Auditor-General asked to investigate Reading deal

Wednesday, 20 March 2024

The office of the Auditor-General John Ryan will do preliminary work before agreeing to investigate the council-brokered deal.

A Wellington city councillor has asked the auditor-general to investigate the controversial Reading cinema deal.

The council is in the midst of brokering an agreement to buy land under the mothballed Courtenay Place complex. US entertainment giant Reading would then use that money to redevelop the earthquake-prone building, shuttered since 2019.

But councillor Ray Chung, a vocal opponent of the $32 million deal, has written to Auditor-General John Ryan asking for an examination of the “very high-risk deal with a highly borrowed, loss-making, overseas group”.

Chung’s complaint doesn’t guarantee that the public sector watchdog will undertake an investigation — it must first undertake preliminary work to understand the deal.

But should it launch an inquiry, it will be a further blow to the plan, backed by Mayor Tory Whanau as a way to rejuvenate the capital’s centre.

Earlier this week, The Post revealed a re-vote may be needed because of uncertainty about whether Reading would be required to put a cinema in the complex.

Councillor Ray Chung says the Reading deal is “very high risk” and wants the Government watchdog to run an eye over the details.

Councillor Tim Brown, who previously championed the subsidy, called on council staff to front up with more information, or legal advice, on what the city is buying and how ratepayers’ money is protected should the development fail.

In his letter to the auditor-general, Chung said he was concerned council staff had misrepresented the benefits to ratepayers, and said the organisation lacked expertise to evaluate the commercial and financial risks.

He said the deal cannot be fiscally neutral, as the council claims, because Reading could buy the land back at the same price in 10 years and the council would lose any capital gains.

Chung wrote that he fears the council has failed to undertake due diligence on the financial health of parent company Reading International.

And he said he has asked for, but not been provided with, an engineer’s report, due diligence documentation, nor a valuation of the land.

He also argued that pertinent information was withheld from councillors before an initial vote on the deal in October.

The Reading complex in Courtenay Place has been closed since 2019.

A spokesperson for the council said it was yet to hear from the Office of the Auditor-General “but we’ll obviously co-operate with them if we are contacted.

“We reiterate that the council voted late last month to continue with the deal after the notice of motion was rejected.”

The council believes the vacant site stands in the way of its plans to revitalise the area. It originally planned to borrow money to fund the deal but also looked at selling ground leases.

The notice of motion, to stop the deal, was brought by councillor Iona Pannett who labelled it “corporate welfare”.

Seven councillors voted for her motion while nine, including Whanau, voted against.

Wellington company director Paul Ridley-Smith, a director of Arvida Group and former manager of majority Wellington Airport-owning Infratil, also recently raised concerns, calling for the council to get an independent auditor or accountant to take a look at the deal.

A spokesman for the Office of the Auditor-General confirmed Chung’s letter was received on Tuesday.