The velodrome track was replaced last year for $2.5 million. Photo / NZME
The velodrome track was replaced last year for $2.5 million. Photo / NZME
Dozens of Whanganui assets, including the recently resurfaced velodrome and the Durie Hill Memorial Tower, could go uninsured as the district council combats rapidly increasing insurance costs.
The decision comes after insurance hikes last year that led to a 57% increase ($1.65 million) in premiums paid by Whanganui District Council – far more than the budgeted 21 per cent increase.
A report from council chief financial officer Mike Fermor said more cost increases were expected.
Insurance for year one of the council’s Long-Term Plan (2024-25) is budgeted at $3.75m but renewing premiums this year will cost $4.1m.
Material damage insurance protects physical assets against damage or loss due to events such as fires, floods, vandalism or burglaries.
In May, the council voted to cancel insurance cover on assets with a combined premium of $107,932, including some Cooks Gardens infrastructure, the Watt Fountain on Victoria Avenue, several memorial statues and parking meters.
Fermor told councillors that, in terms of savings, those assets were “low-hanging fruit” and the time had come to “go to the middle part of the tree”.
“We are not talking about reducing levels of service.
“All it means is we are taking the risk of damage to that asset onto our own balance sheets.”
He said council assets were almost exclusively insured for full replacement costs, not for demolition or functional replacement.
“For example, if our two libraries – the Davis and Alexander – are destroyed, would you replace them as they are or would you have more of a larger community centre with library facilities inside?
“That [community centre] would be a functional replacement.”
The velodrome, resurfaced last year for $2.5m, is currently valued at $12.5m and has an annual insurance premium of $51,560. The Durie Hill Memorial Tower is valued at $4.6m with a premium of $19,002.
For the second round of cuts, the council is proposing assets with premiums totalling around $240,000.
“Many years later, you would come to some of these (low and medium-risk) assets and probably be saying ‘We actually don’t need these’.”
Council chief executive David Langford told the Chronicle that, if a large event caused widespread damage, as in the 2011 Christchurch earthquake, things would most likely not be built back exactly as they were.
Recovery would also “take years and years”.
“You take the opportunity to plan and see if you can do better,” he said.
“Would we rebuild if the community wanted us to? Yes.”
Since the 2015 flooding in Whanganui, the council has paid $9.5m in insurance premiums and has made $250,000 worth of claims.
The council had to be prepared to take risks and pay for things itself instead of putting everything on the premium, Langford said.
“If you think about it from a household point of view, you buy car insurance for the car but you don’t insure the spare wheel in the boot.
“It’s the same for council – pay for insurance for the big, important stuff that you need to rebuild quickly but where we’ve got debt capacity and it’ll save on premiums, be prepared to put a bit on the credit card.”
“[Insurance] is paid for by the ratepayer so we need to make sure we’re not over-insuring and wasting money on premiums we can live without.”
Fermor said the next stage of the process would involve moving further up the list of assets – “higher up the tree” – to determine whether any more could be removed from the insurance schedule.
The committee voted to remove the assets, with the recommendation sent to a full council meeting for a final decision.
Mike Tweed is a multimedia journalist at the Whanganui Chronicle. Since starting in March 2020, he has dabbled in everything from sport to music. At present his focus is local government, primarily the Whanganui District Council.
