The Ports of Auckland is "a failing business in the wrong place", says the chairman of a working group recommending its managed closure in favour of development of Northport.
Wayne Brown, called in by authorities in the past to help fix several major Auckland infrastructure problems, said the ports company paid its owner Auckland Council a $50 million divided last year, but borrowed $75m and will pay only $8m this year "so they have the privilege of utilising $6 billion worth of land".
"If that was placed on the city's balance sheet, they could easily raise the money for the transport things (solutions) they want to buy, said Brown, who considered himself "quite a big Auckland ratepayer".
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The second report of Brown's Upper North Island Supply Chain Strategy (UNISCS) independent working group has been released by Associate Transport Minister Shane Jones, along with an economic analysis by an Ernst & Young-led consortium of advisors.
The report says the managed closure of Auckland's container and car import operations and development of Northport to take up these activities is the best way forward for the freight future of the upper North Island and New Zealand.
The group's preference allows for the continued operation of the Port of Tauranga (PoT), a new inland freight hub in Auckland's northwest and a rejuvenated North Auckland rail line with a spur to Northport. The Auckland ports would retain cruise ship visits. The recommendation is contained in the second report of an $850,000 study for an Upper North Island Supply Chain Strategy (UNISC).
The working group was given $850,000 last year to undertake a comprehensive review of New Zealand's freight and logistics sector for the upper North Island, including ports.
The economic report said the capital cost of shifting the Ports of Auckland (POAL), including its car imports activity, to Northport would be around $10.3 billion.
A survey of 500 Aucklanders polled by the working group was also released. It found 62 per cent believed moving the port would make Auckland a better place to live, work and visit.
POAL, wholly-owned by the Auckland Council has declined to comment.
Northport is 50 per cent owned by NZX-listed PoT, and 50 per cent by Marsden Maritime Holdings, also listed. POAL owns 20 per cent of Marsden Maritime with the balance held by the Northland Regional Council.
Marsden Maritime and PoT leaders welcomed the reports.
A final report from the working group, recommending how to achieve its preferred option, is expected before Christmas.
Brown said it was a "myth" that Auckland was the centre of New Zealand business.
"It's the centre of New Zealand expenditure. It doesn't export anything. The regions do that."
A lot of POAL's containerised imports were "rubbish - stuff for the $2 shops", he said.
POAL last month posted a 30 per cent drop in net profit to $53.9m for the 2019 year. It did not pay a final dividend in line with its plans to pay out only 20 per cent of net profits in dividends for the next two financial years instead of 80 per cent to help fund its expansion plans. A $100m new crane project goes live in February.
The working group and EY consortium explored several options: maintaining the status quo; managed closure of POAL freight operations with listed Northport developing equivalent capacity and PoT continuing its own planned development; no major development of Northport with PoT accepting POAL's freight in addition to its own; both Northport and PoT expanding capacity to take on POAL's freight; and managed closure of POAL with a new "super port" developed in the Firth of Thames.
One of the main reasons why a two-port solution was the preference of the working group was that it provided two distinct north and south entry points for international freight originating in, and destined for, Auckland. Friction with traffic and regional deliveries could be further reduced by a dedicated freight rail line through the Avondale corridor connecting the proposed new northwest inland freight hub and PoT's existing Metroport hub in south Auckland.
The EY report said a full move to Northport could reduce the dividend to Auckland city to $10m, but releasing POAL's 77 hectares of waterfront land for other uses could bring in potential alternative rates income of $42m, leasehold income of $56m and the net annual financial benefit to ratepayers of $48m a year.
POAL could still provide a dividend to the city from continuing to offer shipping support and other maritime services. The report said based on freight growth projections, POAL was expected to run out of room within the next 14 years.
The cost of POAL staying in Auckland was significant, said the EY report.
"The high land value that is required to continue operations at the POAL site means Auckland ratepayers are potentially missing out on subsidies approximately worth $5b to $6b."
POAL had reported its 77h operating site had a book value of about $737m, equating to about $533/sqm.
But the capital value reported by POAL was materially lower than that of comparable CBD land. In 2013 an NZIER study estimated central CBD harbour-side unimproved land values at $3000/sqm. A Future Port study in 2016 estimated undeveloped POAL land value at $1400/sqm with a total value just over $1b.
The variable values indicated the speculative nature of estimating alternative land use values and failed to account for the massive social, culture and environment results of transforming POAL land into a "globally iconic" waterfront development, said the EY report.
Shane Jones, a NZ First MP and also Regional Economic Development Minister, has driven the study and said a "tremendous" amount of work needed to be done to relocate POAL.
The study with its focus on ports was mandated by NZ First in its coalition agreement with Labour and the Greens.
"People should bear in mind there is a huge appetite amongst Aucklanders for them to reclaim their waterfront. There's not an appetite to licence the port to continue to stretch out into the Waitemata Harbour and turn that harbour into a river."
Jones said POAL had "never been comfortable with this study".
"The woeful commercial result they announced (last month) was blamed on the study and the involvement of Parliamentarians in the future of the port. Whenever commercial managers start blaming politicians for their failings then basically you have a maritime version of Fonterra. Look inwardly, don't blame the environment for your woeful performance.
"Ports of Auckland is not paying its way."