Naylor Love is one of the contractors working to reinstate the Christ Church Cathedral. A cost blow-out, however, has thrown continued work into question.
OPINION
The Public Purse is a fortnightly Herald column focused on the public sector and how taxpayer money is spent.
Earlier this month the call went out for more public money to help reinstate the handsome old Victorian Gothic Christchurch Cathedral, which was severely earthquake-damaged in 2011.
Christ Church Cathedral Reinstatement Ltd (CCRL), a Government creation and the joint venture company charged with carrying out the complex reinstatement project, announced that the cost of restoring the listed heritage building has blown out to $248 million, there is an estimated funding gap of $114m, of which some $30m is needed by August, or work will have to stop entirely.
This would leave Cathedral Square, in the heart of Christchurch, in limbo.
Simultaneously, CCRL released an economic analysis to show that, despite the new cost estimate, there is a significant net benefit to the New Zealand public in continuing on the current course to reinstatement.
The cost benefit analysis, commissioned by CCRL and produced by economic consultancy NZIER, compared just two scenarios: push ahead with the current project, which the report assumes will take another six years to finish, or mothball the cathedral as it is – stabilised but ruined – in which case we’re told to assume it’ll remain wrapped up under that giant sheet and out of sight indefinitely.
The net benefit of cathedral reinstatement, which CCRL is promoting to the New Zealand public, the Minister of Finance, Christchurch City Council, the Anglican Church and philanthropic donors, amounts to $1.4m to $31.7m per year, and a benefit cost ratio of 1.1 to 3.0. This indicates that even in the worst case scenario the benefits outweigh the costs; any figure above one represents a net benefit.
It is comforting to have the economists’ assurance that throwing more money at the plan is, in fact, a bargain.
Indeed, the numbers are so soothing you might mistake them for an anaesthetic, designed to make the country forget that the decision to reinstate the cathedral was predicated on a cost of just $104m, and a project timeline of some seven to eight years.
Recall that the Anglican Diocese of Christchurch owns both the cathedral land and the building, and the original $104m cost estimate assumed the use of $40m in insurance proceeds, possible contributions by central and local governments, and roughly $50m in donations.
And bear in mind too, that, since then, grants and forgivable loans of $25m have been committed by the Government, as has a $10m contribution by the Christchurch City Council. Finance Minister Nicola Willis, who is in the midst of an effort to contain government costs, has said she’s been briefed on the matter, but she has not yet indicated her willingness to commit further funds.
Those who have followed the saga will recognise that $104m figure as the estimate (it was originally a few million less) relied upon by the Christchurch Cathedral Working Group when it made its recommendation to both the National-led Government of the day and the Anglican Church, that reinstatement – broadly defined as repair, restoration and seismic strengthening – was a good idea. That was in 2016.
In October 2020, the cost estimate rose to $154m when a full concept design was released.
CCRL now says that a project review last year of the costs and timeline of the work resulted in some reduction of scope, but despite this, the total anticipated bill has risen 48 per cent since 2020, and a whopping 138 per cent since the project was established.
That brings us to the reliability of the cost benefit numbers, which accept that $80m already spent on the cathedral reinstatement to date is a sunk cost, and the evaluation considers just the incremental $168m cost that it assumes is still required.
The first big problem is that the analysis provides for no escalation of the project cost, it simply notes that assessing the accuracy of the CCRL cost estimate is out of scope.
CCRL project director Keith Paterson clarified to the Herald that the cost is a P85 estimate, “with significant contractor and construction planning input”. P85 means there is 85 per cent confidence that the final cost will not exceed $168m from here; on the face value of it, a P85 number will be wrong 15 per cent of the time.
Paterson added that the midpoint of the estimated benefit cost ratio is 2.1, “which means that even if the costs were twice as high, it is more likely than not that the benefits would exceed costs”.
Glenn Boyle, adjunct professor of finance at the University of Canterbury, sees it differently. He said that the consequence of ascribing certainty to cost (when it is clearly likely to increase, see any recent New Zealand mega-project) is that the low end of NZIER’s cost benefit ratio, 1.1, is actually a “false minimum” giving the “misleading impression that even in the worst case there will be a net benefit”.
“Looking at this work, it’s very easy to see scenarios where the benefits have been overstated and the costs have been understated … that would leave things looking very sticky indeed,” Boyle said.
A second reason for wariness is that the single largest benefit tallied in the analysis is derived from what is called “non-use value” for an important site for both culture and heritage. (For comparison, the costs and benefits are converted to an annualised value, in 2024 dollars, for the first year of operation).
It’s worth noting that the tally of benefits includes market value: the money that will be raised through activities like paid tours and sales through a gift shop and cafe ($1.4m).
It includes non-market value: the monetary value given to use of the restored cathedral that will, in fact, be free of charge. This results mainly from hundreds of thousands of New Zealanders viewing the interior or just wandering past enjoying the view ($2.1m).
And it also includes the additional spending by international tourists, who stay longer in New Zealand in order to visit the cathedral ($8.4m).
But the single greatest chunk of the benefit NZIER ascribes to the reinstatement is derived from “low reliability” non-use value ($19.7m) - it eclipses the total for all other benefits.
This is based on an admirably gymnastic exercise, whereby the economists assume that the reinstated cathedral, as a heritage site, will be worth between $2 and $20 per year to every Christchurch resident, and between $1 and $5 per year to every other New Zealander.
The authors rely on a Ministry of Culture and Heritage framework for producing such values, and a range of overseas work aimed at determining the value that citizens of various countries, not including New Zealand, put on knowing they could visit cathedrals and similar amenities regardless of whether they actually do.
Non-use value is exactly as it sounds, a monetary value conceived for such intangible benefits as: the unexercised option to visit the cathedral (“option value”); the enjoyment of knowing you could visit (“existence value”); the value of knowing others can visit (“altruistic value”); and, the value of preserving the cathedral for the next generation (“bequest value”).
In addition, it appears that a non-use value is included in the NZIER analysis, even for those New Zealanders who, it is assumed, also actually visit the cathedral. Those people are counted twice, and account for both a non-use value and various market and non-market use values.
”It wouldn’t worry me if that [non-use] value was just a little bit of the overall value, but it’s more than half,” observed Eric Crampton, chief economist at the New Zealand Initiative.
“And we all know that if more public money is put into this thing there’ll be people who agree, and for them there’s a non-use value, and there’ll be people who are just furious,” he said.
Which raises one of the unanswered questions of the analysis: what is the non-use value of a reinstated cathedral for furious people? And would it be a positive number?
The Herald contacted NZIER co-author Adrian Katz with this question and others; he said only that the client, CCRL, has asked that all media inquiries be redirected to its spokespeople.
Paterson responded, and noted that the non-use values in the report represent estimates of “the average willingness to pay across a population. There are probably some people who are willing to pay $0, just as there are some people who are willing to pay over $1 million.”
He added that NZIER believes there are probably very few people with negative non-use value, as this implies they would be willing to pay money for the reinstatement not to take place.
But the problem with non-use values is that nobody is ever actually asked to pay for what they say they value (or what is inferred on their behalf).
“If there really are substantial non-use benefits, that really seems not a case for government funding but for crowdfunding,” Crampton suggested.
“Set a PledgeMe Campaign to rebuild the cathedral. Advertise it. If people really would receive strong non-use benefits from the project, they could pledge contributions toward it. If the project raises enough pledges, everyone’s credit card is charged and the project goes ahead.”
A final problem with pushing ahead with the current plan, and eating the extra cost, is that it is set against only one alternative in the NZIER work: mothballing, which is given as the counterfactual.
But that is obviously not the only possible future for the cathedral. The options include: repair and rebuild without heritage-sensitive reinstatement; demolition and replacement with a new, more earthquake-resilient building; and leaving the remains of the old church, now deconsecrated, as a stabilised ruin and monument to the natural disaster that befell the city.
It is true that decision-making around the cathedral’s future has a mired history of dispute and controversy, including legal threats and court action waged against the Anglican church, which originally opted to demolish the ruin.
But what appears to be different now, is that the price tag for reinstatement is so eye-wateringly large that it cannot be achieved without large and additional sums of public money.
Kate MacNamara is a South Island-based journalist with a focus on policy, public spending and investigations. She spent a decade at the Canadian Broadcasting Corporation before moving to New Zealand. She joined the Herald in 2020.
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