Other Developments

As part of our review we have investigated other potential developments in or adjacent to the Town Basin area. Developers in the region view the building of the Hundertwasser Art Centre as favourable and some have seen it as a catalyst affecting both the timing and nature of their own developments. Others see it is an opportunity to work with WDC in developing Public Private Partnerships (PPPs) or providing additional infrastructure to the town, such as a potential public transport hub/car park. Other developers are considering commercial developments of 3,500 to 4,000 square metres that includes potential retail and some additional parking. They view the Hundertwasser Art Centre as generating demand (through foot traffic and the desire to work in an enhanced environment) for their own development, as it will become the part of town to “be in”, i.e. a catalyst. Should the Hundertwasser Art Centre not proceed, then the timing for such a

development may also be delayed. The value of such a commercial development could vary from its intensity ranging from a $16m to $40m development, which could provide additional economic growth into the District.

WDC is considering options for the development of a 4 star hotel in the Town Basin area. The developers are currently independent but would be keen to see any hotel development branded with an internationally recognised name e.g. Novotel. The developers see a need for such a hotel in the region, and believe that it would have a corporate base of visitors travelling to the region on business. The development of the Hundertwasser is seen as complimentary to the development and if branded could attract visitors to Whangarei for a night before proceeding further north on their visit and likewise on their return. It could also encourage week-end visits from Auckland.

Other developers in the Town Basin and CBD are keen for the revitalisation of the area, as it is likely to lift the property values of the area, and could result in increased rents, as well as strengthening the balance sheets of organisations including WDC’s.

8.Costs and Benefits to Ratepayers

WDC is considering funding the construction of the Hundertwasser Art Centre through the provisions of grants to the Trust in order to build the Hundertwasser Art Centre. Although WDC are considering various funding mechanisms there are likely to be some costs for

ratepayers. There will be reasons for the Whangarei community to support or not support the proposed Hundertwasser Art Centre. There will be social and economic benefits and there will be financial costs.

8.1. Benefits

There are a number of social and economic benefits, some are short term and some are longer term. The benefits include: • Public access to Hundertwasser and other significant artworks in the region.

• Construction opportunities locally, the Economic Impact Assessment prepared by Deloitte estimates that 68 FTEs would be required. In addition should the Hundertwasser Art Centre progress, it would bring forward other developments within the Town Basin, CBD area of town.

• The Deloitte and Visitor Solutions Economic Impact Assessments have estimated an on-going economic benefit of between $3.5m - $3.7m per annum from 2015 onwards from the development. This does not include the impact from other complimentary

developments that are likely to occur as a result.

• New jobs would be created, with an estimated 11 additional jobs required for front-line work in the Art Centre, and potentially 21 jobs in the cafe/restaurant. Security personnel would also be required for monitoring the CCTV within the centre and for patrols to

• Potential increased spending in the region. Monies spent at the Hundertwasser may not result in diminished spend at other attractions in the region, but in additional spending due to the number of few attractions that the Hundertwasser Art Centre would be competing for.

• The project fits into the strategy of the revitalisation of the Town Basin, improving the look and feel of the heart of the city, and should help to engender a “sense of place” for ratepayers, and a place to spend time in, which would not only benefit existing ratepayers but could attract professionals and their families to the Whangarei District, growing its cultural base and aiding its future sustainability.

• Compliments and enhances other developments such as the Art Park, the new location of the Whangarei Art Museum, and the Hatea Hub Bridge development.

• The revitalisation of the Town Basin is likely to result in an increase in property values in and around the Town Basin and the CBD.

8.2. Costs

In addition to the benefits above, the proposed Hundertwasser Art Centre would also bring with it costs. The costs include:

• The grants provided towards the construction costs of $13.6m will need to be paid for, either through rates paying for a loan over a set period of time or through some other funding mechanism. $1.2m of these costs will need to be incurred in strengthening the building, whatever its future use, as it is a public building subject to the provisions of WDC’s earthquake code and is being

addressed independently of the proposed Hundertwasser Art Centre. Therefore $12.4m is the additional cost to be funded by WDC less any additional grants that can be secured by the Trust towards the construction of the centre.

• There is an opportunity cost of what the funding from a full commercial lease would provide Council compared with transferring the Hundertwasser Art Centre to the Trust.

The costs to ratepayers and the funding mechanisms to support building the Hundertwasser Art Centre are being considered by WDC and are outside the scope of this report. It should be noted that significant spending of $1.2m is required to make the building usable for any other development there.

9.Conclusion

From our analysis of the proposed Hundertwasser Art Centre, the ownership and governance structure would appear to be an appropriate one, as there is shared governance between WDC and the Trust in the form of the elected council members sitting on the Trust’s board. The operation of the Trust will allow the Trust to apply for grants that would not otherwise be available to WDC. Care should be taken by the Trust and WDC as they will be related parties for accounting purposes, and appropriate controls and policies should be put in place if they are not already there.

Visitor numbers projected are relatively conservative and are based on historical and projected information from the MED and are then projected further out through to 2025. The visitor numbers as discussed are those projected to visit Whangarei and Northland whether the Hundertwasser Art Centre is developed or not. The development of the Hundertwasser Art Centre may encourage new additional visitors to the region and could result in a similar success story as the Guggenheim building in Bilbao, Spain. Although this would be hard to gauge as the Hundertwasser Art Centre and New Zealand are far more remote to international visitors than mainland Europe, and there are other unknowns that would make any influx of additional visitors hard to gauge. Therefore our projections are based on the more conservative visitor patterns that are known and measured.

The price for entry admissions is based on our research of other entry fees for numerous attractions, and what would appear to be a fair price for the public with allowance made for the opening of the centre in mid 2014. For local ratepayers, we have shown in our analysis that they would pay 50% of entry fees to the centre. There have been suggestions that local residents could purchase an annual pass to the centre or enter free with a full paying guest from outside the region. WDC will need to give further consideration as to how local ratepayers would be charged. This could be carried out through consultation with the public and/or through market research.

The financial analysis shows that the Hundertwasser Art Centre could operate without additional WDC support, unless there was a

significant shortfall in visitor numbers in the short term. Should grant or sponsorship (for theatre complex) funding be sought, it will serve to strengthen the financial performance of the Trust. Budgets and operating costs will however need to be closely monitored, as the project is

shows that there are a number of expenses that are more sensitive than others and these should be monitored more closely to keep control of costs.

We would recommend that if the project progresses, that budgets are set with monthly reporting back on actual results, including variance analysis, so if any problems emerge that they can be identified and mitigated in a timely manner.

We have shown the cafe/restaurant being run by an external third party, as this is neither the Trust’s or WDC’s core business. The financial projections developed for the cafe/restaurant which will be open in the evenings as well during the day, show reasonable returns prior to an owner taking out a salary or dividend (excluded from analysis). However, although the returns projected are higher than the sub-lease rental income to be earned, the risks would be significantly higher, and we would therefore recommend that the Trust sub-lease the cafe/restaurant to a third party, and accept the lower returns of lease income but also the lower risks associated with sub-leasing.

There are a number of risks and opportunities for WDC in building the Hundertwasser Art Centre. Many of these impact on the wider Town Basin and CBD area as well as the Hundertwasser Art Centre itself. There are opportunities to revitalise the Town Basin, and the

Hundertwasser Art Centre is likely to encourage other developments to progress in the near vicinity which fits with WDC’s long term strategic vision for the city’s heart and developing a “sense of place”.

WDC are keen to increase outside spending in the District, and the Hundertwasser Art Centre provides an example of an attraction where visitors could spend a few hours. However, WDC need to encourage visitors to stay longer, preferably overnight, in order to maximise visitor spend in the district. Therefore additional attractions are required. Attractions such as the Artisans market and the Art Trail are examples of this. WDC should also consider river/harbour charter tours etc and other attractions to stop Whangarei being just a stepping stone to the Bay of Islands and the Far North, and become a destination in its own right. The potential development of a 4 star hotel is likely to assist in attracting overnight stays, or week-end visits from Auckland in addition to attracting a core of business travellers to the District. The Hundertwasser Art Centre and other developments may provide jobs locally in the construction industry in the short term, and/or attract out of town workers to spend their wages in the District. New jobs would be created within the Hundertwasser Art Centre and the

cafe/restaurant. The separate economic impact analysis carried out shows that there is an annual benefit of $3.5m per annum to the region from developing the Hundertwasser Art Centre. This is prior to the hotel or other developments that may occur.

The revitalised waterfront area will not only attract tourists and visitors but will also become a place for locals to enjoy the waterfront and attractions in the way that many waterfront developments have both in New Zealand and overseas. The developments are likely to increase property values in the area, which may result in an uplift of rental value for owners of the properties.

One of the key risks for WDC will be considering the availability of car parking close-by to these attractions and also managing traffic flows from the state highway down to the Town Basin especially during peak traffic times and the summer season. We understand that WDC is in the process of undertaking a Car Parking Strategy, but we would recommend that should the project progress, that Traffic consultants review the new strategy and potential traffic flows into the Town Basin.

WDC will need to consider the other benefits and of course the cost to its ratepayers in making a decision to progress with the Hundertwasser Art Centre, as well as considering their views during the 2012 – 2022 Long Term Plan consultation process.

Overall, the Hundertwasser Art Centre presents a unique opportunity to develop one of New Zealand’s truly iconic buildings that also fits within the WDC’s Town Basin revitalisation vision, with economic benefits of $3.5m per annum, which would deliver a return on investment in the District over a pay-back period of 4 years on the construction cost of $13.7m. The development may also put Whangarei on the international map for visitors interested in such a unique structure or Hundertwasser’s other art works.