13 Nov 2015

Mayor defends Akld Council asset consultations

5:43 pm on 13 November 2015

Mayor of Auckland Len Brown said he did not support selling off major strategic assets owned by the Auckland Council.

Auckland Council Meeting. Mayor Len Brown

Auckland Mayor Len Brown. Photo: RNZ / Diego Opatowski

His comments come after Labour MP Phil Goff said Aucklanders had no appetite for the sale of strategic assets and council reports that raise the idea are a waste of ratepayers' money.

The Council has commissioned reports from two consulting companies to look at whether it is running its finances in the best way.

They suggested it should consider selling off assets such as airport shares, the port and Watercare.

However, Mr Brown said the council would look at other recommendations in the reports, such as selling car parks and golf courses.

Phil Goff

Labour MP Phil Goff. Photo: RNZ / Alexander Robertson

Mr Goff, who is expected to run for the city's mayoralty next year, said some of the ideas were stupid.

Auckland had shown before that they don't want key assets hocked off, so the council should not have spent hundreds of thousands of dollars on reports like this, he said.

But Mr Brown defended the usefulness of the reports, saying it was interesting to know the value of the assets and listen to the opinions of others, even if the council had no intention of acting on them.

He could not see any backing for selling them off, given Aucklanders' sentiments about asset sales, coupled with the income stream they generate and the increase in their value, he said.

Councillor George Wood said the reports reflected the stark realities of running the city.

If the council sold assets and invested the money it would get a much better return for Aucklanders who were up against it, he said.

Aucklanders did not want rate rises so the council must consider the alternatives in the report, he said.

Other ideas put up for further study in the reports include leasing the right to run the city's port company, and the future of 13 council-owned golf courses, three of which could reap up to $700 million.

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Photo: AFP

Billions of dollars of gains

The Ernst & Young (EY) study into Alternative Sources of Financing identified billions of dollars of gains that could supplement rate rises and borrowing, though not all of them would be easy or quick to realise.

The findings will be subject to months of political debate as next year's budget is pulled together. They lay out a battleground of ideas to be campaigned on during the 2016 local body election year.

Top of the consultants' hit list is the council's 22.4 percent stake in Auckland Airport, currently worth around $1.3 billion. EY said the strategic reason for owning the shares was weak.

EY saw even less reason for the Council to hang on to a $345 million investment fund, which provided good returns but carried the risk of market fluctuations.

More problematic to realise is the 75 percent share in the energy company Vector, which is held by the Auckland Energy Consumer Trust and worth around $2 billion.

Legislation locks up the shares in trust ownership until 2073, and EY noted even a partial sell-down, with the proceeds going to the council, would need Trust agreement, which appears highly unlikely.

One of the hottest political potatoes is the future of the council-owned Ports of Auckland.

EY saw merit in retaining the port land, but leasing out the operating company. This could be worth $41 million a year more to the council than owning the lot and receiving an annual dividend.

Another ambitious but complex idea is the sale of 49 percent of the council's water company Watercare Services, which has a book value of more than $8 billion.

EY said it was hard to gauge whether Watercare was truly efficient, but said partial privatisation would need Government approval and should be accompanied by an independent body to act as a watchdog.

The consultants saw plenty of scope for improvement in the way the council operated, and in how it used assets such as buildings and land.

EY believed $15 million a year could be saved by the council and its various agencies pooling duplicated backroom functions such as IT, Finance, HR and property management.

Parks, libraries, car parks and golf courses


Photo: 123rf

The council could reap much more from many of its buildings and property, such as open air car parks, it said.

Car park sites could be sold to developers, who would continue to provide public parking in multi-level commercial developments.

Some libraries could be developed to include retail space on valuable street frontages, with library space elsewhere in the building.

Small scale examples of inefficiency included the council's vehicle fleet, where 236 cars spent 70 percent of their time unused and simply parked at their base location.

Some of the ideas, such as the future of park land and the sale of surplus property, are already subject to council reviews.

Cameron Partners was the other company consulted.

It said the council should review its obligation to provide inner city golf courses, especially those that had limited community accesses.

The city owns 13 golf courses valued at $61 million.

Its report said if only the four most valuable were sold for housing land, the council could earn $1.4 billion.

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