Auckland Future Fund: Councillors Christine Fletcher and Mike Lee go head-to-head

Councillors Mike Lee and Christine Fletcher go head to head on the pros and cons of the Auckland Future Fund.

OPINION: Mayor Wayne Brown has plans for a regional wealth fund to secure the council’s financial future and respond to natural disasters such as last year’s storms. The ‘Auckland Future Fund’ would be set up by selling a long-term lease to run Ports of Auckland and using the council’s remaining airport shares to create a $3-$4 billion war chest. Councillors Christine Fletcher and Mike Lee go head to head to argue the pros and cons as they see it.

For: Councillor Christine Fletcher

Auckland Councillor Christine Fletcher. Photo / Nick Reed

Since Auckland’s amalgamation in 2010, the council has normalised bad financial behaviour. This resulted in spending recklessly, then selling assets (often, for quite unsatisfactory terms), while increasing rates well above the rate of inflation.

Quoting one disgruntled constituent, “council abuses citizens by treating them as a public ATM, and assuming ratepayers can always be forced to cough up rate increases, year-on-year, that will exceed pay increases and inflation. This inevitably harms ratepayers’ ability to pay for essentials, (food, power, gas, petrol, water rates, education and family-related costs)”.

The Auckland Council, in its current state, is not financially sustainable. Unless commissioners are to be appointed, things must change. Everything must be up for discussion - no sacred cows this time. We must find real and permanent savings (not just deferring works), consider canning unrealistic projects, levels of service, seeking fairer funding from central government but also, importantly, consideration to asset optimisation.

The key issue is: How can we best create better returns, reduced costs and enduring value from the assets the council still owns?

Previously, any discussion around assets become shrouded in suspicion and emotion. History tells the sad story of legacy council assets simply frittered away to service “today’s” debt.

There is a better alternative. In this Long-Term Plan 2024-34 out for consultation, Mayor Wayne Brown has proposed the creation of an Auckland Future Fund (AFF).

Think Super Fund or, for those with long memories, a new Infrastructure Auckland fund.

Infrastructure Auckland was created from the assets of the Auckland Regional Services Trust. This fund provided the seeding funds for successful projects like the North Shore Busway and Britomart. What is proposed now, is that AFF be legally ring-fenced for self-insurance and weather resilience.

Auckland was already in a poor position before last year’s Anniversary Floods and Cyclone Gabrielle. These events demonstrated our absolute lack of financial management and infrastructure resilience.

Taking all these issues into account the mayor is charged with establishing a realistic and achievable work programme, based on a fair and sustainable rating base and importantly, an open-minded and intelligent approach to risk. That is, how we can best protect the council’s assets and Aucklanders from future risk? The two are inherently linked.

Auckland was already in a poor position before last year’s Anniversary Floods and Cyclone Gabrielle. Photo / Dean Purcell

How can we maximise the best return from our major existing and future assets? These include, for example, the port operations, and council-controlled organisations (CCOs), including the land they own and manage, and any subsequent proceeds.

The mayor’s proposal is to unlock $3-$4 billion in ratepayer money to create a diversified regional wealth fund. This fund would be independent of the council and, both legally and rigidly protected from overspending council officers.

This involves potentially transferring the council’s shareholding in Auckland International Airport Ltd (AIAL) to the AFF and also leasing Port of Auckland Ltd (POAL) operations for a period of 35 years, importantly, while maintaining the land in public ownership, to establish the fund.

The council would be responsible in terms of setting an appropriate lease to safeguard the environment and conditions of workers. This would put to rest for at least 35 years the time-wasting speculation and costs associated with moving the port.

An Auckland Future Fund would diversify the council’s investment portfolio across different assets, industries, and regions while providing a facility for self-insurance against future shocks.

In addition, it will deliver higher cash returns for ratepayers, to help pay for council services and keep rate increases to a fairer level. It will also protect the value of our inter-generational assets with substantial savings and cost benefits for council and ratepayers.

These new rules will simply stop council officers from overspending and then expecting rate increases above inflation to cover their excesses.

Having certainty of tenure is imperative. To consider a profitable long-term lease the port must remain where it is removing uncertainty for the port operator, users, and key stakeholders.

Importantly, the council retains ownership of the port land. At the end of the proposed 35-year lease, the port operations would return to the council.

I recognise there is more information required regarding the port, however, the council needs to know in principle whether the public support this concept before investing time and money in the detail. This is the first step in a long journey of coming to grips with a difficult situation – treating the public with the respect they deserve and harnessing the community intellect and then having the maturity to say, “The current situation isn’t sustainable, and here are some options – what do you think?”

This public consultation process, if conducted professionally, is refreshing after the dishonesty of earlier councils. I recall elected members being assured during budget cycles, “there was no crisis, and all was well” – when anyone with a modicum of foresight could see it was not true. And that was before the storms of 2023. Have your say.

Against - Councillor Mike Lee

Councillor Mike Lee. Photo / Alex Burton

On February 20, the Auckland Council’s budget committee chaired by Mayor Wayne Brown signed off the council’s draft $102 billion Long-Term Plan(LTP).

The key feature this year apart from the rate increases - 7.5 per cent this year, 3.5 per cent in 2025 (election year) and 8 per cent in 2026 - is the proposed 35-year lease of the Port of Auckland, and the sell-down of the remaining shares in Auckland International Airport.

Last year, the mayor, despite having no popular mandate for asset sales - he never mentioned this once in his election campaign - attempted to sell all of the council’s 18 per cent shareholding in the airport.

He managed to muster enough votes to sell 7 per cent after much political arm-twisting and trading jobs for votes at the same time the council pushed through the largest rate increase since the Auckland Council was formed in 2010.

The airport shares - gifted to the Auckland Council in 2010 by the legacy Manukau and Auckland City councils - are a sound inter-generational investment, being of both strategic significance and commercial value, the dividends providing long-term income supplementary to rates.

Hard on the heels late last year to support the sale of the downtown car park building, the mayor is determined to sell the remainder of the airport shares and a 35-year lease in Port of Auckland valued between $2-$3 billion.

The stated reason for the sale of the airport shares last year was the need to repay council debt, however, council debt levels and debt-to-income ratios have ended up very much as they were before the sale. This is because, despite election promises to fix Auckland, Mr Brown has shown no interest in tackling the council’s and its council-controlled organisations’ (CCOs) systemic spending problem.

This time the mayor has come up with a completely new reason for pushing a massive sale of the council’s strategic assets - the biggest privatisation in New Zealand local government history. The pretext this year is to liquidate those income-earning assets and put the cash into a “professionally managed Auckland Future Fund”.

The airport shares - gifted to the Auckland Council in 2010 by the legacy Manukau and Auckland City councils - are a sound inter-generational investment. Photo / Brett Phibbs

Many of us remember what happened in 2018 to the council’s Diversified Asset Fund comprising about $400m of international stocks, bonds and cash inherited from the former Auckland Regional Council. It was managed by a small but highly competent CCO, Auckland Council Investments Ltd, earning an average 18 per cent return. The policy of leasing/selling the port was embedded among council officers long before Wayne Brown arrived.

The chances of the Auckland Future Fund, in reality, a cash slush fund, avoiding the ultimate fate of the looted Diversified Asset Fund and the predatory legal and accounting consultants the council has been paying are slim indeed.

If the mayor gets his way, the remaining airport shares, still a very significant package amounting to 11 per cent and worth $1.4b will be transferred to the new fund.

Beneath the glossy veneer of the “AK Have your Say” consultation document are two references to what will happen to the shares: “It is almost certain that most if not all of the AIAL shares, would be sold over time”. So much for consultation. So much for democracy.

Mayor Wayne Brown came into office on a promise to fix Auckland and is now halfway through his term. His actual record of fixing anything is modest indeed, (think road cones and AT). In his first year in office, the mayor banged on about moving the port from Auckland. That obsession has been replaced by a new one, moving not the port – but moving the ownership of the port - from the people of Auckland, our children and grandchildren, to wealthy foreign shareholders, probably from Dubai. Once that lease is signed, it will almost certainly be extended at the convenience of the leesee. It’s effectively a sale.

Most troubling is that the council, as it did last year with the sale of the airport shares, and the Downtown Car Park Building is trifling with its statutory public consultation obligations set out in the Local Government Act. Despite this being legally a “special consultative procedure” relating to strategic assets, the consultation the public will be getting will not include the traditional right for ordinary citizens to present to their elected councillors in a formal public hearing.

There will be hearings for selected regional stakeholders, of course, but not for the ordinary citizens of Auckland, the people who candidate Wayne Brown convinced he was Mr Fix-it. Rather than Mr Fixit he has turned out to be Mr Sell-it.