It was handed over BY the district government to PCB, AFTER the district government had reconstructed the stadium.
This is from 2006:
http://www.cricinfo.com/pakistan/content/story/248131.html
Kanwar Naved Jameel, Hyderabad district Nazim (mayor), said the management of the Niaz Stadium in Hyderabad would be handed over to the Pakistan Cricket Board (PCB) completely…
Kanwar said the District Government has taken all possible measures within its available resources for the renovation of the Niaz\ stadium.
But as usual, PCB is neglecting Niaz Stadium yet again. This is from 2009:
http://www.accessmylibrary.com/coms2/summary_0286-37288192_ITM
Sindh Minister for Sports Dr Muhammad Ali Shah has expressed his concern over the performance of Pakistan Cricket Board (PCB) in maintenance of Niaz Stadium Hyderabad and added that it is better if district government Hyderabad look-after the Niaz Stadium instead of PCB.
The district will again fall in the hands of incompetent. The same people who have neglected Hyderabad (and Sindh in general) for decades.