How the Town Hall budget leapt by $140m

Saturday, 30 December 2023

Cost reports over the past year show how the Town Hall budget increased so far, so fast. (File photo)

Documents paint a fuller picture of why the Town Hall’s refurbishment budget blew out. Erin Gourley investigates.

The Wellington Town Hall’s budget overrun left councillors and the public aghast at how a project could increase by $140m in one year.

The final cost of the project, which has been through a series of budget increases since its inception in 2013, could be anywhere from $250m to $329m. In October the council reluctantly approved the upper cost estimate of $329m.

The biggest shock was the magnitude, and how the costs had managed to run away from the council so quickly.

Since the first public statement about the Town Hall’s cost increase in October, the overrun has been framed as a result of well-signalled risks with the ground conditions coming to bear on the project.

Mayor Tory Whanau, as she announced the cost increase, said: “As we proceed more issues are being found with the ground conditions, and that’s what’s causing most of the cost escalation.”

But that wasn’t the full story, documents released to The Post under the Local Government Official Information and Meetings Act show.

Cost reports over the past year show that just half of the escalation, $65 million, was an unexpected increase in cost.

The rest of the “blow-out” was a deliberate rescoping of the project by the council, based on declining seismic ratings of the Town Hall’s neighbouring buildings, the Municipal Office Building and Michael Fowler Centre.

The cost estimates for the Wellington Town Hall since November 2022, based on the original scope of the project.

Without those buildings nearby, the Town Hall needed to include more storage, bathrooms, kitchen and a bar, and an entire extra room. The new items ‒ combined with others which had never been costed before, like $2m for branding ‒ added $59 million to the project’s cost.

Council spokesperson Richard MacLean confirmed that there were a number of rescoping changes to the project this year. “We needed to make change to the way we are delivering [the National Music Centre] and that results in additional cost to the Town Hall project.”

In some cases, the original plan needed to be changed ‒ for example, the only toilets for the concert venue were going to be in the basement and accessible by stairs. That would not be acceptable for quality of experience or the likely patrons of the Town Hall, project consultants at RCP told the council.

RCP was brought on board by the council when it became clear, midway through the year, that the budget of $182 million was going to be exceeded by a large margin.

In the lead-up to the earthquake prone notices for the neighbouring buildings, costs had been steadily increasing as builders driving piles into the ground found the basement filling up with water.

But there were other factors driving the steady increase in construction costs too. At one point there were 200 instructions from the project board which had not yet been resolved.

As much as 40% of the work invoiced by Naylor Love was related to variations to the original plan.

That was an “extremely large proportion,” consulting firm RCP noted in its review of the project, and had disrupted construction as well as adding time and cost to the build.

Ground conditions were a factor, but so were the large volumes of contract instructions issued by the project’s board.

Quantity Surveyor reports took on an increasingly panicked tone about the volume of changes being requested. Some of them, like the more complicated basement to house a floating recording studio, made the work more difficult.

“If we continue to receive close to 100 new instructions each month, it is going to be very difficult to catch up and not leave considerable unknown risk until the project is completed,” they noted in July.

In September they were begging the project board to stop issuing new contract instructions. “We need this trend to reduce considerably over the coming months to reverse the trend and drive down ongoing change and further programme issues.”

RCP’s report identified “pricing fatigue”, where variations get more expensive because of the volume that have to be processed, as a risk that could bump up the cost moving forward.

There is some good news for Wellingtonians, though. The RCP review said it expected the costs for the project could stay closer to the low end of the estimated range, around $250m.

Councillors had not seen the cost reports over the past year, but had been provided with the RCP report in a meeting.

MacLean said councillors were not updated on the increasing budget until “we had a full understanding of the situation and a plan to address”.

Councillor Ben McNulty said he first heard the rumour of the cost increase at a site visit to the Town Hall in March, but received no further updates until October.

“I continue to maintain the Town Hall budget is an improper use of money, especially as we go into a summer with likely water shortages.”

The Town Hall Saga

1904: The new Wellington Town Hall opens. It will be strengthened three times over the next century after suffering damage in earthquakes including the 1942 Wairarapa earthquake.

2009: The Town Hall is declared earthquake prone.

June 2013: Wellington City Council votes for strengthening to begin in November, expected to take four years and cost $43.7m. Former chief executive Kevin Lavery warns councillors it is a lot of money for no return.

Feb 2014: Investigations into the foundations reveal the cost of strengthening is likely to be more than $60m. Strengthening is put on hold.

March 2017: With plans for the National Centre of Music now centring on the Town Hall, council approves a budget of $90m to get the project back up and running.

April 2018: Earthquake strengthening work begins.

Feb 2019: Councillors approve a budget increase, bringing total cost to $112m along with a secret contingency fund of $24m. Town Hall scheduled to reopen in 2023.

June 2021: Staff warn strengthening budget could increase by a further $10m due to Covid-19 related costs.

May 2022: Budget increases to $182.4m. Opening pushed back to 2025.

Oct 2023: Staff request a budget increase of up to $147m, with the opening pushed back to 2027. The total cost could be as much as $329m. Council approves the increase.