The council's shareholdings in Ports of Auckland are valued at $1.079 billion. Photo / Brett Phibbs
The council's shareholdings in Ports of Auckland are valued at $1.079 billion. Photo / Brett Phibbs
A proposed privatisation programme of Super City assets, ranging from golf courses to port and airport shares, offers up billions of dollars for the cash-strapped Auckland Council but little in the way of rates relief.
Proceeds are earmarked for new roads, public transport, water connections and other infrastructure to meet Auckland's rapid growth. Some proceeds could go to reducing debt.
A no-holds-barred review of council assets by two advisory firms aims to reduce the proportion of revenue from rates and maximise the return on council assets.
The programme will not affect current rates, which rose by an average of 9.9 per cent for households this year after promises by Mayor Len Brown to peg them at 2.5 per cent.
There is a chance the level of rates increases could reduce in future.
Last night, Mr Brown and a strong contender to replace him next year, Labour MP Phil Goff, dismissed the main recommendations by Cameron Partners and EY (formerly Ernst Young) to privatise strategic assets such as the council's shareholdings in Auckland Airport and Ports of Auckland, valued at $1.4 billion and $1.079 billion respectively.
The two firms have also suggested the council sell part of Watercare Services, valued at $8.5 billion, valuable golf courses like Remuera, Chamberlain Park and Takapuna, and even parks and reserves.
Both firms have suggested the council sell part of Watercare Services. Photo / Supplied
EY suggested 49 per cent of Watercare could be privatised in 2017, with the proceeds used to pay down council debt.
The review also criticised council spending, saying expensive office accommodation, such as No 1 Queen St - the base of Auckland's highest-paid bureaucrat, Auckland Transport boss David Warburton, who earns between $660,000 and $680,000 - should be replaced with cheaper premises.
Mr Brown said there were some interesting ideas, like a review of car fleets and sharing back-office functions, but a number that simply would not float.
"I don't support the idea of selling golf courses in places like Remuera or Takapuna for housing development, any more than I support selling libraries or parkland.
"In terms of ... Watercare, we know that to make it commercially attractive we would need to double the price of water," he said.
Mr Goff said spending $490,000 on two reports on the one issue to come up with recommendations that Aucklanders would overwhelmingly reject was a waste of money.
"Why contemplate selling parks when the population is forecast to grow by one million? We need more, not less, green space," said Mr Goff.
Other ideas floated by Cameron Partners and EY are relaxing the development rules for volcanic view shafts - worth $440 million in the case of the Mt Eden view shaft - selling 1412 pensioner houses to a social housing provider and outsourcing IT, payroll and printing services and the car fleet.
The review has been welcomed by right-leaning councillors Dick Quax and George Wood, particularly the sale of airport and port shares.
Said Mr Wood: "Council must look closely at each option and then seek the views of Aucklanders."
Employers and Manufacturers chief executive Kim Campbell said the reviews went a long way to laying out options to enable Auckland to cope with its growth.
"Selling off parts of the city's parks, reserves and golf courses may be a step too far politically but options such as ... making better use of the city's property portfolio are common sense.
Chamberlain Park Golf Course in Auckland. Photo / Brett Phibbs
"The council needs to show willingness to sell some of these assets [to] strengthen its case with central government to also invest in some of these projects," Mr Campbell said.
Chief finance officer Sue Tindal said the council's finances were in a very good state but acknowledged the city's growth was putting pressure on its ability to build new infrastructure and fund core services.
Finance and performance committee chairwoman Penny Webster said: "There are no sacred cows. We have a lot of infrastructure to build and need to look at options."
She said her committee would discuss the reports next Thursday and receive a fuller report in February.
Consultants Cameron Partners (CP) and EY yesterday issued separate studies about the Super City's multi-billion dollar assets. The reports investigate whether Auckland City should sell or retain the assets.
Auckland International Airport and runways. Photo / Greg Bowker
22.4 per cent holding,valued at $1.4 bn
CP: Finds no strategic reason for council to own shares. Tests scenarios of selling all the shares or a 12.4 per cent stake.
EY: Concludes there are weak strategic reasons for keeping the shares. Proceeds could be used to pay down debt, reduce rates or invest in infrastructure.
Ports of Auckland shares
100 per cent, valued at $1.079bn
CP: Sale or part-sale impractical until a wide-ranging port study is concluded. Suggests splitting the port company into land owner and operator.
EY: Suggests leasing operations to a private operator and keeping the land under council ownership.
CP: Notes that water services are already outsourced in Papakura.
EY: A mixed ownership model, with 49 per cent privatised in 2017, would attract international interest. Would require law change and an independent regulator.
Park and reserves
CP: Selling land valued at $15 to $20sq m where surrounding houses are valued at $1000sq m. Releasing 5 per cent of this land could equate to $2.25bn.
Golf courses
CP: Top four courses - Remuera, Chamberlain Park, Pupuke, Takapuna - with 30 per cent reserved for public spaces, could be turned into housing worth $1.4 billion for council. Lease arrangements need to be resolved.
EY: Remuera golf course pays $130,000 in rent a year, whereas a fair market rental would be $16 million. Could have a market value of $275 million.
Non-CBD carparks are reportedly worth $285 million to the council. Photo / Greg Bowker
Value $328 million
CP: In the CBD, council could keep freehold and development rights and sell the building and leasehold interests worth about $110 million. Selling the development rights with obligation to keep providing parking is worth $153 million. Non-CBD carparks worth $285 million.
EY: Carparks offer opportunities for more intensive development, which could be sold freehold, leasehold or in a joint venture with developers. For example, the Constellation Drive Busway carpark has a value of $55sq m that could increase to 1500sq m in a commercial arrangement.
Community facilities
Council has 282 community facilities, halls, libraries, swimming pools
CP: Lack of rigorous process around decisions for community assets. Opportunities to relocate services and free up land for high density housing, retail, commercial development. Local boards could share in savings by changes to service delivery and release of capital.
EY: Rationalise parts of the network deemed surplus to requirements. Epsom, Glenfield libraries and Howick community centre offer opportunities for intensification. Look at more one-stop shops housing libraries and other community facilities. Crack down on sports clubs defaulting on community loans. Review free entry to swimming pools for under 16s.
Cameron Partners: There is no reason for council to own commercial buildings. Better to lease.
EY: Occupancy rates are 15sqm per person at council and 12sq m in the private sector, representing a possible 20 per cent saving. Cut back on leasing costs. For example, it cost $550sq m at No 1 Queen St. This could be parred back to $450sq m at less impressive premises.
Council diversified investment portfolio
Global shares and bonds valued at $328 million
CP: Unusual for a council to hold such an asset.
EY: The rationale for holding this asset is weaker than rationale for keeping airport shares. Sell.
Auckland Energy Consumer Trust
Owns 75.4 per cent of Vector, value about $2.3 billion. Council is long-term beneficiary of trust
EY: Suggest selling down 24.4 per cent of shares valued at $768 million to retain 51 per cent ownership. A sale would be highly contentious.
Electric trains
Value $440m
CP: Sale and lease back an option
Outsourcing options
CP: Level of outsourcing by Auckland Council is low compared with similar-sized organisations. Suggestions include IT, payroll, car fleets and printing services. Suggests investigate outsourcing the asset management of Auckland Transport, Watercare and stormwater
EY: Investigate integrating the entire Auckland Council fleet of vehicles. Use of many vehicles at some locations is below 50 per cent.
Debt
Forecast to increase from $7.2 billion to $11.6 billion in 2025
CP: Little headroom to breach debt capacity. Could increase current debt projections by accepting a lower credit rating but downside includes higher interest rates, financial risks and negative reaction from investors.
