies to assist businesses where there is long-term business disruption.
The MPs also called for fair support for the businesses hit by the CRL construction works.
But, says Beck: “Nothing happened.”
“There was a small contribution made after that, which was totally inadequate,” Beck says. A $4m fund was set up, but the amounts offered to businesses were tiny.
“It was very unfair on the businesses, and created further anxiety.”
Australian lawyer Rick Mitry is heading a roughly A$400m (NZ$420m) class action against the New South Wales Government from more than 230 businesses affected by the Sydney light rail project, which was completed last year.
“Viv could have been talking about Sydney,” Mitry says. “Auckland is almost a picture of what happened here. The impact here has also been devastating.”
Many businesses went bust. Some people lost homes. Marriages failed.
“Some of them admitted themselves to psychiatric institutions, and there have been suicides,” Mitry says.
“Whatever planning was done was totally ignored anyway by the project managers. Their main concern was how much more cheaply, and how much more they could minimise the costs during construction.
“I think there is a belief that you have temporary pain for future success, that you just get through this, and then it will be fine,” he says.
It's not Seattle, but Bordeaux in France which Mitry points New Zealand civic leaders towards for a example of how to support businesses through a big rail project.
The Bordeaux rail project factored in the cost of compensation for 100 per cent of businesses’ losses, plus a bonus on top for inconvenience, he says.
“Everybody was happy. Nobody was distressed.”
After studying the impact of Los Angeles’ metro rail extension a decade ago, Dr Rosalie Singerman Ray from Columbia University concluded all such projects needed to set aside money to support businesses.
“Most people got a pittance compared to what they had lost,” Ray says.
At the time, politics in the US was anti-mass transit, and extra costs were not acceptable.
A painful lawsuit faced by the Mineapolis had led it to be another model New Zealand could look to, she says.
Contracts for projects there now impose penalties for interruptions to local businesses, and offer bonuses for behaviour that enables businesses to continue to thrive.
But for now a law change is not on the Government’s to-do list.
“We have a massive task ahead of us to retro-fit our cities with the public transport infrastructure we need to move more people to reduce congestion and emissions,” Wood says.