Regional rail company cash-hungry enterprise

A regional rail company proposed for Auckland could tap ratepayers for expenses of up to a million dollars a year as it prepares to take over Tranz Rail's commuter lines in 2003.

The sum is on top of an expected $4.2 million bill for legal fees and technical advice on the Tranz Rail deal up until next December.

Four councils - Auckland, Manukau, Waitakere and Papakura - have agreed that a company should be set up to hold rail leases bought in the deal, which now has a December 8 completion deadline.

Politicians have left senior officials from these councils, the regional council and Infrastructure Auckland, to work out how that company will hold and develop rail leases for commuter services.

In a report obtained by the Herald, the officials call on the councils, as the only shareholders, to agree to give initial working capital for the company while "future financial issues are resolved."

The report puts estimated annual cash needs in the next two years at between $400,000 and $1 million.

After deducting possible income of $200,000 from advertising, it suggests administration costs of between $600,000 and $1 million.

When the Tranz Rail services contract with the Auckland Regional Council expires in 2003, or 2004, the report expects the company's costs will be covered by fees from whoever wins the new contract to run the services.

Councils are asked to allow the recruitment process for establishing a shortlist of company directors to begin.

Directors could be chosen late next month by a shareholders' group, formed of two appointees from each city and district council.

The report says three to six directors will be needed and paid fees at market rate. The Herald understands this could be $25,000 to $28,000 each a year.

Directors will need support staff and advisers on contracts.

The report's recommendations will be considered today by Waitakere councillors at a special meeting.

The chairman of the council's works committee, Allen Davies, said yesterday that there had been concerns that a local authority trading enterprise could become too far removed from shareholders' control.

"The worry is how hungry this beast could become and the need to go back to the ratepayer for more."

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