Council Officer's Report: Analysis or Propaganda?

The report to Council on the University of Canterbury National Conservatorium of Music ( PDF downloadable from http://www.soac.org.nz/ccc-green-light.phpsee) makes disturbing reading and raises serious concerns about Council processes and the quality of the information on which its decision-making is based.  If we assume that the Council officer who prepared it was not incompetent,  then it appears it was either written under instruction to come up with the result wanted by the Council or that the officer knew the result required and wrote the report to fit.  It fails to address a number of important questions and is based on a whole series of unexamined assumptions. 

Is it a proper use of the the Council's borrowing capacity to fund a tertiary institution?

The report does not directly address this question.  It simply accepts that the project is beneficial and is aligned with certain council policies and glosses over the issue.  Yet it is important because the Council does not have unlimited borrowing power and it is also required by its liability management policy to keeps its borrowing within the limits needed to maintain its AA+ rating. Hence, there is an opportunity cost to any borrowing decision that is made, but nowhere in the report is this acknowledged. The report states that the University could fund the project itself. (para 8)  It has been explained elsewhere that one reason for involving the Council is because it can borrow more cheaply than the University.  But the fact that it can do so does not supply an answer to the question of whether it should do so, especially if borrowing to assist an institution able to fund itself  limits the Council's ability to borrow for some other project that might not only have greater and wider community value but also be fully dependent on Council funding, or if it prevents Council undertaking emergency borrowing without harm to its credit rating. The need for the recent $19.1 million  buy-out of a private waste disposal company to ensure the continued operation of the City's waste collections illustrates the importance of caution before committing to substantial borrowing for an institution that has the assets to be able to borrow elsewhere.

Many of the claims made for this project are highly contentious and a whole range of other potential projects could equally be described as beneficial and in alignment with Council policy. Before the question of whether the Council should borrow for this particular project can be validly answered there needs to be a much more rigorous discussion of any potential positives weighed against any potential negatives as well as an examination of whether the claimed benefits could be achieved equally well in ways that do not require Council borrowing.  There seems to be an underlying assumption in the report that the interests of the University and the Council are identical (see especially the Executive Summary), but that is not so.  The Council has much wider responsibilities and it needs to ensure its decision making reflects this.

The key reasons given in support amount to the following:

• Para 20 b  It 'will enhance the existing cultural activities in the area and the outcomes sought for the cultural well-being of the Council's district.'  (Curious wording, this.  You might expect city or inner city, but why Council's district?  Does this reflect a narrow interest in the Cultural 1 Zone with the imminent shift of Council Headquarters to this area?)  
• Para 31   It is aligned with the LTCCP  community outcomes of a city for recreation, fun and activity, a city for lifelong learning and an attractive and well-designed  city.
• Para 32  It is aligned with the direction set by the Central City Revitalisation project.  In particular: it adds visibility to the cultural precinct; it reconnects the historic town and gown link; it reinforces the centre as a place for creative young people; and it will assist in supporting more residential activity.
  
• Para 33  It will provide a basis for the Council to begin to address how it connects Ilam to the Central City and develop greater synergies between campus and downtown. 

No supporting evidence is provided for these statements.  There are many people in the city who believe that this project, rather than enhancing the existing cultural activities of the area, will, to the contrary,  have a directly harmful effect.  Given that performance students might well practise up to 5 hours a day, and that the Conservatorium will be an institutional building  closed to the public for most of the time,  claims that it will enliven the Cultural precinct seem distinctly spurious.  As a correspondent to The Press has correctly pointed out, the shift of up to 1000 Council workers nearby is likely to do much more to generate foot traffic and life in the area than this proposal ever could.  No-one would quarrel with the aim of seeing more performances by staff and students of the university in the cultural precinct but the Council and the University together could provide opportunities  for that to happen without needing to provide the place of study in the city. ( I have recently seen performances in the atrium of the Art Gallery, for example, and what about the forecourt of the new civic building when it is completed.) Further, if the City wishes to enhance performance opportunities in the Central City, it would be better to assist with creating an auditorium of the size and type currently lacking in the City, as identified by theatre expert, Elric Hooper, rather than backing the construction of yet another one of a size already well-catered for. There is no evidence that any attention has been paid to whether the auditorium will meet an actual need in the city and yet this is surely one of the obvious questions that the Council should be asking itself

The  statements in paragraphs 31 and 32 are equally unconvincing as a justification.  The features of the project which are said to align with the LTCCP would apply equally to a building on the campus. In addition there is widespread community disagreement with the opinion that the proposed building would contribute to an attractive, well-designed city.  No-one would argue with its visibility but that is unlikely to reflect credit on either the Council or the University. It is certainly insufficient justification for Council borrowing, as is the notion of reconnecting the historic Town and Gown link.  Besides, the University already has a visible presence at the Arts Centre in the SOFA Gallery, which is entirely in keeping with the aims of the Arts Centre and the desire expressed in the report to reinforce the city as a place for creative young people.  The shortcomings of the revitalisation claim have already been noted. Furthermore,  no justification is put forward for supporting revitalisation in a precinct which is thriving compared to the South of the City and the CPIT/Catholic Cathedral precincts which, according to the Council's own policy documents, are priority areas for redevelopment. The possibility that this project will assist in supporting residential development in the Central City is a very weak argument.  Students follow cheap rent and that is not to be found in the north-west side of the central city.  This argument might be more convincing if the music school were to be in the vicinity of CPIT and the Music Centre, where it would also assist in creating a concentrated hub of musical activity.

The statements made in paragraph 33 are a good illustration of the problems with this report. They put the cart before the horse. The council should be looking at the synergies it wants to achieve between campus and downtown before deciding the proposal is a good thing.  Any departure from the long standing policy to base teaching at Ilam, if that is felt to be desirable, needs be looked at as part of a wider discussion which examines the pros and cons of a move within the context of a range of issues, including the social and environmental impacts, zoning implications, whether there is room for further expansion and its potential impact on traffic and transport policy. Given the trend towards developing links between tertiary insitutions (the Canterbury Tertiary Alliance) it would make sense to concentrate the University's town activities in the area of CPIT (which already has links with the Music Department) to allow easier and more efficient transport links to be developed between Ilam and town and to enhance the opportunities for meaningful relationships between both insitutions to develop.  It would also enhance the relationship with the Music Centre, a major training ground for future students of the Conservatorium.  

Apart from the unsubstantiated and exaggerated claims made in justification of the project, there are several glaring areas of omission which should be examined before the Council is able to reach a sound determination concerning its involvement.

Planning Issues

If the Council is to consider funding and developing a building for another institution on land it doesn't own then surely before doing so it needs to satisfy itself first that the proposal complies with the requirements of its own city plan.  Planning Consultant Malcolm Douglass has argued that tertiary education is not a permitted use within Cultural 1 Zone so this proposal is  a non-complying use  There is no evidence whatever in the report that this issue has even been considered. Nor has any consideration been given as to whether the design is likely to comply with the planning provisions for the zone, including shading effects.  The views of the University and the design panel as to the compatibility of the building are taken completely at face value.  Obvious questions need to  be raised about the impact of the design on the heritage values of the site and even more importantly, any potential impact from the construction process upon the heritage fabric of the existing buildings.   One would expect the Councillors to require  some evaluation of these issues in the report and to decline to make any decision in the absence of such assessments.  It is simply not adequate to state (para 20b)  that the social and environmental impact is considered to be at a low level. Given the vehemently expressed public opposition to the proposal this statement is difficult to sustain.  As a consequence, one would also expect to see some discussion of potential resource management expenses and discussion as to who should bear such  costs.  The document is silent on all these issues.   Where are the reports from the planning section or the heritage section of the Council?

Risk assessment issues

In addition to the unexamined risks relating to impact on the heritage buildings and the potential costs of resource management referred to above, one might also have expected the report to consider matters such as the following:

• How vulnerable is the project to external factors such as changes in government policy for funding tertiary institutions, changing patterns of student demand for the courses offered, changing interest rates,  or possible cost overruns through delays or unexpected difficulties as a result of the sensitivity of the site?
• How viable is the concept of a National Conservatorium given the already successful New Zealand School of Music in Wellington? The letter from the Director of the School quoted in The Press (5/8/09) reveals clearly that the University has supplied misinformation in its public advertisements concerning the status of that institution.  This illustrates the need for the Council to appraise itself of all the relevant information needed to make the decision.  It cannot afford to rely solely on input from the institution that stands to benefit from its borrowing.
• If at some stage in the future the University decides it can no longer afford to support the music programme and a building in town, will the Council be left with a useful asset or will it be too purpose-designed for any alternative use? (Music is a resource intensive programme requiring high levels of one-on-one tuition and expensive facilities. It is has been indicated to University staff that the project will be cross-subsidised by the whole university. If the proposed Conservatorium fails to live up to expectations it will become an obvious candidate for future cost cutting exercises.)
• What are the implications for the Council if the University falls behind or defaults on its payments?
• What are the risks that the council will need to undertake further borrowing for unforeseen reasons which will cause it to exceed it borrowing ratio and so place its borrowing ratings at risk.  If the situation arises, is there provision to increase the rate charged to the university and what impact would that have on the viability of the project?

Supposing, after weighing all the issues carefully, it was felt that the Council should support this project, a position, which I would suggest is in fact untenable, a second equally vital question has been glossed over in the report.

Why should the Council set up a financial structure for  the development of this project which is in breach of its Liability Management Policy?

The Council's liability management policy requires loans to be recovered within a 30 year period but it is proposed in the report that this should be extended to a 50 year period "because the balance between repayment of the loan and the income required to meet that cost is best achieved by a 50 year term rather than a period of 30 years."   This is undoubtedly a desirable outcome for the University, but what are the consequences for the Council?  This is not examined in the report but at the very least it means that the delay in recovery of the debt will raise its borrowing ratio for longer and therefore impose yet another opportunity cost. It certainly does not assist the Council to maintain a prudent level of liquidity to meet planned and unforeseen cash requirements as required in its policy.  It seems very difficult to argue that the advantages to the City of this proposal are so compelling as to justify non-compliance with its policy.

Failure to properly examine the reasonably practicable options for achieving the objectives of the decision.

The report considers that the Council's obligation  under s. 77 of the Local Government Act 2002  to examine all practicable options for achieving the objective of the decision have been met. It identifies the only two reasonably practicable options as funding or not funding. In order to meet the requirements of the Act it is not adequate for the report merely to state that exercising the option not to fund would probably result in the new music school being built at Ilam.  The benefits and costs of that option also needed to be examined and the extent to which community outcomes etc. would be achieved should have been taken into account.  

It is also completely unsatisfactory to discuss only the recommended funding and development structure. A range of permutations are possible. These include the Council simply borrowing and leaving the University itself to lease from the Arts Centre and build the building; the Council borrowing and carrying out the development itself; as well as the chosen structure of using an existing Council Company, CBL, to carry out the development and lease the building to the university.  The report needed to examine the costs and benefits of all of these methods and any other possible structures.   Amongst the issues that should have been raised and evaluated were the legality of a 'subdivision"  resulting from lease of part of an allotment for a term of more than 35 years, what forms of security the Council has as a result of the various arrangements, given that neither it nor the University own the land, and the question of why the Council (or Council Company) should be an intermediary in a relationship between the University and the Arts Centre Trust Board  and the implications of taking on that role.  It is surely not the appropriate role of the Council  "to manage the ongoing relationship with The Arts Centre of Christchurch Trust. (para 8)

Failure to consider issues of prudent stewardship and effective use of its resources.

It is one of the obligations of a local authority to ensure prudent stewardship and efficient and effective use of its resources in the interests of its district and region. (s. 14 (1) (g) Local Government Act 2002.)  This report seems to have paid insufficient attention to this obligation or its own LTCCP outcome of managing public funds responsibly.  

One of the questions which has been totally ignored is whether it is prudent stewardship or efficient and effective use of Council resources to build at the Arts Centre when a music school could be built much less expensively on campus.  For example:

• There would be no need for to use the expensive materials required to fit in with the Arts Centre.
• Expensive monitoring to ensure there was no impact on the surrounding heritage buildings would not be required.
  
• An expensive underground carpark would not be needed.
  
• Resource management costs would be considerably reduced.
  
• There would be no need to pay a ground rental.
  
• Although it might still be desirable to build an auditorium of the capacity the city lacks (though this is not what is proposed at the Arts Centre), it would be unnecessary to build a library and the need for lecture spaces could be reduced by the use of  shared lecture rooms.
• The administrative and energy costs of a split campus would be avoided. 
  

Without taking these matters into account the Council can scarcely be said to have properly considered its obligations of stewardship and effective use of resources.

Given all the shortcomings of this report, it is disturbing that it should be accompanied by the advice that a formal consultative process is unnecessary because it would add nothing to the Council's understanding  of community views and those views will be taken into account during the resource management process.  This demonstrates a fundamental misunderstanding of the meaning of consultation.  

The LTCCP states that progress in achieving the outcome of a well governed city will be measured, among other things, by confidence in Council decision-making.  So long as the Council continues to make decisions on the sort of limited information and evaluations given in this report, then no-one is likely to feel great confidence in their decision-making.