Govt paid up to $70m over odds in rail deal

By BERNARD ORSMAN

The Government paid between $60 million and $70 million more than valuation to buy back the lease of the Auckland rail corridors.

Act transport spokeswoman Deborah Coddington has released a letter from Finance Minister Dr Michael Cullen to Tranz Rail managing director Michael Beard showing the lease was worth "no more than $10-$20 million". The Government paid Tranz Rail $81 million.

The letter, dated August 16 last year and released under the Official Information Act, shows that Dr Cullen offered $75 million in recognition of the strategic value of the assets to Tranz Rail and to reflect "our eagerness to find a compromise and close a deal".

"But $75 million is a long way from a commercial valuation and will be difficult for the Government to justify publicly," Dr Cullen wrote.

Ms Coddington said paying up to $70 million above valuation was an outrageous abuse of taxpayers' money and one reason why governments should keep away from buying or running a commercial enterprise.

"I doubt Dr Cullen would buy a train set for $80 when it's only worth $10 or $20. But when it comes to other people's money, he's quite happy to spend up large," she said.

A spokeswoman for Dr Cullen said yesterday that the $81 million price was a good deal under the circumstances. The Government was at a disadvantage when it took over negotiations with Tranz Rail after Auckland councils had agreed to pay $112 million for the lease.

It was important for the Crown to reach an early settlement, she said, to provide time for the Auckland Regional Council to set up a rail commuter service from next July, when Tranz Rail's contract to run Auckland's commuter trains ends and the new Britomart rail station opens.