Earthquake prone buildings in the Feilding CBD
a  proposal for a coordinated approach 		 
 
 
                 
 
       
 
 
   
  This presentation is predicated on the assumption that the Arthur Morgenstern earthquake strengthening methodology in terms of both design and execution, is "fit for purpose" in the Manawatu District.  
  Introduction      
 
    As a result of my six years as Executive Director of Enterprise Feilding (until 1997), I fully understand the importance of the CBD and it surrounds to the fabric of the Manawatu District and beyond.

Until recently I have only been an observer in the "earthquake prone building" space. That changed when I joined the Board of Manchester House. We have such a building from which our Op Shop operates (on the corner of Fergusson and Stafford Sts). 		 
  The MDC hosted meeting  
 
  Listening to the Morgenstern presentation last Tuesday (15th September, 2020), there were two stand-outs that came to mind:   
    > His methodology has the ability to deliver cost effective remedial "fixes" thereby offering a potentially viable solution for impacted building owners; and   
    > This lends itself to developing a coordinated "all buildings" strategy.  
  Sustainability imperatives    
 
    A fundamental imperative influencing economic performance in either the macro or micro environment, is confidence. Without that, there is little or no new investment, precipitating a downward spiral that becomes a self-fulfilling prophesy of doom and gloom.

At a time when there are questions about the sustainability of retail shopping as we know it, the added burden of uncertainty because of earthquake strengthening could be "the final straw".  Individual building owners must ask themselves "can my remedial actions make a difference to overall confidence"?

In the absence of a majority of others following suit, the answer is probably "it's unlikely".

The problem with an uncoordinated approach is that it is likely the remediated buildings will be scattered around the town so no one area can be collectively deemed to be "safe".

There needs to be a catalyst to drive an "all buildings" approach. 		 
  A unique opportunity    
 
    In my view, there are three unique factors that come together in support of this "all buildings" approach. They are as follows:  
    > Historically low interest rates (local authority and Government bonds are currently yielding under 1%);  
    > The cost of earthquake strengthening work is tax deductible.  
    > The PM has stated that the Government is relying on the primary sector to drag the national economy out of its COVID-19 recession.  This can only be achieved with resilient support communities such as Feilding.  
    Post the South Island earthquakes, the issues faced by Feilding are replicated throughout the country.  This provides Feilding with the opportunity to make a case to central government to pilot this "all buildings" approach to tackle the remedial action for earthquake prone buildings.  
  The proposal in principle    
 
    While a facilitation role is justifiable, direct Council "investment" in upgrades to private property is more problematic. Any solution therefore needs to be based on commercial principles where possible, albeit utilising all the assistance available from central government that can be accessed.

  
    The concept is to raise a pool of funding repayable in 25 to 30 years, benefiting from the current very low interest rates. Ideally it could be a mix of central government and private funding.

In order to be able to utilise the deductibility of the strengthening costs for tax purposes, a limited partnership would likely be the best vehicle to use.  This would be structured in such a way so that the private funders could acquire a share of the tax losses from the properties opting for equity participation.

There could be two options for building owners. The first would be to borrow from the fund, paying a 0.50% to 0.75% margin over the cost of funds and assigning the fund (say) 10% share in any growth over and above the base value (to be defined) plus strengthening costs.

The second option would be for the fund to take an equity stake in the building in return for providing the remedial funding.  [It is this option that would produce the deductible expenditure to be shared with private investors.] 

The details will be on a case by case basis but it means that if this scheme can be put together, building owners could theoretically get their buildings compliant without having to find any cash themselves, other than for advice.  The annual interest cost payable by the building owner would relate to the retained ownership percentage.  [Existing mortgages, if excessive, may complicate things to the point of making entry into the scheme impossible but these issues will need to be dealt with on a case by case basis.]
  
  Conclusion    
 
    This is a high-level overview of a concept that needs expert refinement.  If it is deemed worthy of more detailed consideration, funding options for the investigations will need to be considered.

Besides the funding benefits, a coordinated approach would deliver economies of scale in relation to the design and consenting processes as well as the structural work itself. 

As mentioned in the Morgenstern presentation, there can be considerable cost savings by "grouping" a number of adjacent buildings for strengthening purposes. Furthermore, his proposal does not require the building to be un-occupied so the town would not have to be closed down.

I believe that the case for a coordinated "all buildings" approach is compelling.