Controversial accord has Auckland Transport paying $19.7m to run tunnels under site.

Auckland Council and commercial landlord Precinct Properties have struck a deal to allow the City Rail Link tunnels to run beneath a $550 million, 36-level downtown office and shopping tower.

Mayor Len Brown and Precinct chief executive Scott Pritchard announced the deal yesterday, details of which include settlement of the controversial sale of public Queen Elizabeth Square land.

The tower will rise on the site currently occupied by Westfield between the square, Lower Albert St, Customs St East and Quay St. Building is to start next year.

The deal sees the landlord agree to allow the tunnels to be built under its block, while paying the council $27.2 million for conditional acquisition of the square.

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The ledger evens up somewhat after council-controlled Auckland Transport agrees to fork out $19.7 million to Precinct for the CRL project.

Of that, $10.7 million is to run the tunnels under the tower because the land is privately owned. The remaining $9 million will be paid as "compensation" for the tunnel volume and provision of an east-west pedestrian laneway through the site.

Councillor Mike Lee has opposed these arrangements, saying they are not in the public interest.

"This raises serious questions," he said, adding Precinct should not get any money.

"Precinct are now being handed $19.7 million from the ratepayers of Auckland ... Auckland will regret these decisions in years to come."

Mr Pritchard said the deal would allow a much better shopping centre to be built because an extra 130m street frontage was allowed through the acquisition of nearly 1900sq m of public land.

"The site has been under-used but consented for an office tower for a long time. We think everyone will have been aware a development needed to happen here."

Mr Brown described the deal as a milestone for Auckland.

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"This is the first step towards the construction of the CRL," he said. "It will lead to an exciting transformation of the public spaces around the Britomart train station area. And it's an example of how a partnership with the private sector can deliver economic transformation and more jobs in Auckland."

Construction of the Downtown section of the CRL was due to begin next year, with completion by 2019, Mr Brown said. Tenders were due to go out later this year.

The Government does not plan to start funding its half of the project until 2020, unless the council meets tough rail patronage and downtown employment targets.

The square sale was approved by Auckland Council's development committee on September 11 after a report by staff said the proceeds of the sale of an under-utilised and poor-performing city space would enable the creation of new public spaces that better met the needs of the area.

Mr Brown said the deal now meant a co-ordinated approach could be taken to the construction work.

"Aucklanders have made it clear the CRL is their number one transport priority and this brings us closer to enabling a start to construction in about a year's time."

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