Monday, July 30, 2012

Is it any wonder investment is leaving Christchurch? [updated]

A new "plan" for the rebuilding of central Christchurch is to be announced at 6pm today.

This will be (hold on, let me count) the sixth different plan for rebuilding the central city to be announced by govt or local govt since the first earthquake.

No wonder property owners haven't got on and started rebuilding themselves.

First, they were barred from their own property. Then, with the release of each plan, they've been told their property will be confiscated if the planners deem it necessary.

The radio story announcing the new plan was accompanied by the hand wringing of Mayor Parker, bewailing the flight of investment capital out of Christchurch. Is it any wonder?

It’s still not too late to turn Christchurch into an Enterprise Zone. It could be done overnight.

No, we won’t know how Christchurch would look if that were to happen. There’d be no grand plan about which to trumpet—no great monuments for politicians to unveil; but there’d be rebuilding, you can be sure of that; the rebuilding would start, carried out by people using their own property, their own money, and expecting to turn a profit on it.

In other words: rebuilding the way this city and every great city* was built in the first place.

A simple fact forgotten by those who harbour a fetish for grand plans and a wish to keep Christchurch on welfare.

UPDATE: The citizens of Christchurch deserve more respect than to have  inflicted on them more infantile boosterism, says Hugh Pavletich, Coordinator of Cantabrians Unite.

Later today an announcement will be made on the proposed central public projects. All these proposed projects will likely be loss makers, requiring on going ratepayer / taxpayer subsidies.
National and international research also illustrates the wider economic and social benefits are minimal ...- at best. Indeed - comprehensive and robust research often illustrates there are wide economic and social costs.
The focus should be on how best to provide these loss making services in whole or in part, at the lowest possible ongoing cost to ratepayers and taxpayers.
It is to be hoped the media makes a point of communicating with people both nationally and internationally, with credibility and expertise in these public projects.
In very general terms, if at the outset the development cost estimates are in the order of $800 million and because these projects appear to be rushed, it will be likely there will be substantial costs blowouts. The promoters need to be asked ( based on reputable international evidence and research ) what provision at this stage have they made for likely cost blowouts.
By rushing in to these projects, the promoters will be forced to pay excessive land costs. Going forward, central area land values are expected to fall dramatically. The public deserves to be fully informed of the additional land costs involved with these proposed rushed projects.
Even based on the initial costs estimates of around $800 million, when the ongoing costs of capital and operating losses (including insurances, maintenance, depreciation, staffing etc. etc.) are factored in, it seems likely these could be in the order of at least some 10% or $80 million a year of ongoing losses.
With a little over 150,000 households, this is in the order of $533 per household - more if there are cost blowouts.
While of course the commercial / industrial sector pay a substantial proportion of the Local Authority rates - the losses are still a cost to us all as citizens. The commercial / industrial sector will simply pass on these increased rates costs in the prices they charge for the goods and services they provide. Business is simply an intermediary.
And in the broader sense - have we got our priorities right - with people first - housing second - and business third.
Quality decisions can only be made if the citizens of Christchurch are provided with honest and credible information.
The citizens of Christchurch most certainly deserve to be treated with respect. They deserve much better than to be inflicted with infantile boosterism.

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5 Comments:

Blogger Eric Crampton said...

Rumour has it that they'll be compensated based on the value of the land as of today. And the land, as of today, isn't really worth much. We'll see what the final document says though.

Too many people spent too much time playing SimCity when they were kids.

7/30/2012 09:43:00 am  
Blogger Berend de Boer said...

I disagree Eric: I think the wouldn't seen this if they had been playing SimCity. Playing SimCity very quickly introduces some reality into a planner.

7/30/2012 11:21:00 am  
Blogger Kiwiwit said...

This is the model for the new plan for Christchurch.

7/30/2012 12:10:00 pm  
Anonymous Maurice Winn said...

It's easy to be seduced into the bludgers' beliefs. Be careful Peter: << The commercial / industrial sector will simply pass on these increased rates costs in the prices they charge for the goods and services they provide. Business is simply an intermediary. >>

No, they won't simply pass on costs. That's the cost plus mentality of central planners in action who don't understand the wellsprings of wealth.

The cost plus crowd think that they can add their bits and pieces, RMA, GST and Petrol Tax for Roads and on and on and on and the people who buy the products will pay the bill. They do admit that there is a limit to the process and in the case of cigarettes they aim to stop people smoking, while collecting heaps of loot. More and more people give up smoking - until they go black market and grow their own tobacco.

What really happens with added costs is that people have $1 in their wallet and they decide how to spend it. Each thing they buy has a consumer surplus for that individual buyers. As the price rises, fewer and fewer buyers find that thing worth buying. So they don't buy it. They don't simply pay whatever the suppliers demand.

As costs are loaded on, less and less can be bought. Businesses shrink or go bust or make minimal profits and can't expand.

When the extra rates are loaded onto the products of businesses, those businesses do just pass on the costs, but some of their previous customers stop buying. As the burdens increase, fewer and fewer buyers remain.

In the end, everyone gives up. Bludging socialism once again runs out of opm.

7/30/2012 07:00:00 pm  
Blogger Mark said...

My comments posted at the Press website copied below. I would encourage readers to go to the link below and make a similar point.

http://www.stuff.co.nz/the-press/news/christchurch-earthquake-2011/city-blueprint/7375080/Bold-plan-for-a-new-Christchurch

"If I forget the real world and pretend I'm playing SimCity this all looks very nice. But what most people are missing is that good cities aren't created by master plans and regulations, no matter how good the plan. They're created by the initiative of individuals getting out there and doing it, moderated by price signals about what the market wants and can afford. It's something which evolves and changes over time.



I'm hoping this is largely bread and circuses for the masses, and that apart from a few key government projects, they'll largely leave the city's development to the market. With the exception of places like Canberra, this is how ALL cities grow. But if they're serious about enforcing this plan, all I can see ahead is a wasteland for the next 10 years as they struggle to find funds - and if they can find the funds a sterile 'Canberra on the Avon' in 20 years time or so when it's all done."

7/31/2012 10:26:00 am  

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