KEY POINTS:
In the debate over the waterfront stadium, the Government has glossed over one important cost: the extent and nature of the compensation paid to Ports of Auckland for giving up its land.
Rugby World Cup Minister Trevor Mallard has so far vaguely suggested the matter would be settled with some sort of accounting entry, implying the package would be a mere shuffling of paper between two related entities.
The cost, he insists, is simply the cost of construction: a cool $500 million.
He has so far refused to be specific, but observers say the deal would probably work something like this:
Auckland Regional Council would borrow money to reclaim land on the waterfront. It then hands this cash to Ports of Auckland, which then reclaims the land. Ports of Auckland then pays a special dividend to its owner, Auckland Regional Holdings, which then repays that cash to Auckland Regional Council to cover the original loan.
Ports of Auckland suffers a reduction of its asset base and this is matched by a reduction in the assets of Regional Holdings, but in exchange for such a loss the ARC is granted a stake in the stadium. It is not real cash, so no one is any worse off.
Such a formula is disingenuous.
If the ARC, Regional Holdings and the Ports of Auckland somehow come up with a scheme that creates a reclamation equal to the size of the land occupied by the new stadium, real money has been spent. And this cost must be put before the public as the true costs of the stadium are assessed.
Meanwhile, the scheme sounds fine in theory. But in reality there are a couple of significant hurdles that have ramifications beyond the simple question of whether the stadium is the right choice for Auckland.
The Port Companies Act is unequivocal. The principal objective of every port company "shall be to operate as a successful business". This clause prevents the port from paying a special dividend unless it has capital on the balance sheet than cannot be gainfully employed in port business.
But, under the Mallard proposal, once the ARC has compensated Ports of Auckland for the loss of the land, the firm's capital structure would presumably be no different to what it would have been before the deal. That is to say, the port would be in neither a worse nor better position.
So, if the Ports of Auckland directors then pay a special dividend to Auckland Regional Holdings they face an awkward question: why did they not make a similar payout before the Government threw its weight behind the stadium?
Unless they can point to some fundamental change in the port company's circumstances that justifies the port company taking on extra debt - something other than their willingness to sanction the stadium - the directors may be in breach of the Port Companies Act.
Even if that hurdle is set aside, it is not clear Auckland Regional Holdings will be able to pass the cash to the Auckland Regional Council to pay off the original loan. Section 34 of Local Government Amendment Act 2004 requires the ARC to use 85 per cent of the distributions from Regional Holdings to fund stormwater and regional transport. Those supporting the stadium dismiss these objections as mere trifles. The Government, they say, can simply change the legislation to get the deal done. Those who oppose such moves are curmudgeons lacking vision.
They are right to suggest special legislation is needed.
Ports of Auckland managing director Geoff Vazey declared as much on Thursday night when he told the 500-plus people assembled for the port's Christmas party that it would not vacate the land until it had a suitable replacement. Since a replacement cannot be built before May, when work is slated to begin on the stadium's enormous foundation, Vazey was saying the port would have to be forced from the land.
But the charge of curmudgeonly pedantry does not stand up against the breadth of special legislation that will be required including changes to the Resource Management Act, the Local Government Amendment Act, the Port Companies Act - and lets not forget the laws for the new tourist tax and the rest of the funding package.
Moreover, the substantive parts of this legislation would have to be in place before work started. For example, could the Government give the green light to start work on the project even before the special committee considering the resource consent had considered the matter?
The programme puts Parliament under extraordinary pressure. It will require MPs to be single-minded about the purpose of the legislation - the creation of a set of laws that will allow us to build a stage for a rugby tournament. It potentially forces MPs to set aside pressing issues such as the legislation allowing Ports of Auckland to merge with the Port of Tauranga and to ignore long-standing objections to the Resource Management Act - even though the special resource consent dispensation gives weight to those objections.
The narrow focus of the legislation and the haste with which it would be introduced would inevitably create loopholes and precedents in direct opposition to the Government's - and the public's - intentions and best interests.
If a waterfront stadium is sufficient justification for special legislation, why shouldn't the Government make a similar case for a coal-fired plant next to the Tiwai Point aluminium smelter?
Or give the green light to Meridian Energy's power scheme on the Waitaki?
The Government's support for the stadium is eroding its moral authority.
The long-term consequences of this should not be discounted.
