Auditor-General Lyn Provost has begun an inquiry into Auckland Council's involvement in a new town centre at Westgate, which is costing ratepayers about $200 million.
The inquiry follows concerns raised with the Office of the Auditor-General about the way the project was established by the former Waitakere City Council and is being managed.
The Westgate town centre at Massey North is a $1 billion public-private partnership between New Zealand Retail Property Group (NZRPG) and council, first mooted in 2002.
It is said to be New Zealand's biggest new town centre, equivalent to a new Manukau or Albany, set on a 56ha site at the end of the Northwestern Motorway.
The first stage of Westgate began opening for business at the end of last year when Mitre 10, Palmers Garden Centre and Pak'nSave opened stores.
The council is spending $200 million on roading, parks and community facilities, including a $27 million library and town square.
In a letter to one complainant, Ms Provost said she had received a number of concerns, largely relating to how the line between the public and private benefits of the project have been managed.
"I have decided that it is appropriate to examine and report on these matters, given the public sector's continuing interest in exploring new ways of working with private sector partners and the novel collaborative arrangements in this project," she said.
Among the concerns and allegations raised with the Auditor-General are ratepayer cash being used to purchase Westgate Rd through the current Westgate Shopping Centre for about $7 million, the council buying assets to help NZRPG's financial position to start construction early and NZRPG receiving a council-funded project management fee of 8.5 per cent when the going rate was about 4 per cent.
The Auditor-General has been told the council paid $1000sq m for Westgate Rd that should have been vested free to the council and a "high" price of $630sq m to buy land for the library and town centre.
Council chief executive Stephen Town said draft terms of reference had been received from the Auditor- General and he expected these to be finalised and published next week.
The council would co-operate fully with the inquiry, he said.
A mayoral spokesman said Len Brown was aware of the inquiry, but had nothing to add to Mr Town's comments.
NZRPG chief executive Campbell Barbour was unaware of the inquiry when the Weekend Herald contacted him yesterday.
"Until I know any more I don't want to comment," he said.
Councillor Chris Fletcher, who has held concerns about the project for several years, said the matter was a bigger scandal than the original Britomart scheme and an inquiry was long overdue.
She raised the issue in 2011, leading to the council obtaining an independent report on the allegations from a senior partner at law firm Meredith Connell, Chris Moore.
The report, completed in April 2012, has not been made public.
Former Waitakere Mayor Sir Bob Harvey could not be reached for comment.
His deputy, Penny Hulse, who is deputy mayor of Auckland Council, said it was a huge project - not without its complexities and everyone did everything they could to ensure all the i's were dotted and t's crossed.
It was up to the Office of the Auditor-General to make the call if it thought any issues needed investigating, she said.
Ms Provost is not expected to make any public comment on the inquiry until her report is released.
The council will not be commenting during the inquiry.
• New $1 billion town centre planned for Westgate.
• Former Waitakere City Council agrees to fund $200m of infrastructure.
• Concerns raised about way project was established and is being managed.
• Council investigates concerns but report not made public.
• Auditor-General Lyn Provost announces her own inquiry in response to concerns.
• When complete, her report will be made public.