First published on Stuff.co.nz March 27th 2024
Here’s an idea: how about a financially fit Auckland Council that can withstand some economic battering?
We’re in a recession. People are doing it tough. They should be able to rely on councils to plan for these events and not pass their bad planning onto ratepayers.
Everyone knows that Auckland Council is also facing financial strife. But we need to start by making sure we are making the most of the assets we have before putting our hand out.
That’s where the idea of a wealth fund for Auckland comes in.
Our proposal for the Long-term Plan is out for public consultation. We detail how a $3–4 billion Auckland Future Fund is possible. Dumb decision-making got us into this mess; we need forward-thinking and pragmatism to get us out.
Right now, our two biggest financial assets are exposed to the same physical risks as the rest of Auckland. Auckland Airport’s one of the first things to flood, and our port would be damaged if a tsunami hit us. Both are exposed to Auckland’s economy. Why do we have all our money tied up in assets exposed to the same risks? It’s illogical. I’ve dealt with many illogical things in council, but this one really tops it.
To make matters worse, neither of these assets provides us with a long-term cash return above our cost of capital. So, they don’t really help us pay for council services or keep rates down. We can do better.
My solution is to establish a new regional wealth fund, the Auckland Future Fund. In it, we will put our Auckland Airport shares and the money we get from leasing the operation of the port for 35 years.
This is not about asset sales; it’s about growing our asset value and making better returns on those assets.
There’s a small group of people who have a misguided belief that keeping the Auckland Airport shares somehow gives us some sort of control over it or helps us keep rates down—they don’t’. We do not own enough to have any say in how it is run. Our shares return a meagre 1.31% a year in dividends. A personal savings account returns more than double that.
The port is different. Leasing out the operation of the port keeps it in public ownership but makes it perform better for Aucklanders. Right now, it’s only bringing in just over 2%. Again, that’s less than a personal savings account. We expect that a diversified portfolio of assets in the Auckland Future Fund could return 7.5% annually, with 2% being reinvested each year to maintain the real value of the fund. 5.5% would be distributed across the council group to pay for council services and mitigate rate rises.
The Auckland Future Fund would also make provision for climate change risks through self-insurance. Diversifying our asset base better prepares us for natural disasters and other shocks.
A 35-year lease would keep the waterfront land and strategic assets in public ownership forever, while enabling us to set timeframes for land to be transferred for better public use. That will provide certainty to port users and workers about the port and enable investment in long-term infrastructure like rail and inland ports. We will also include protections for workers and the environment.
This is about making the most of Auckland’s assets, including our beloved waterfront. We can both open land to the public and get more out of the port’s operation. Win-win.
It’s about thinking ahead. Look forward, Auckland, and let’s get on with it.
