Ports of Auckland is not contributing to a proposed $49.2 million cruise ship terminal on Queens Wharf even though it will use the wharf at minimal or no cost and collect the berthage fees.
Ports managing director Jens Madsen yesterday said the company - which sold Queens Wharf for $40 million to the Government and Auckland Regional Council - was making a positive contribution to ensuring the wharf was a success.
"In return for Ports of Auckland's use of the cruise ship terminal and part of the wharf on cruise ship days, we have taken on the future obligation to maintain the under-wharf structure.
"We are also responsible for dredging and berth maintenance," he said.
If the terminal is built as part of a $97 million option for the wharf, the new Auckland Council will be responsible for the surface of the wharf and any buildings.
Mr Madsen said the ports company did not make huge profits out of the cruise business, especially when maintenance costs and risks were factored in.
It is understood the company is spending about $2 million on repairs to Princes Wharf, the main cruise ship facility.
Mr Madsen said the ports company was a commercial business and paid 75 per cent of its net profit to its sole owner, Auckland Regional Holdings - the investment arm of the Auckland Regional Council - which used the money to pay for transport and stormwater projects.
Last June, the ports company reported a sharp fall in net profit to $5.4 million. At the same time, Auckland Regional Holdings put $40 million in equity and $20 million in loans into the port.
The financial arrangements for Queens Wharf have rung alarm bells with the Auckland City Council.
A council report said the arrangement would be unfair because without payment for cruise ship use, the Auckland Council would not be able to recoup the $4.1 million annual cost of operating the wharf. Council income for the wharf is estimated at $1.6 million.
The report's authors, Martin Tegg and Ross Tucker, said spending money on Queens Wharf was discretionary and outside the normal definition of core council business. Capital investment to promote economic development was traditionally the role of the Government.
They also questioned how ratepayer funding for the cruise ship terminal sat within Mayor John Banks and Citizens and Ratepayers' mantra of "affordable progress".
Mr Banks, under pressure to increase the council's $56 million commitment to Queens Wharf and underwrite a $40 million loan to Eden Park, has been embarrassed this week by deep cuts to budgets for maintaining Auckland's volcanic cones.
A review by PricewaterhouseCoopers into the business case for Queens Wharf supported the case for public investment.
There was a "significantly positive" cost benefit even at a capital cost of $98 million.
It said that spending more on a functional terminal - estimated at $6 million to $10 million by the cruise ship industry - "does not deliver any significant additional benefits from the cruise ship industry".
However, the review said, the extra cost may stimulate regional economic activity and change in the city.
* Ports of Auckland will not pay anything towards the proposed $49.2 million cruise ship terminal on Queens Wharf.
* It will still be using the wharf and collect berthage fees.
* Auckland Council would not be able to recoup the $4.1 million annual cost of operating the wharf without payment for cruise ship use.
* Council income for the wharf is estimated at $1.6 million.By Bernard Orsman @BernardOrsman Email Bernard