Wellington sludge plant likely to top $500m

Thursday, 14 August 2025

Wellington City councillors are being asked to approve an extra $83 million for the city’s sludge minimisation plant despite being told three times by officials that they didn’t know how the funding would be paid for.

Council papers released alongside the proposal reveal the answer: $8 million would come from a targeted rate on residents, with the remaining $75 million borrowed as debt.

A lowdown of the cost blowout was given to councillors at a briefing on Thursday where it was confirmed the entire project, originally slated to cost $200m in 2021, would now cost between $478m and $511m.

The surprise overrun had been revealed to councillors behind closed doors earlier this month. Councillors will vote to approve the extra funding next week.

Council staff today implored councillors to vote it through, saying there would be serious implications if it was not - including the site being forced to shutdown and sunk costs.

Staff were unable to answer many of the questions asked during the 75-minute briefing including the final impact on rates and whether the additional cost would be borne solely by council debt, the cost of extending the landfill consent to cover delays, or options for a “plan b” if the funding was not approved.

Meanwhile, the cost of commissioning the plant had risen by more than $17m, from a starting budget of $2.5m.

The first of its kind in New Zealand, the sludge project was a significant investment with $400m set aside for the project in 2022, soaring from an estimated $200m in 2021, all funded through a standalone levy on ratepayers.

Items such as decommissioning an existing de-watering plant, removing an on-site building, and certain pipeline works were also not included in the initial cost estimates.

Officers said the original business case still stacked up but hadn’t provided the detailed reassessment to councillors.

There was also no clear statement on who was responsible for budget underestimation or omissions, with officers largely attributing the increases to risk realisation rather than mismanagement. A “reset” of the project team’s capability was also promised to ensure the 'right skills' were in place.

Chief Infrastructure Officer Jenny Chetwynd told councillors the escalation stemmed from the risks the council accepted when approving the project — risks that were now materialising.

The first signs of a cost increase emerged in March, triggering a review of the project’s completion costs. Council staff were notified in June

The project was approved during a volatile post-Covid-19 commercial market, with limited contractor interest who expected a premium, meaning the council took on greater share and a high level of risk.

With a mid-year 2026 deadline needed to be met, the council pushed forward with a contract to proceed. Today councillors were told the deadline had been extended to the end of next year.

The risk of the project, approving the budget on an incomplete design, delays and reassessment of commissioning requirements were all factors that drove costs, Chetwynd said.

The increase would likely be funded through council debt but that was still not confirmed, and other options such as involving central government were on the table.

While it was the second time today staff had admitted a cost overrun due to an incomplete design before proceeding with contracts, the first being the Golden Mile project with a $20m overrun, staff said entering into contracts when designs were not finalised was reasonably common.

Nureddin Abdurahman questioned the fairness of presenting the project to councillors before the design was finalised. Diane Calvert said she wasn’t hearing what the council could do better, and asked what message should be given to the public — and who should be held accountable.

Ben McNulty floated the idea of the council formally writing to Greater Wellington Regional Council asking it to instruct their staff not to prosecute if Wellington city breached its current landfill resource consent while the sludge plant was delayed - essentially to save ratepayers the cost of extending the consent. Officers did not commit to this.