Hutt City Council
19 June 2019
File:
(19/811)
Report no:
HCC2019/3/139
Naenae Pool - Initial
Information on Options for Community Feedback
Purpose
of Report
1. The purpose of
this report is to provide Council with relevant information on possible project
options in relation to the Naenae Pool and Naenae Community Hub, including how
these project options might be funded. This information is to inform what
options Council consults with the community on in the coming months.
|
Recommendations
That Council:
(i) notes and
receives the contents of the report;
(ii) agrees that officers
undertake pre-consultation in the July – September 2019 period with the
community on project and funding options;
(iii) considers which of the
following project options, if not all, to consult with the community on:
(a) new integrated pool
and community hub;
(b) refurbishment of
pool and separate new community hub (as previously designed);
(c) new pool only;
(d) refurbishment of
pool only; or
(e) do nothing;
(iv) considers which of the following
funding options, if not all, to consult with the community on:
(a) rates increase
together with debt funding;
(b) removing or
deferring projects already in the Long Term Plan;
(c) asset sales;
(d) reducing Council
services; or
(e) combination of the
above;
(v) agrees that the incoming
Council reviews the results of consultation and makes a decision on the
future of this project in November 2019; and
(vi) notes that this decision is
likely to require a Long Term Plan amendment process early in 2020.
|
Executive Summary
2. This report provides Council with high level project
options, rough orders of cost and possible funding options to address the
closure of the Naenae Pool.
3. The information is
provided to inform Council decision making on what it will seek feedback on from
the community. Council is not required or able at this stage to agree a
final option and how it will be funded. We need to hear from the community.
We want:
Ø the
community to share their views and be heard;
Ø to
know which option people prefer, and why; so we can understand and so
that we pick up any new or different thinking that might add value; and
Ø to
know how people think we should pay for it, if a refurbishment or rebuild
option is preferred.
4. The project options Council has to consider are:
· New integrated Pool and Community Hub ($66M)
· Refurbished Pool and separate new Community Hub ($39M)
· New Pool only ($52M)
· Refurbished Pool only ($30M)
· Do nothing.
5. The integrated Pool and Community Hub is aligned to current
Council strategies and intent – Leisure and Wellbeing, Integrated
Community Facilities.
6. The funding options available to Council are:
· Rates increase together with debt funding
· Remove or defer existing capital projects in the Long Term
Plan (LTP)
· Sale of Council Assets
· Reduced Council services
· A combination of all or some of the above.
7. The
report notes that a number of the funding options may be unpalatable from a
community perspective. Officers are of the view that a rates increase together
with debt funding, is the preferable funding option as it does not impact
significantly on existing Council plans and services.
8. Council is able to seek feedback and or consult on all
options or some. Council needs to give serious consideration to this,
particularly with regard to funding options.
Background
9. In December 2018, following receipt of an engineering
assessment of the Naenae Learners Pool building, a decision was made to close this
part of the facility to the public due to some building elements in this area
rating less than 34% New Building Standard or NBS.
10. Since
this time engineers have continued to assess other structural elements of the
remainder of the facility.
11. On 10 April 2019, officers received a written report on the
main pool advising the results of the partial seismic assessment for the main
pool hall and grandstand. This report indicated an overall rating of less than
34%NBS. This area houses the main pool, fitness suite, meetings rooms and
offices. Some major components of the building structure were reported to be
below 20%.
12. At a workshop held on 10 April 2019, officers informed the
Mayor and Councillors of the contents of the report. They were unanimous in
their support of the officers’ decision to close the pool.
13. The
decision to close the pool was made after considering a number of factors, with
safety of the public and staff the number one priority.
14. Peer review verification of the seismic report has been
completed by independent consultants and confirms the building is below 34%
NBS.
15. Since
closure, officers have been working to provide Councillors with information
about potential future options for this facility, the Naenae Community Hub, and
the Naenae Community Hall.
16. Officers engaged consultants to progress a remediation
proposal and rough order of costs for the facility. This is discussed
below.
17. Officers also engaged consultants to complete high level concepts
and rough order of costs for a new aquatic facility as well as an
integrated aquatic facility with a community hub. This is discussed below.
18. Several weeks ago as part of the Annual Plan process
Council agreed to the following financial changes:
· capital
timing changes – $9M for Pool in 2019/20, Community Hub $8.1M in 2020/21;
· reduction
of net operating costs for Naenae Pool by $0.5M with $0.3M reallocated to other
Aquatic Services;
· supporting
Naenae CBD activation $200k over two years;
· special
consultation and LTP amendment costs $100k; and
· Naenae
community activities and events $100k over two years.
Discussion
New Build Options (see
images further in report)
19. The high level concept
discussed in this section is an example of one possible option for progressing
new swimming pool and community hub facilities in Naenae. It has been
commissioned to enable rough order costs to be developed for Council
consideration.
20. Consultants were tasked with
developing a high level concept design for an integrated pool and community hub
which incorporated swimming pool services, library, community meeting spaces, a
recreation and performance hall and a community gym in a single building.
21. A new integrated pool/hub
option provides a significant increase in the level of service provided to the
community, with fit for purpose facilities designed in an optimal way for
flexibility of use, ensuring full accessibility and providing synergy between
hub and pool based activities. It reduces duplication and can leverage
economies of scale in construction.
22. The concept developed
includes minimum functional requirements to deliver a fit for purpose facility
and is anticipated to have a lifespan of >75 years.
23. The integrated design retains
all previous elements from the community hub project.
24. When developing the pool
design consultants were asked to consider:
· the
swimming and recreational needs of the local community;
· the
needs of local aquatic clubs and the facilities fit within the regional pools
network; and
· recreational
activities for children 10-14 years.
25. Key aspects of the new pool
concept include: a 50m main pool, a warm water adults pool, waterslide, diving board,
and a large children’s and toddlers’ pool with outlets to allow the
addition of a range of waterplay features.
26. The 50m pool has been
designed with a moveable bulkhead and moveable floor over part of the pool.
This allows three independent zones to be provided for multiple activities to
occur simultaneously; like swimming lessons, club bookings and public swimming.
27. This flexibility in design
significantly increases the level of service to the public from previous
provision and would allow greater public use of the pool when aquatic sport
activities are taking place.
28. Naenae Pool’s place in
the regional network of pool facilities is primarily as an aquatic sport pool.
The new pool option as designed has the ability to meet the majority of required
standards for national level aquatic sports.
29. The design also includes all
required ancillary spaces such as control rooms, change facilities, pool shop
and a gym facility on level one.
30. At this stage a new build has
not included a café due to the proximity of Hillary Court.
31. Energy efficient electric
water heat pumps have been included in line with Council’s 2050 zero
carbon target.
32. This new design will be at
100% NBS IL3 and take two to three years to complete from project initiation.
33. For costing purposes
consultants have provided delineation between the pool/gym facility and the
community hub/library in the design allowing for costings to be developed for
separate and combined facilities.
34. Council has previously been presented
with information on a stand-alone community hub.
Refurbishment Option (see
images further in report)
35. A refurbishment brings the
pool facility up to 67% NBS at IL3.
36. This option addresses key
structural issues identified in the detailed seismic assessment in addition to:
replacing the roof; updating plant; completing necessary isolated remedial leak
work on the pool tank; and accessibility and fire systems improvements required
to meet code.
37. It should be noted that this
does not make the facility wholly fit for purpose as it will still not meet a
number of aquatic sport requirements, some accessibility constraints will still
exist and the layout of the design is sub-optimal. No service level
improvements will occur for the community in this option.
38. This option will take two to
three years to complete from project initiation and have a significant time
creep risk due to the type and complexity of work required.
39. The lifespan of a refurbished
facility is hard to estimate. New parts of the building would be expected to
have 50 years of life, however there are a large number of original items
retained such as pool tank, glulam structural beams etc, that will require ongoing
maintenance and budgets.
40. Officers have priced in a
change from gas boilers to electrical heating for a refurbishment in line with
Council’s 2050 zero carbon targets.
Do Nothing Option
41. A ‘do nothing’
option is not recommended by officers, however this is still an option
available to Council. This would still incur costs of demolition and asbestos
removal of the unsafe facility/facilities.
42. The land could be kept as
reserve, or repurposed for other uses. It is currently classified as recreation
reserve. This would leave a very significant gap in Hutt City’s, and the
wider regions, aquatic services. It would likely pose further challenges to the
retail precinct also.
Additional Information
Alignment to Council Strategy and
Direction
43. Officers are of the view that an Integrated Pool and Hub
option is the most strategically aligned to existing Council strategies and
intent.
44. An important contributor to achieving Council’s
strategic intent, as outlined in the Leisure and Wellbeing Strategy, is
ensuring that our suburban centres and neighbourhoods are provided with
world-class, fit-for-purpose community facilities.
45. Integration and rationalisation are the two main
principles behind the Integrated Community Facilities Plan.
46. By combining facilities into hubs, Council can
update and modernise its facilities more efficiently and at less cost, as well
as broaden the range, and increase the standard, of services. They will provide
multiple facilities at an appropriate level for the needs and size of the
communities they serve.
47. These hub developments are important to our existing
community, but will also help provide the kinds of facilities communities,
whanau and individuals increasingly desire and expect in their community. Consequently,
they are seen as crucial to rejuvenating the city and making it more attractive
to prospective new home owners and developers.
48. Such hubs will be an exciting feature of our city
in the future, contributing to Lower Hutt as being a great place to live, work
and play.
Heritage
49. Neither the pool, library
or hall are listed as heritage buildings in the District Plan or by Heritage
New Zealand.
50. Officers are aware that
some individuals and groups place heritage value on the pool façade particularly.
51. Naturally there is a
tension between heritage retention, financial constraints and creating the most
fit for purpose community facilities. Our view is that the priority should be
on providing the best functional building for community use within the fiscal
constraints Council identifies.
52. In a refurbishment option
the existing façade of the pool will be retained and while changes will
be required to windows and in-fill walls, officers believe that this will not
detract from the current aesthetic.
53. At this stage a new build
option has not considered retention of the façade due to how the build
would fit on the available space of the pool and community hall area.
54. The new build concept
presented, features two key elements. Firstly, the extension of the pedestrian
mall from Hilary Court across Everest Avenue and right through the new
facility. The designers have embraced this idea and created a heart, or spine,
for the facility that mirrors the mall, giving a nod to the importance of Hillary
Court as the first pedestrian mall in New Zealand.
55. Secondly, pre-European
history is celebrated by the jagged front edge of the facility and skylights. A
key local legend is that of two Taniwha who through ‘rupture’
created the streams Te Awamutu and Waiwhetu. An extract of the design
inspiration is included as Appendix 1 to this report.
Construction Sector and
Procurement Options
56. Appendix 2 to this report
provides a view of the current construction market and procurement options. Procurement
methodology will be informed by the final option approved. Through consultation,
officers will continue to explore all procurement options, including seeking
expert advice.
Naenae Pool Significance in
Aquatic Network
57. The Naenae Pool opened in
1956 to service the rapidly growing urban areas of Naenae, Epuni and Taita. The
main pool was converted to a covered indoor pool in 1987 and a covered learners
pool was added in 1998. The pool was built to the then Olympic Swimming Pool
Standards and hosted many national and international events.
58. The pool plays an important
role for aquatic sport codes in the Hutt Valley and is currently the home to
Naenae Swimming Club, Swimzone Racing, Hutt Waterpolo Club and the Wellington
Canoepolo Association. Within the regional pools network Naenae is considered a
critical venue for aquatic sports training and as a back-up venue for regional
and national aquatic sports events. The Wellington Regional Aquatics Centre
(WRAC) in Kilbirnie is the only international class aquatic facility in the
Wellington Region.
59. Naenae Pool currently hosts
five national aquatic sport events annually and 20-30 local/regional events.
45% of visitors to Naenae Pool are for group, club or programme use. If the
pool was not replaced there would be a significant decrease in aquatic sport
participation.
60. In our local pool context
Naenae and Huia are considered our major venues. Naenae Pool attracts on
average 450,000 visitors per year or 40% of all swimming pool visits in the
city. The pool also fills a gap locally by providing recreational opportunities
for young teens (10-14 years). If the pool was not replaced it would not be
possible to relocate all of this activity to other venues.
61. Naenae pool continues to play
an integral part in the local community providing opportunities for people,
particularly children, to learn to swim, exercise, recreate, compete and
socialise.
62. As with all public pools a
balance between public and programmed use is essential to maintain a well-used
and efficient service. As such, flexibility in design and operation is
critical.
Naenae Community Hall
63. Officers undertook an Initial Seismic Assessment in
April/May 2019 of the Naenae Community Hall (the Hall) as due diligence before
deciding whether to reopen this facility for public use.
64. The result of the ISA was
19% of NBS with advice from engineers that:
· there
is little point in undertaking a Detailed Seismic Assessment as it was unlikely
to change the outcome of this initial assessment; and
· the
Hall currently poses a significant life safety risk and should be fenced off
immediately.
65. The Hall was going to be
demolished as part of the Naenae Community Hub development.
66. In the event that the Naenae Hub
is either removed from the LTP or pushed back significantly, then Council needs
to make a decision about the future of the Naenae Community Hall.
67. It can either:
· be
demolished; or
· design
works started to ascertain a design solution and cost to bring the structure
from current to minimum 67% NBS.
68. Officers have been given advice
that to develop a solution will take a minimum of six months. Only at this
point in time will a cost estimate be possible. Completion of these works will
take another minimum six months given the type and nature of work required is
complex.
Options
69. As detailed in the report
Council has multiple options to consider in terms of delivery of this project:
· New
build pool and integrated community hub.
· Refurbishment
of pool and new community hub (as previously designed).
· New
build pool only.
· Refurbishment
of pool only.
· Do
nothing.
70. Each option has a range of
considerations noted below.
Consultation
71. Officers are of the view that
this project meets Council’s Significance Policy thresholds, particularly
that ‘the matter under consideration is of public interest or
controversial within the community’, together with these relevant
criteria in the policy:
a. Financial threshold of 10% LTP spend change ( ~$63M)
b. An alternation to
the ‘level of service provision of a core Council activity’, which
would likely be the case with the new pool/hub option.
The project is therefore likely to trigger the need for a
special consultative procedure and an amendment to Council’s LTP as per
the Local Government Act.
72. Ahead of the local body
elections in October this year, officers recommend an initial informal
pre-consultation process to help inform and guide any special consultative
procedure required for an LTP amendment.
73. Following the election, the
incoming Council will meet and consider the consultation feedback and make a
decision on how to progress forward. An LTP amendment is required to be audited
which adds some complexity to the process and has timing implications. There is
also the need to ensure that the public have a reasonable period to consider
the options presented in the LTP amendment and are provided with an opportunity
to present their views to Council on the options. This is likely to be a
minimum period of two to three months in duration. Council could choose to
progress this process at pace post the election or to do this as part of a
broader piece of work linking into the Annual Plan 2020-2021 timing.
74. If the refurbishment option
is selected there will be no further public engagement after the LTP amendment.
75. If a new build is selected
then officers recommend undertaking a full public and community engagement
process.
76. This process can easily be
replicated and conducted in a time efficient manner, providing the community
with an opportunity to comment on how their aspirations are reflected in the
facility design. This consultation would engage with local Naenae residents and
key stakeholders of the pool/hub (ie, user groups, gym members, key community
groups etc,).
77. This would utilise the
existing concept as a starting point and encourage feedback to amend the design
and note any current exclusions that the community see as desirable. The
approach uses:
· using the billboard that has been planned for the corner of
Everest Avenue and Treadwell Street;
· written and online surveys distributed in letterboxes and
at key community locations;
· face to face meetings with key community organisations and
user groups;
· open public meetings with officers and the design team;
· the Eastern Community Panel;
· Bang the Table; and
· using the portable container in Naenae to have Council
staff engage directly with the community for a period of time.
78. Outcomes from this
consultation process would be presented back to the Project Control Group for
consideration and decision, taking into account the fiscal constraints of the
project.
79. Officers were asked to
provide some commentary on a co-design process for a new pool. Officers do not
recommend that this be pursued for this project. The following has been taken
into account when considering this recommendation:
· Co-design can be an extremely effective way to bring
community on a journey with Council on a particular topic/project.
· Co‑design also sometimes brings new ideas or thoughts
to the table that otherwise would not be considered.
· Co-design also has the ability to provide peer to peer
mediation within a community which can be useful.
· Often co-design is not appropriately resourced or given the
time required to be conducted in an effective manner.
· Officers
are acutely aware of the community desire to have a functioning pool operating
in Naenae in a timely fashion, and that a co-design process conducted properly
would extend project timelines presented in this report by one to two years.
This is backed up by colleagues from other Councils who have undertaken similar
processes. This could mean opening a new facility to
the public extends into 2025.
· If a co-design process is not conducted properly officers
would have concerns that we place large value in a potentially minority view
and not focus on mass participation processes. Officers clearly support methods
of community engagement which encourage the largest possible number of
responses. Generally these are those that are delivered with mixed methods,
times, ways to participate and are overall simple and easy to understand and to
be involved in. Co-design as a method can deliver this desired outcome, but as
noted above needs appropriate resource and time.
· That the hub project has had extensive consultation already
undertaken.
· An existing engagement plan for the hub project can easily
be replicated and delivered.
· There is a risk that co-design might lead to design which
conflicts with core Council functional requirements, or contradicts
Council’s/sector adopted strategic priorities.
· Council would need to employ an officer to lead this
process as we do not currently have capacity to run a proper co-design process
with the community in-house.
· The scope of the architects’ work obtained in
procurement would need to extend considerably to allow for co-design to run in
parallel to the design process. This would add cost to the estimates provided.
· We would need to factor in construction cost escalation
over the additional period of time for the project budget.
· Total cost projected increase by undertaking a co-design
process is $4-5M for the above three items (construction cost escalation for
additional time, additional architect fee requirements, staffing and delivery
costs).
· The largest risk of co-design is setting unrealistic
expectations in the community for what they can influence within project fiscal
constraints (ie, unless there is an open or ranged project budget then many
community ideas may not be possible to achieve alongside core requirements).
Legal
Considerations
80. Legal considerations are
covered in consultation and financial sections respectively.
Financial
Considerations
81. The table below details the indicative capital
cost comparison between the three major project options:
|
|
Refurbishment
of Pool
|
New Pool
|
New Integrated Pool/Hub
|
|
Demolition
of Pool
|
|
$1,000,000*
|
$1,000,000*
|
|
Asbestos Removal
|
$500,000*
|
$500,000*
|
$500,000*
|
|
Design
|
$2,007,100
|
$4,464,672
|
$5,662,260
|
|
Main
Construction Contract (Facility)
|
$20,071,000
|
$37,205,600
|
$47,185,500
|
|
External
Works
|
$200,000
|
$500,000*
|
$500,000*
|
|
Council
Consultants (Project Manager, QS Geotech, peer reviews, Accessibility,
Sustainability etc,)
|
$460,000
|
$460,000
|
$460,000
|
|
Consenting
|
$80,000
|
$120,000
|
$150,000
|
|
Fit Out
|
$480,000
|
$500,000
|
$1,300,000
|
|
Community
and Public Art Initiatives
|
$100,000
|
$200,000
|
$200,000
|
|
Relocation
of Wellington Electricity Transformer
|
|
$200,000*
|
$200,000*
|
|
Contingency @
18% for new
build, 30% for refurb
|
$6,021,300
|
$7,141,875
|
$9,055,616
|
|
Resource
Consent Fees
|
$10,000
|
$10,000
|
$10,000
|
|
Building
Insurance
|
$60,000
|
$60,000
|
$60,000
|
|
Total
|
$29,989,400
|
$52,362,147
|
$66,283,376
|
|
Scope
Variations
|
Unknown
|
Unknown
|
Unknown
|
*No quotes currently obtained on these items.
82. The above costs do not give allowance for any changes in
scope to the projects as a result of community input, project governance input
etc.
83. Contingency levels are deemed appropriate for the type of
project (ie, 18% new build and 30% refurbishment), although it should be noted
there is a significant outstanding risk for the new build options in ground
conditions.
84. To date no geotechnical work has been undertaken and this
could have a significant impact on foundation and structure requirements.
Officers would recommend that geotechnical work is undertaken early in any new
build initiative.
85. The construction costs presented above are in line with
other recent builds.
86. Councillors need to be aware that this report presents a
rough order of costs only, with two significant variables noted above.
Impact
on Financial Strategy Limits
87. While there is no allowance in the financial plan for this
scale of work on the Naenae Pool, there is an allowance of $9M for some
refurbishment work on the pool, as well as $8.8M for the Naenae Community Hub.
88. The table below summarises the funding shortfall:
|
|
Refurbishment
of Pool
|
New Pool
|
New Integrated Pool/Hub
|
|
Total
Cost
|
$30M
|
$52M
|
$66M
|
|
LTP
Funding
|
$9M
|
$9M
|
$18M
|
|
Shortfall
|
$21M
|
$43M
|
$48M
|
89. With no change to funding options, each of these projects
will result in breaches of the Financial Strategy debt cap as outlined in the
following graph.
|
Year
|
Debt limit
|
Current state
|
Refurbishment
only option
|
Integrated pool
and hub option
|
New pool only
option
|
|
|
Debt to revenue
%
$M variance to
debt limit
|
|
2022/23
|
130%
|
128% (2% gap)
$4.1M
|
141% (11% over)
$19.6M
|
157% (27% over)
$49.6M
|
153% (23% over)
$42.2M
|
|
2025/26
|
110%
|
109.9% (0.1%
gap)
$0.1M
|
126% (16% over)
$31.3M
|
141% (31% over)
$60.9M
|
136% (26% over)
$52M
|
90. It should be noted that while the debt cap is breached, the
debt is always within the emergency contingency of 170% of revenue.
Project
Funding Options
91. Several funding options are available for Council to
consider to assist with mitigating the project costs. These include:
· Rates increase together with debt funding
· Removing or deferring projects already in the LTP
· Asset Sales
· Reducing Council services
· A combination of all of the above.
92. It is recommended that Council considers which
funding options are included in this initial consultation. While Council could
consult on all options, it is however noted that a number of the funding
options, such as reducing service levels or removing/deferring projects, are
likely to be unpalatable from a community perspective. There has been
significant consultation through previous LTP/Annual Plan processes that has
established service levels and projects that are included in Council
plans. Officers are of the view that the first funding option, being a
rates increase together with debt funding, is likely to be the preferable
funding option as it does not impact significantly on existing Council plans
and services. There may however be some minor service changes or projects that
could be deferred which may be acceptable and help support the funding
solution. Further information on each of the funding options is provided below.
93. Funding option 1 : Rates increase together with debt
funding
· Council could consider increasing rates by 1%
for one, two or three years. This would have a significant cumulative
impact over 20 years. In the short term the rates funding would not be
sufficient to fund the full project and debt funding would also be required to supplement
the rates funding.
Example – 1% rates increase over two years
|
|
Y1
|
Y2
|
Accumulated
at Y20
|
|
Additional 1%
rates 2020/21
|
$1.05m
|
$1.05m
|
$21m
|
|
Additional 1%
rates 2021/22
|
|
$1.05m
|
$19.9m
|
|
Year
|
Debt limit
|
Current state
|
Refurbishment
only option
|
Integrated pool
and hub option
|
New pool only
option
|
|
|
Debt to revenue
%
$M variance to
debt limit
|
|
2022/23
|
130%
|
128% (2% gap)
$4.1M
|
135% (5% over)
$8.3M
|
151% (21% over)
$38.3M
|
147% (17% over)
$30.9M
|
|
2025/26
|
110%
|
109.9% (0.1%
gap)
$0.1M
|
116% (6% over)
$11.7M
|
131% (21% over)
$41.3M
|
127% (16% over)
$32.4M
|
· In this specific example, the Financial Strategy limit cap
breach is alleviated, but it is still breached.
· Essentially this option uses both increased rates and debt
to meet the overall funding requirement over a 20 year period.
· Council could approve a short term breach in the Financial
Strategy limits specifically in order to deliver a solution for Naenae pool.
94. Funding option 2: Removing or deferring projects already in
the LTP
· Council could choose to remove, defer or realign projects
that are already in the LTP. Depending on the size and timing of the
project, this option could help to relieve pressure on the Financial Strategy
limits.
· There has already been public consultation on these
projects through previous LTP processes, so it is likely that there would be
adverse feedback received from the community on this funding option and it may
require further consultation. Some minor deferrals of projects may be
acceptable but total removal of projects is unlikely to be
palatable.
· Examples of potential projects are as follows:
i. Naenae and Wainuiomata Community Hubs
ii. Petone Wharf
iii. Hutt Valley Tennis
iv. Wainuiomata Sportsville
v. Bell Park and Te Whiti Park Improvements
vi. Hutt Valley Gymsports development
vii. Cycleway/Shared pathway developments.
· Additionally, RiverLink ($50M) and Cross Valley Connection
($35M) projects could be considered for removal and or deferring.
95. Funding option 3 : Asset Sales
The sale of Council
assets (non-infrastructure) is also a funding option. Council could
consider such assets as Houses, Marina, other. Given the history of
consultation on these services through previous LTP processes, it is not
expected that this funding option would be the preferred option.
96. Funding option 4 : Reducing Council services
· Council could choose to reduce operating budgets to
mitigate the funding impact. This would result in a reduction of
services, the impact of which Council officers would need to determine.
· There are a range of service reduction options that could
be considered which include:
i. Reduced Library, Museum, Hub, Aquatic services –
reduced hours, facilities available.
ii. Reduced Community Grant funding.
iii. Disestablish Community Panels and Boards.
iv. Reduced recycling services.
v. Reduced funding support for economic development –
Chamber of Commerce, Suburban Shopping precincts, other.
vi. Reduced funding for City Events.
vii. Reduced funding for Environmental Sustainability
initiatives.
viii. Other
· Very significant reductions in services would be required
to meet the budget shortfall outlined for all three options. The savings
would be made up of direct costs as well as savings in associated salaries and other
personnel costs. Whilst the community may support minor changes to service
levels, it is unlikely that significant service reductions would be supported.
Ongoing
Operational Costs
97. A
more detailed business case will need to be developed when design details are
agreed and finalised. For all options the overall net-costs (excluding Council
overheads, depreciation and interest) of operating the Naenae Pool is not
expected to change materially.
Economic Impact
98. An economic impact assessment
of options is in progress and needs further review.
Timeline
99. The following is an
indicative timetable with ambitious deadlines due to the urgency and
significance of the project. An alternative timeline would be to complete the
LTP amendment process together with the Annual Plan 2020-2021 process.
Images
Strengthening Option
New Build Option
Floor Plan – Integrated
Pool and Hub
Coneptual Image – Integrated Pool and Hub
Conceptual Image – new
entarnce aligned to Hiliary Court Entrance
Conceptual Image – New Pool
Appendices
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No.
|
Title
|
Page
|
|
1⇩
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Local Naenae Legend
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29
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2⇩
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Current State of Wellington Construction Market and
Procurement Options
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30
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Author: Mike Mercer
Divisional Manager Community Hubs
Author: Allen Yip
Strategic Projects Manager
Author: Marcus Sherwood
Divisional Manager, Parks and Recreation
Author: Stephen Keatley
Strategic Assets and Project Manager
Author: Jenny Livschitz
Chief Financial Officer
Reviewed By: Matt Reid
General Manager City and Community Services
Approved By: Jo Miller
Chief Executive
|
Attachment 2
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Current State of Wellington Construction Market and Procurement
Options
|
The current state of the Wellington Construction Market and Procurement
options for Naenae Pool in light of the forecasted market conditions
________________________________________________________________The
Wellington Construction Market
Short
History
Over the last 5
years the construction sector underwent some significant changes. These include
rising construction costs, labour shortages, high demand, ongoing changes in
legislative requirements and natural events such as flooding and earthquakes.
We have also seen
the rise and fall of some of the main construction companies in the market,
following on from demise of Mainzeal in 2011. These include Hawkins Orange and
Ebert Construction going into receivership and Fletcher Building withdrawing
from vertical construction.
Leading
Wellington Construction Firms
The main leading
construction, infrastructure and project management firms active in the
Wellington Market is LT Mcguiness Ltd, Naylor Love, McKee Fehl Construction and
Hawkins Construction owned by Downer Group.
Other rising
construction, infrastructure and project management firms on the rise in the
Wellington Market are Maycroft Construction, Armstrong Downs, Southbase
Construction and Watts & Hughes Construction.
Wellington
Construction economic forecast/pipeline
The future pipeline
for Wellington is still strong, signalling a continuation of the pressures of
the past two years.
MBIE’s National Construction Pipeline Report 2018[2] states that the
Wellington region had the strongest growth of any of the regions featured in
this report in 2017, with total construction value increasing 11% to $2.8b.
Total construction value is forecast to continue at
this raised level before growing again in 2020 by 20% to $3.4b in 2023.
Residential building activity is expected to drive growth in Wellington with
Non-residential building activity expected to reduce slowly from the $0.8b in
2017 to around $0.5b in 2020.
· The value of
Wellington’s non-residential
building activity is expected to reduce by 30% to $0.5b in 2020 and then level
out to 2023
· Since 2015 the
Wellington infrastructure activity held steady around the $0.5b per annum and
is expected to continue along this line until 2023. Strong Infrastructure
project intentions in the region is indicated by the high value of research
data.
The RLB Forecast Report 89, Fourth Quarter
2018[3]
indicate that construction picked up in the second quarter of 2018 and that
underlying construction demand remains very strong especially in the
residential sector despite some slowing in the pipeline of construction work in
some areas.
Some key points.
· Architects can expect
some slowing in the pipeline of non-residential and Government work as shown in
the NZIER Quarterly Survey of Business Opinion (QSBO).
· An increase of
technicians and trades people moving to New Zealand is expected as Government
focuses on bringing workers to areas where labour demand is greatest.
· The construction sector
continues to face various challenges such as low operating margins, labour
shortages and uncertainty of cashflow. This is particularly evident amongst
smaller and mid-sized firms.
· Construction demand for
concrete in Wellington has risen slightly since 2015 with Auckland and its
surrounding regions leading demand.
Influencing
Factors on the construction market
The rising
construction cost and future pipeline has led to specific pressure points
especially around supply and demand constraints, skills shortages and wage
pressures.
Skill
shortages
Various industry
leaders have been vocal about the skills shortages:
· Ruma Karaitiana, the previous chief
executive of the Building and Construction Industry Training Organisation
(BCITO) stated ‘‘…construction is now one of the fastest
growing parts of the economy, predicted to grow 3.2 per cent per annum until at
least 2017.’’ He specified that the most recent forecasts
showed about 1600 carpenters would be needed by 2018. About 5500 project
builders, including carpenters, would be required, and the bricklaying industry
would need about 150 workers a year. Experts say one of the distinguishing
characteristics of this construction cycle is the breadth of the shortage of
workers, with engineers, quantity surveyors, architects and building scientists
also in extremely short supply[4].
· IPENZ chief
executive Andrew Cleland says some of the work in Christchurch is not able to
be carried out as quickly as people would like because of the high volume of
work and not enough engineers with the right competence for technically
demanding work. Immigrant engineers have helped meet some of the demand but
take time to get up to speed with local requirements for critical work.
The shortage of engineers is not
confined to Christchurch though. There is a nationwide demand for engineering
expertise. Engineering disciplines at Immigration New Zealand[5] in the category of long-term
skills' shortages include structural, civil, chemical, electrical and
mechanical. The Ministry of Business, Innovation and Employment website
(Immigration) also flags a need for quantity surveyors and project managers, and
some demand for tradesmen such as painters and carpenters.
MBIE’s
Future demand for Construction Workers 2nd Edition[6] projects a 9 percent growth
in demand for Wellington construction related workers. Project Builders is in
high demand (up 14 percent) followed by Truck Drivers (up 10 percent). The
overall regional increase in construction related occupations is approximately
4,200 between 2016 and 2013. When compared to earlier projections prepared in
2016, 700 additional employees wil be required over the period 20121.
Stats NZ report the regions unemployment rate at 3.7 percent in Q1, 2019
as opposed to the national figure of 4.3 per cent.
Wage
Increases
According to the
latest labour market statistics in March 2019, the LCI (Labour Cost Index)
salary and wage rates (including overtime) increased 2.3 percent over the year.
The gap between wage rates and consumer inflation increased further in the
latest quarter, as wage growth remained steady and CPI inflation continued to
weaken. Wage inflation has now been higher or equal to the CPI for
four-and-a-half years. Contributing to higher construction costs.
Supply
and demand constraints
· The construction industry is
classified as a high growth industry according to Statistics NZ. The latest
Business Demography Statistics show that for the construction industry
enterprises increased to 61,860 (up 3.1 percent) from February 2017 and during
the same period 4,931 closed their doors[7].
This high churn leads to severe supply chain constraints or even a breakdown of
consistent and reliable supply, for example Mainzeal.
· Building cost inflation is predicted
to ease below 4 percent later in 2019 before settling down to just over 3
percent by the end of 20123[8].
· Earthquake strengthening activity
continues to contribute to demand in non-residential construction.
Legislative
changes and Design
Earthquake
standards changed resulting in previously seismic acceptable buildings now
falling below the NBS line and requiring strengthening to comply with code.
Inflation
Inflation contributed to increased
materials and labour costs, combined with increasing demand for construction
has pushing overall construction cost significantly upwards. The construction
cost has risen significantly due to a combination of factors including the
cyclical nature of the industry, changes in construction methods, supply and
demand pressures as well as legislative changes.
New Zealand construction industry is
highly cyclical with significant boom and bust periods. This implicitly leads
to a high number of deaths and births of construction (and construction
related) companies. The consequence of this high churn is supply chain constraints
and lack of constructive and sufficient long-term planning to meet varying
demand. These constraints are even more pronounced in Christchurch due to the
rebuild as well as in Auckland as a result of rapid expansion.
New innovative methods and designs
have been introduced leading to a significant increase in demand for products
such as engineered structural steel and precast concrete. Demand has
outstripped supply leading to capacity issues resulting in substantial price
increases for these products.
Legislative changes including the
ongoing changes in the building code has increased the demand for compliance on
contractors. Constant legislative changes within the sector requires constant
up skilling of staff by already under resourced small construction SMEs.
Environmental
events
The report by Local
Government New Zealand found that sea level rise and flooding could affect $14
billion worth of council-owned infrastructure assets across New Zealand without
. This value does not take into consideration cost to central government or
private interests and could place increased demand on the construction sector
over the next decade[9].
What
does this mean for Naenae Pool?
From the evidence above it is clear
that the New Zealand construction industry is complex. It is apparent that
timing and tight management of the up- and downstream supply and demand value
chain will be needed to provide cost effective solutions for clients.
Despite on-going demand for
construction in the region, indications predict a slight ease in the Wellington
construction market over the next couple of years although construction cost is
expected to outperform CPI inflation.
What this mean for Naenae Pool
depends on Hutt City Council’s decision on options for repair or
reconstruction of the asset. Strong demand for earthquake strengthening in the
region will mean less available contractors and inflated non-competitive
pricing.
Demolition and reconstruction of the
asset may present slightly better procurement options due to diminishing
construction workload forecast to 20123. The scale of the project will also
draw attention among the main contractor market leaders.
Procurement
Options for Construction
Methods
of Procurement
Traditional
Method
Traditional method
is a procurement method that the design work will separate from construction.
Upon the completion of the design, client will appoint a main contractor
following a tender process to carry out the works through bidding.
Disadvantages of
this method resolve around time where a lot of time is devoted to the design
element. The cost may be higher as the quantities are captured in the design
and specifications and the contractor has little flexibility to manage the
price.
This method is
recommended for use in both options where the pool is going to be refurbished
and strengthened as well as for the demolition and reconstruction of the pool.
Design
& Build Method
Design and build
method of procurement is a way to fast track the construction and the
contractor should dictate a fixed cost or maximum price that offers certainty
to the client. A single line of contact also smoothens the line of
communication and avoids fall outs.
The down side is
that the contractor now has interest in cutting costs that may compromise
quality and quantity of materials. Margins will be tight as they need to make a
profit under a set maximum price calculated under competitive circumstances. It
also reduces flexibility as the contractor may apply huge penalties to
implement changes.
This option is
recommended for use in conjunction with the ECI option below for demolition and
reconstruction of the building.
Early
Contractor Involvement (ECI)
This procurement
model allows for the early engagement of the contractor during the design
stage. The contractor provides constructability, methodology and suitable
materials input throughout the design period and have the opportunity to work
with subcontractors ahead of the tender stage.
This option is
recommended for consideration when the pool is to be demolished and rebuild.
Positive
attributes:
•Selection by
value
· Buildability
Challenges
• Opportunity
for innovation
• Client
Involvement
• Target
Price
• Accuracy of
estimating
• Programme
Savings
•
Collaborative approach
Negatives:
• Reduced price
tension/non-competitive pricing (value for money – Perceived or
real?)
• Must have a clear project objective
• Incentive to deliver?
• Resource Requirements
Construction
Management (Not Recommended)
Construction
management is best suited to experienced developers with a large in house
experience team to deal with complex projects. This is normally performed by
the main contractor who packages each element and let it for tender to
sub-contractors to complete the project.
The benefit is cost
as you know you are getting the best cost by tendering each element across the
board. The developer will also retain control of quantity and changes can be
made throughout the development at minimum penalty compared to the other
options.
This is a high time
and management intense process that require the hire of an experienced
construction manager and with the potential for a large amount of contracts to
be put in place with a room for error.
