Saturday, 18 April 2015

Crunch time for CIT

The Dominion Post reports that the end date for tenders on the old CIT is 12 May. I understand there are a number of very different proposals in the pipeline, and it will be interesting to see what comes to pass.

I hope that we see some of the interested parties working together for the best outcome. CIT has a lot of empty land (9.7 hectares) around it that might be able to be used for housing development, while the buildings themselves are retained.

The article itself mentions either retirement villages, a growth area with New Zealand's ageing population, or - disturbingly - "national retail brands" which they say represents an "excellent opportunity" for a "bulk retail development." This appears to be a suggestion for turning some of CIT into retail, an idea which I wouldn't support.

My view remains the same that the best thing for Upper Hutt, given the growth in investment in innovation through the likes of Callaghan Innovation, would be for the CIT campus to become a technology park.

Thursday, 9 April 2015

Long Term Plan season in the Hutt

UH Mayor Wayne Guppy at the public consultation.
It's long term plan season - when our local councils put together their plans for the next ten years. Both Upper Hutt City Council and Hutt City Council have their ten-year plans under way and open for consultation now.

In Upper Hutt, there's a number of projects:

  • Reconstruction of Fergusson/Main/Gibbons St intersection (increased demand) $6.5 million 
  • Rural roads upgrades (improve services) $6.1 million 
  • Stormwater - Pinehaven Stream project (UHCC 50% cost share) $5.8 million
  • Fergusson/Ward/Whakatiki intersection upgrade (increased demand) $4.5 million 
  • Water supply - new Cruickshank reservoir (increased demand) $4.1 million 
  • Akatarawa Cemetery development (increased demand) $3.7 million

Overall it's a pretty balanced - the water and roading projects are pretty standard. The key thing for me though is that the council's debt remains below the Local Government Cost Index (LGCI) while a spending a bit more on extra projects to help Upper Hutt grow. They are:

  • Boosting economic development $500,000 
  • Cruickshank Rail Tunnel walkway/cycleway $452,000 
  • LED street light upgrade $431,000 
  • Upper Hutt City walkway/cycleway network $281,000 
  • Hutt River Trail upgrades (Rimutaka Cycle Trail) $253,000 
  • Harcourt Park paddling pool upgrade $245,000

It's pleasing to see local businesses are behind these plans. The investment in cycleways is good, especially the Cruikshank Rail Tunnel. Developing the tourist and recreation potential of Upper Hutt in this way is definitely a good think.

I'd question the rate of return from the half a million in economic development. If the rate of return is better than the cost incurred by the council of borrowing the money, then potentially more could be spent; on the other hand if its worse then this item of expenditure could be trimmed. We have seem a lot of positives in this area - but are we getting value for money?

The LED street light upgrade is another good idea. LED lighting looks better, and more importantly it uses much less electricity, so over time there's a net benefit to ratepayers.

Consultation on Upper Hutt's LTP closes on 20 April.

Meanwhile in Lower Hutt, Hutt City has its LTP up for consultation. Along with the key projects, they have a number of additional projects:
  • Eastern Bays Shared Path between Lowry Bay and Days Bay $9 million
  • City-wide cycle network upgrades. $3 million
  • Regional Bowls Centre in Naenae, funded through asset sales. $2 million
  • City-wide science and technology projects. $500,000
  • Viewing platform at the top of Wainuiomata Hill. $200,000
  • Petone and Wainuiomata Sportsville projects. $200,000
The regional bowls centre in Naenae is controversial, especially since it's funded by asset sales. Again, the rate of return on science and technology projects is debatable, but pleasing to see it forms a part of Hutt City's future plans.

There are also a number of projects from last year's plan that are underway:
  • Civic Centre development- scheduled to be completed by mid / late 2016
  • The construction of the Taita Community Centre – scheduled to be completed mid / late 2015
  • Fraser Park developments (in three phases), phase two – new multi-purpose clubrooms scheduled to be completed by late 2015 / early 2016.
  • Construction of new Learn to Swim and hydrotherapy facilities at Huia Pool – scheduled to be completed mid / late 2016
  • Significant Avalon Park developments - scheduled to be completed mid / late 2017.
  • Work on the Hutt River Trail to complete walkways and cycleways – completed mid / late 2015
  • Riddiford Gardens development - scheduled to be completed mid / late 2017.
Consultation on Hutt City's plan is open through to 30 April.

Monday, 30 March 2015

Northland implications

David Farrar has the best analysis I've seen on the reasons why National lost the Northland by-election. I think reason 3 - Mike Sabin's departure - is the strongest. The feeling I picked up from National supporters in Northland was that the vacuum of information about Sabin's departure - which inevitably was filled with rumour and conjecture - really irritated even the most loyal supporters.

The question now is what happens in 2017. The preliminary results point to Peter's win being made possible by a large number of Labour voters giving Peters their electorate vote, as Andrew Little essentially instructed them to do.

It was a smart move by Little, and a clear demonstration that he understands MMP. But it creates a two-part problem for Labour that will be a headache in 2017: firstly it means they lose the ability to whack National over deals in Epsom and Ohariu. Morally their position is degraded - the media will simply point out they accommodated Winston where it suited them, to stick it to the government. But I suspect the public understands this is part and parcel of MMP anyway.

Secondly it means that the deal will need to be repeated in 2017 to ensure a similar result. This will be even more imperative if the rumour (Peters wanted to capture an electorate seat to guarantee NZ First's survival, similar to Act's win in Epsom in 2005) that Northland is part of Winston Peters exit strategy are true. If Labour wants an alternative to the Greens (and they should) then NZ First is their best bet. That means Willow Jean Prime will need to take another loss on the chin for Labour - and that risks a Margaret Hawkeswood style melt-down.*

My prediction is that Winston will now work to position himself alongside National, to keep Little and Labour on their toes. That way he might be able to extract more - perhaps even the baubles of office - if he finds himself as Kingmaker again in 2017.

*Margaret Hawkeswood was Labour's candidate for Coromandel in 1999; she was very unhappy when Helen Clark told Labour supporters there to give their electorate vote to Jeanette Fitzsimons (Greens co-leader) to get the Greens into Parliament. On election night that worked; however after the counting of the special votes the Greens got enough votes to get over the 5% party vote threshold.

Thursday, 26 March 2015

CIT's future options

Picture from the Upper Hutt Leader.
The CIT is now on the market (Upper Hutt Leader, 26 March). The ongoing saga since the closure of CIT in 2001 may be drawing to a close. JLL has been appointed to sell the buildings and land which has a council valuation of $13 million.

With the Treaty of Waitangi claim now resolved, there seem to be a number of future options for CIT:
  • The site is cleared and turned into a housing development.
  • CIT returns to some form of tertiary institution. WelTec may have to spend millions on earthquake strengthening its Petone building, it would make sense for WelTec to instead purchase CIT.
  • A technology park, hosting high-tech companies and creating high value, well-paid jobs in Upper Hutt.
My personal preference (as you can probably guess) would be for CIT to become a technology park. There could be a mixture of both a tertiary institution and technology park (or an "incubator" for new high-tech ventures) which would get optimal use of the site.

Wednesday, 25 March 2015

Alan Bollard and the Smiling Curve

Last week I went to a presentation by former Reserve Bank Governor Alan Bollard hosted by the New Zealand Initiative. The key concept Dr Bollard used was the "smiling curve", a way of emphasising where value is created in a modern economy. In years past, the curve was flatter - it was the fabrication of products that created the lion's share of the value in the economy.

The relentless expansion of technology and growth of the service economy has changed all of that.

Keep on smilin'
Now, more value is created at the start of the production process - patents, technology, research and development - and at the end of the process - brand, service and marketing. Dr Bollard then related this to New Zealand's economy and specifically to the dairy industry, using figures from the FMG Institute. The numbers showed that the production of milk power had a return on capital of 9%, where as marketing had a 17% return, and 29% for research and development. Oliver Hartwich, Executive Director of the New Zealand Initiative, asks:
...what would it mean for a New Zealand dairy company that is seeking to do increase its business in Asian markets? They might be aware that the return on assets is only 7 percent for farming, 9 percent for powder plants whereas it is 17 percent for marketing and even 29 percent for R&D and processing.
Which is where it gets interesting. There seems to be agreement that increasing our R&D spend is a good thing, but we need to make sure we take advantage of it. On the other hand, there are also lots of people who seem to think New Zealand should focus on the middle of the curve.