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Home / Business / Business Reports / Project Auckland

Project Auckland: Desperately seeking capital

Fran O'Sullivan
By Fran O'Sullivan
Head of Business·NZ Herald·
8 Dec, 2014 04:00 PM4 mins to read

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Selling down share-holdings in Auckland Council-owned businesses such as the Ports of Auckland is one option to help fund transport infrastructure. Photo / Richard Robinson

Selling down share-holdings in Auckland Council-owned businesses such as the Ports of Auckland is one option to help fund transport infrastructure. Photo / Richard Robinson

Funding transport infrastructure is Auckland's No 1 growth pain, writes Fran O'Sullivan.

Auckland City's two major business lobbies are agreed: Funding transport infrastructure is Auckland's No 1 growth pain.

Lobby leaders Michael Barnett and Kim Campbell - like many Aucklanders - are opposed to major rates rises in Auckland to help underpin the investment deficit gap for big ticket transport projects.

In separate articles for Project Auckland 2014 - Barnett, chief executive of the Auckland Chamber of Commerce, and Campbell, chief executive of the EMA - have proposed a range of funding options including selling down share-holdings in Auckland Council-owned businesses.

This would provide much needed capital towards funding costly projects like Auckland Mayor Len Brown's City Rail Link (CRL). The project faced a new hurdle last week when Auditor-General Lyn Provost refused to sign off the council's 10-year budget while funding for the $2.4 billion project remains uncertain.

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Brown has said he will put up an amended budget to councillors this week. The Herald reports that the mayor's compromise plan will still see $280 million of "enabling" works over the first three years of the plan.

That involves digging "cut and cover" tunnels west from Britomart and then through Albert St to Wyndham St, to clear the way for a major redevelopment of the Downtown Shopping Centre in the path of the 3.5km rail link to Eden Tce.

The two-year delay, to 2018-19, for the start of the main tunnelling and construction of two underground stations - would push the completion date to 2023.

The issue has the potential to spark new conflict between Brown who wants to make good on his 2010 mayoral election pledges and Transport Minister Simon Bridges, who is holding firm to the Government's 2020 start date.

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Bridges said the Government will consider an earlier start date "if it becomes clear Auckland's CBD employment and rail patronage are growing faster than expected".

Brown's desire to step up the project timeline is supported by a number of councillors and Labour.

The issues from Provost's perspective are: The significant forecasting assumptions associated with funding for the CRL and "the significant level of uncertainty" associated with the Government's half share of $1.2 billion and locking down "alternative funding sources to raise $344 million, from particular types of user charges or regional taxes, many of which would require legislative change".

As Provost earlier said, "the main risks to the CRL are that central government will not agree to provide direct funding nor enable the Auckland Council to access alternative funding sources".

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Fundamentally this is absurd. Both sides need to show flexibility.

Brown needs to show he is able to look at new funding options which don't drive the Super City too much further into debt. The Government should also be prepared to have a much more open debate on funding models. This step is necessary to show good faith given Local Government Minister Paula Bennett's aim for central government to have a bigger presence in Auckland.

Simpson Grierson's Earl Gray stresses comprehensive funding is essential for Auckland's development, pointing out that without it, any plans will be compromised.

"Rates alone cannot provide the level of finance needed for many of the key projects vital for the city. Alternatives need to be found," writes Gray in Project Auckland 2014.

Barnett points out that Transport Minister Simon Bridges has welcomed Auckland having a debate about future transport infrastructure investment plans but has stated that the Government remains "sceptical" about the two current options: a toll for motorway users or a package involving increased rates, a regional fuel tax or an increase in national fuel tax. Barnett agrees with Campbell that hiking Auckland rates is a non-starter.

"It is hugely unfair that Auckland's 525,000 rate payers fund the $300 million a year of additional revenue needed to benefit Auckland's 1.5 million people plus some 2 million visitors to travel around Auckland."

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Says Campbell: "We could pay through a low per entry road toll. Or, we could pay by investing the proceeds of an asset sell down in new infrastructure."

In an abridged article on D19, Barnett argues an "open debate" on transport funding could canvass other options such as a partial sell-down of Ports of Auckland shares. Or for Council to leverage property developments on top of Auckland's transport hubs.

On D17, Campbell notes one of Auckland's largest assets are the AECT's $2 billion shares in Vector. "They should be handed over right away to invest in the infrastructure the city urgently needs now."

It's a timely debate. And it's time for action.

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