What the Reading deal tells us about the decline of New Zealand’s capital city

Sunday, 3 March 2024

Andrea Vance is National Affairs Editor of The Post and Sunday Star-Times

Opinion: There is something horribly symbolic in Wellington buying into a dying industry to arrest its own death spiral.

On Thursday, nine city councillors voted to bung corporate welfare to foreign millionaires in order to breathe new life into the city’s grubby party strip.

The shuttered Reading cinema site had became a symbol of a general malaise settling over the threadbare city.

Now it is an allegory of the broken system of local government: opaque budgeting arrangements, questionable spending decisions and ultimately ratepayers footing the bill and paying a lot more for a lot less.

If you aren’t across the details of this fiasco, they bear repeating in all their technicolour stupidity.

With breathtaking naivety, the council has agreed to stump up $32m to buy the land under the mothballed complex.

In the council’s telling, the NASDAQ-listed entertainment and property giant will use the cash to renovate the quake-prone building, reopen the theatre, and the city’s grateful residents will throng in the doors, magically reviving the precinct and restoring the Hollywood of the South Seas back to its former glory.

In the Netflix era…

It is little wonder council officials fought to keep details of this deal secret: it is an atrocity.

There appear to be no guarantees for an initial $6m payment on completion of design work. What’s to stop Reading taking that money and walking away?

The company also has the right to buy the land back at the same price within the first decade, robbing the ratepayer of any appreciation gains.

There are also questions about why the redevelopment isn’t being done with normal financing. Reading International didn’t make a profit in the last year, and its share price dropped around 80% over the last half decade: just how big a risk is the council taking on?

The council has also failed to explain why it didn’t explore other options that didn’t involve shovelling cash to a large overseas corporation at a time when it is threatening cuts to community facilities and proposing to sell off the public stake in the city airport.

In a trainwreck of a Newstalk ZB interview on Friday ( a must listen for all Wellingtonians ) Mayor Tory Whanau was troublingly vague.

Contrary to its specious insistence that the corporate handout is cost-neutral, the council is considering selling off ground leases to fund it. (Not to mention the true, or opportunity, costs of borrowing.)

Whanau didn’t know if the rent paid by Reading would cover the loss of that income. “Possibly not,” she said, then utterly failing to grasp what she had admitted.

She embarrassed herself further by admitting these were specifics she had delegated to council staff. “That’s not a level of detail that we’ve discussed as part of this decision. That’s going into the finer detail of the agreements.”

This is why we are where we are.

Whanau, who had no prior experience of local government, sat down to dinner with Reading’s owners mere days after she was elected.

Forced to rely on terrible advice from council officials, innocent of the the commercial world and unaccountable to the public for the money they fritter away, she was utterly captured.

A savvy mayor would defer expenditure on pet projects, dump rats-and-mice cuts and increased parking fees, and instead introduce a base rates increase to recognise rising costs and a targeted water levy to address the financial crisis.

That would give sympathetic residents some certainty and a sense that things are under control. Finishing the job of revitalising the city once the books are back in black would be a solid platform for re-election.

But Whanau is out of her depth. She has drifted into local body governance with an impatience for business, finance and economic calculations. The politics she practises are moored in identity and symbolism - and that is why she cannot kill her darlings.

Her motivation in clinging to the Reading deal is understandable. She needs to deliver something tangible to meet at least some of her campaign promises. Odds are she will be long gone before the chickens come home to roost on this reckless transaction.

What’s less clear is the rationale driving most of Labour’s representatives on the council.

It’s hard to imagine these councillors entered politics to support an administration that wants to cut swimming pools and community centres, while front-loading the cost of out-of-control capital spending on already struggling households.

Within Labour circles there is mounting horror at their antics, propping up a Green mayor who is governing like a Tory: selling off assets, cutting services, privatising the public good, making secret deals and dishing out subsidies to foreign multinationals.

Although the party opposes the sale of the public stake in the city’s airport, the feeling is these councillors aren’t making enough noise about a proposal that presents clear political capital and an obvious point of difference between Labour and the Greens at the next election.

Like Wellington, Whanau’s mayoralty is in the doldrums. The question being asked within Labour is why are the party’s own councillors so intent on preserving it?