Tag Archives | Auckland Council

Council valuation shows outer suburbs hit harder this time

Outer suburbs have captured more of the rise in Auckland’s property values in the latest 3-yearly valuation, dated 1 July and released (in broad terms) yesterday.

As it’s the value movement compared to what’s happening in other suburbs that determines whether the share of rates rises or falls, that means it’s the outer suburbs that are more likely to face higher rates increases.

That’s in contrast to the 2014 valuation, when residents in central suburbs were up in arms at facing a bigger increase in rates bills because their property values had taken a hike.

Property owners will receive their valuation notices from Auckland Council in the mail or via email from next Monday, 20 November.

The average rise in Auckland property values across all market sectors since 2014 was 45%. For residential it was 46%, commercial 43%, industrial 47%, lifestyle properties 57%, rural 35%.

Auckland Council chief economist David Norman said the rise in residential values reflected at least 3 things: “First, Auckland’s strong population growth over the last 3years has not been matched by increases in the number of new houses being built, and this has pushed prices up. Second, record low interest rates have allowed people to bid up prices to secure somewhere to live because housing has been in short supply. And third, the unitary plan has added a lot of value to properties that can now carry higher intensity residential development than before.”

Mr Norman said the largest movements in the outer suburbs appeared to be a result of higher demand in areas where property was less expensive.

Local board areas with the largest movements – an average over 45% – are in Waiheke, Otara-Papatoetoe, Papakura, Mangere-Otahuhu, Manurewa, Henderson-Massey, Maungakiekie-Tamaki, Franklin, Howick, Rodney & Upper Harbour.

Movements within the remaining boards ranged between 11-44%.

The rates impact

Auckland Council head of rates Debbie Acott said a big increase in property value wouldn’t necessarily mean a corresponding increase in rates: “We expected to see an increase in valuations since the last revaluation in 2014, so movements in the 40-50% bracket really aren’t a surprise.

“Generally speaking, the values in Auckland’s outer suburbs appear to be catching up with the 2014 revaluation.

“Areas that increased the most in the last revaluation – by & large central Auckland – are now moving roughly along the average. Those that didn’t last time – mainly outer Auckland – are the ones with the highest increases this time.

“Property valuations are used to help us work out everyone’s share of rates – they don’t mean that we collect any more money. However, we won’t know the impact of this revaluation on rates until we agree our next budget in 2018.

“Because of Auckland’s dynamic property market, and valuations only capturing a moment in time, they should not to be viewed as current market value.”

The council revalued 549,000 properties, including every piece of land except roads & waterways.

Individual property data will be available from next Monday, 20 November, at the Auckland Council website.

Before valuations are finalised, they have to be approved by the Valuer-general, who’s responsible for authorising rating valuations for the Government.

Auckland Council uses capital value, or CV, as its rating valuation method, measuring the likely price the property would have sold for on 1 July 2017. The new values will be used to help set rates for the 3-year rating period beginning on 1 July 2018.

The council didn’t mention it, but many people refer to the council valuation as CV as if it’s a valuation that’s updated outside the rating valuation process.

Links:
Individual property data
Indicative residential average change in capital value since last revaluation
Notes to indicative residential average change

Earlier stories:
29 June 2015: 2% get big rates hike, 22% get cut
25 June 2015: Council approves rates, transport levy & long-term plan after 2 close shaves
23 June 2015: Flurry of targeted rates will distort rates bills
19 November 2014: Council will recommend end to rates caps, but the vote was close
8 November 2014: Brewer pushes for higher uniform charge in rates bill
6 November 2014: 3.5% average Auckland rates rise now proposed
20 August 2014: Auckland valuations used as rates basis rise average 33% in 3 years

Attribution: Council release.

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First value-for-money reviews point to $373 million of council savings

Auckland Council’s finance & performance committee will vote next Monday on the first recommendations from an assessment of whether it’s getting value for money from its various arms, including council-controlled organisations.

Auckland mayor Phil Goff.

Mayor Phil Goff welcomed the findings of the first group of reviews yesterday: “The reviews have identified potential savings of up to $373 million over 10 years. I expect the realised savings to be reinvested in vital services & infrastructure for Auckland.

“I instigated these reviews because elected representatives on council have an obligation to ensure that what we do is effective & efficient, and provides Auckland residents with the best value for the money they invest in us.

“With unprecedented population growth, Auckland has a massive need for investment in services & infrastructure to keep pace with this growth. Money is a scare resource and we need to make sure that we are getting the best return from what we spend.

“Auckland is New Zealand’s first council to review comprehensively & in depth the value for money in what it does. This is a legislative requirement under section 17a of the Local Government Act.

“The reviews are the culmination of months of work by council professional staff, with input from external experts in the areas under review and overseen by an independent reference panel.”

The reviews note that the council has already delivered efficiency savings for Aucklanders. However, they also noted that further integration of functions, shared procurement & services, clear performance measurement and better strategic & operational co-ordination could lower operational & capital expenditure considerably and improve services.

3 waters

The report notes that, through amalgamation, Auckland Council’s water services have delivered benefits to Auckland ratepayers saving hundreds of millions of dollars. However, Mr Goff said more could be done: “There is potentially $300 million in savings to be achieved through further integration, joint procurement & capital planning across the council’s 3 water services.

“$13 million of those savings could be realised immediately by combining operations & maintenance of our water & stormwater services, which I support.”

Communications & engagement

Mr Goff said it was to him during the mayoral campaign that there were issues with the structure of communications across the council group and the review clearly supported that: “I support a cut of at least 15% to the operating budget of communications & engagement over the next 3 years, and joint procurement between council & CCOs that in total represents potential savings of $54.5 million over 10 years.

“I cannot predetermine the outcome of next week’s committee, but I expect work will begin quickly across council & CCO communications functions to cut costs, improve co-ordination and to develop a group-wide strategy to address low levels of trust in the council.”

Waste

The reviews note that the council’s waste service has saved $165 million in operating costs since amalgamation and has a clear plan to reduce domestic waste, which the report said was working.

However, the report also concluded that the council’s waste service would “benefit from a broader business case methodology, and will also need to assess a shift of focus from residential to commercial & industrial waste, which accounts for 86% of all waste in Auckland.

“The environment & community committee will examine these recommendations, and it & professional staff will report back on changes which need to be made,” Mr Goff said.

International investment attraction & global partnerships

The review of council & CCO investment attraction & global partnerships found the functions were well organised & aligned, and business processes accorded with best practice. It recommends exploring a fee-for-service as a way to offset costs where direct personal benefits from the council’s activities can be identified.

The 4 reviews are the first tranche of a systematic value-for-money review process across the entire council group that will examine all ratepayer-funded functions & services during this term of council.

The second group of reviews is underway and includes the council’s group procurement and parks & open spaces. They’re due for completion early next year.

Links:
Auckland Council, finance & performance committee agenda Monday 6 November:
9, Value for money section 17A review programme
Attachments
Three waters terms of reference
Three waters value for money (s17A) review report 2017
Domestic waste terms of reference
Domestic waste value for money (s17A) review report 2017
Communications & engagement terms of reference
Communications & engagement value for money (s17A) review report 2017
Investment attraction & global partnerships terms of reference
Investment attraction & global partnerships value for money (s17A) review report 2017

Attribution: Mayoral release, agenda.

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Council counts over $100 million/year in procurement gains

Deputy mayor Bill Cashmore says Auckland Council achieved $106.1 million in procurement benefits in the last financial year.

Cllr Cashmore, who chairs the strategic procurement committee, said on Thursday the council was a significant purchaser of goods & services and had started to deliver impressive results from process improvements.

“It’s an area where we are doing more to both save money & deliver sustainable benefits within our community. We’re doing this by teaming up with council-controlled organisations when we go to the market, reducing our costs in areas such as recruitment & software maintenance and through new technology that delivers greater efficiency.

“Last financial year, $29.5 million of additional value/year for the next 5 years was generated through our new maintenance contracts. 88% more trees will be pruned annually and significantly more weed control delivered across the region.”

Cllr Cashmore benefits included “sustainable procurement”, which meant leveraging off purchasing arrangements to deliver tangible social, economic & environmental benefits. One example is the Te Auaunga Awa (Oakley Creek) project, which saw the regeneration of one of Auckland’s longest urban streams, flowing from Hillsborough through Mt Roskill, Owairaka & Waterview to the Waitemata Harbour. The project also saw 17 young Aucklanders recruited into training.

“Our procurement approach is maturing and it’s great to see these results being delivered for our communities & ratepayers. There is a lot of potential for the council to use its purchasing power wisely and deliver broader benefits to our communities. We will continue to build on these benefits.”

Attribution: Council release.

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Council looks at way forward from 2010 transition setup

Sprinkled through a huge document on governance, to go to Auckland Council’s governing body on Thursday, are a few points which are highly pertinent to the way the council’s various arms will work with one another over the next few years.

The governance framework issue arose largely because the local boards, established under the 2010 reform of local government in the Auckland region, didn’t have a clear role.

They could propose budgets to the governing body, but the governing body determined the eventual sums doled out.

The working relationship between local boards & council-controlled organisations (CCOs) was also unclear. Could boards tell the CCOs what should happen in their domain? Or should Auckland Transport, for example – whose domain includes roads & footpaths throughout the region – treat such places as its domain, so it’s not subservient to any board?

Early last year, the council commissioned an independent consultant, Gareth Stiven, to carry out a review which looked at the policies, processes, protocols & organisational support structures that had been put in place since 2010.

Since 2003, Mr Stiven has been business advisory manager at Auckland City Council for 5 years, the old council’s economic development group manager for the next 2½ years, a director in PricewaterhouseCooper’s finance & economics team for over 5 years, self-employed from the start of 2016 (the period when he conducted Auckland Council’s research) and, since the start of this year, strategy general manager for Housing NZ Corp.

Ward & local rate changes

Outside his scope for the Auckland Council review were fundamental changes to the governance structure or the structure of council-controlled organisations. Nevertheless, some changes are mooted in the eventual report, such as reducing the number of wards & boards (the region has 13 wards, 20 ward councillors, 21 local boards), and the possibility of local (distinct from regional) rates.

Mr Stiven’s work was followed by months of workshopping for local board members & councillors. The boards received the report last month so they could provide comment for the governing body meeting this week.

The political working group for the framework project, set up after Mr Stiven presented his report last December, was unusual in itself – membership of 7 councillors & 7 local board members.

This week’s report contains 36 recommendations for change, under 4 themes:

Organisational structures & culture have not adapted to the complexity of the model: The review found that the organisation had struggled to adapt to the unique & complex governance arrangements in Auckland, and that this had impacted on the quality of advice & support for elected members
Complementary decision-making, but key aspects of overlap: The review touched on a number of decision-making functions where there is overlap between the governing body & local boards, or a lack of clarity about roles
Lack of alignment of accountabilities with responsibilities: The review found that the system of decision-making creates incentives for elected members to act locally despite regional benefits
Local boards are not sufficiently empowered: The review identified that there are some practices that are constraining local boards from carrying out their role, including the inflexibility of funding arrangements and the difficulties in feeding local input into regional decision-making. It also noted some local frustrations in relation to transport decision-making.

3 workstreams

The political working party has traversed a wide range of issues under 3 workstreams: policy, finance & funding and governance.

It’s also established a fourth workstream on organisational support, to respond to the changes coming out of the review, and will look at how the council organisation supports local boards as well as implementation of improvements required with current support provision. This workstream will be reported back internally to the project’s executive steering group in November.

The political working party noted that “there needs to be more recognition, support & empowerment of local boards as governors of a discrete set of local services & activities.

It also noted that the council’s focus “has tended to be on the regional ahead of the local for the first 6 years. While this is understandable for the purposes of developing & harmonising a wide range of policies, plans & bylaws, it is not sustainable in the long term and is not consistent with the policy intent of the governance reforms.

“For example, one of the key issues that the working party has been grappling with is the funding & financial model that is currently in place, and how that constrains local decision-making & local flexibility. In effect, the Auckland Transition Agency put in place a model that locked in legacy funding arrangements & service delivery models that are now 7 years out of date.”

Input from one governance tier to another

The initial 2016 review identified a number of issues about the way regional policy is developed, including low local board awareness of regional work programmes, the time & resource required to seek local board input and variable advice to local boards. The political working party has recommended that a framework for local input into regional policies should be developed, including prioritisation & agreed mechanisms for seeking local board input.

The review concluded that there are limited incentives for local boards to consider local assets in a regional context, and that this can lead to conflict between the governing body & local boards. It recommended a ‘call-in’ right was considered: “The working party doesn’t consider a call-in right is desirable, but instead has recommended that staff provide explicit regional impact advice where local decisions may have regional or sub-regional impacts. “

In response to frustration among some local board members about transport decision-making & their ability to carry out their place-shaping roles, the political working party considered local boards had a critical role in local place-shaping and has recommended that:

  • Auckland Transport should be more responsive to local boards in their place-shaping role
  • there should be increased use of the existing accountability mechanisms available to the council to ensure that Auckland Transport complies with expectations on local board engagement
  • there should be a significant increase to the local transport capital fund (currently set at $10.8 million) and the exact amount & allocation across local boards should be decided in the 2018-28 long-term plan, and
  • the review of accountability mechanisms for council-controlled organisations should consider the use of section 92(2) of the Local Government Auckland Council Act for local board plans, which allows the governing body to direct council-controlled organisations to act consistently with plans & strategies of the council.

The political working party has recommended that a 3-year pilot project with the Waiheke Local Board be established to enable more local leadership and the development of policy for specific local issues. The pilot would be actively monitored and the findings considered for wider application.

The 2016 governance framework review report identified some issues related to funding & financing, in particular:

  • local boards do not have to balance the trade-offs of financial decisions in the same way that the governing body needs to e.g. local boards can advocate for both additional investment in their own area and lower rates
  • inflexibility of the current funding policies to empower local board decision-making. In particular local boards feel they have little or no control over the 90 per cent of their budget that is for ‘Asset Based Services’, and
  • inflexibility of the current procurement processes and definition of when local boards or groups of local boards can undertake procurement of major contracts.

The report to the council this week says the working party members working on the funding & finance workstream went through a number of options to address these issues: “The majority of local boards & the political working party didn’t support or recommend a model of local rates for local activities, applied generally, but 4 local boards asked to participate in a pilot of the local rates model of decision-making.”

  • The report to the governing body was produced by Linda Taylor, programme manager for the governance framework review.

Links to items on Thursday’s governing body agenda:
10, Governance framework review: Recommendations of the political working party
7.1, Local board input: Waiheke Local Board
7.2, Local board input: Rodney Local Board
10, Recommendations of the political working party
Policy issues    
Funding & finance    
Governance & representation    
Delegations test for Reserves Act decisions    
Waiheke Local Board pilot project proposal    
Summary of local board feedback    
Complete feedback & resolutions of local boards    

Attribution: Council governing body agenda.

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Council accounts show revenue & assets up, net debt below forecast

Auckland Council released its unaudited financial results for the June year to the NZX yesterday (because the council has listed debt securities), with more detail to come in 4 weeks.

The deputy auditor-general will complete the audit and issue an audit opinion on 28 September.

Group highlights include:

  • Revenue up 11% ($424 million) to $4.129 billion, ($3.705 billion in 2016), including
    • Rates $1.641 billion ($1.564 billion)
    • Fees & user charges $1.193 billion ($1.083 billion)
  • Operating surplus $340 million before gains & losses ($250 million)
  • Net debt (after cash on hand) up $486 million to $7.969 billion, but $467 million lower than forecast
  • Surplus after tax $640 million ($231 million deficit)
  • Total assets up $2.7 billion to $47.36 billion ($44.68 billion)
  • Net assets $35.78 billion ($33.65 billion).

Auckland Council Group acting chief financial officer Matthew Walker said the group’s financial performance “shows it is balancing the need for prudent financial management with the investment required to address the growth challenges Auckland faces.

“As a successful & increasingly global city, Auckland’s population is growing rapidly. This continually adds to the demands on our transport, 3 waters & community infrastructure such as libraries & parks. Yet the group results show the council is on track to deliver its largest programme of investment ever over the next decade, based on the adopted 2015-25 long-term plan.

In the last year, the council group (including council-controlled organisations such as Auckland Transport & Watercare Services Ltd) delivered $1.66 billion of investment, including its share of the city rail link, now co-funded by Auckland Council & the Government.

Mr Walker said the council sold down part of its diversified financial assets portfolio in August 2016 and issued debt in $NZ, Euro, Norwegian kroner & $A. Meanwhile, it continued to raise debt through the Local Government Funding Agency. He said low interest rates had contributed to a lower cost of funds during the course of this financial year.

“The council maintained its credit ratings of AA (stable) from Standard & Poor’s, and Aa2 from Moody’s Investor Services, confirming our prudent fiscal management and strong debt-servicing capability. These continue to remain among the strongest credit ratings in New Zealand.

“The council has begun the development of its long-term plan 2018-28. While group debt is projected to reach $11.6 billion by 2025, it will remain at a prudent level relative to our income.
“The group’s asset base is expected to grow from $45 billion to $60 billion over that same period to 2025.”

Capex highlights:

  • $310 million on water & wastewater infrastructure
  • $200 million on parks, sports facilities, libraries, community centres & facilities
  • $430 million on roads & footpaths, and
  • $288 million on public transport.

Link: Auckland Council 30 June 2017 accounts (on NZX)

Attribution: Council accounts & release.

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Matching infrastructure to population explosion a key Goff plank

Auckland mayor Phil Goff laid out his vision yesterday to build infrastructure at a rate that would match the region’s unprecedented population growth.

Some funding mechanisms are in place, and the council & Government have agreed bigger funding streams for some areas such as transport, but their budgets still show a $5.9 billion shortfall over the next decade.

The mayor said he would seek staff advice on options for broadening the council’s revenue base, which currently relies on rates to generate almost 50% of its funding. Other options include:

  1. the further development of special purpose vehicles funded by growth infrastructure targeted rates
  2. the application of the targeted rate on accommodation to the informal sector (eg, Airbnb)
  3. the sale of non-strategic assets, and
  4. likely proceeds from various road pricing options & practicality of implementation.

The mayor wrote his 8-page report to set the process going for the council’s 10-year budget (otherwise known as its long-term plan) for 2018-28.

The process now is for the council to run political workshops through September-November, finishing with a more concrete mayoral proposal which will go to more workshops in December, then out to public consultation in March and adoption of the plan on 27 June next year.

Mr Goff wrote in his release presenting the report:

“Our vision for Auckland is a world-class city where talent wants to live. It must be the city which can keep the best & brightest of our young people in New Zealand while competing globally with other cities around the world for skills, entrepreneurship & investment.

“My key focus is to build infrastructure at a rate that matches unprecedented population growth to maintain our quality of life and make it easier to do business in our city.

“Auckland grows by 45,000 people/year and is clearly a desirable place to live. This growth creates opportunities, but it also presents challenges in housing shortages & affordability, growing traffic congestion & pressure on our environment.

“The key to tackling these issues is our ability to lift investment in our infrastructure.

“Investment in public transport, including light rail, in active transport modes like cycling & walking, and optimising our road network is critical.

“That’s why, under our latest Auckland transport alignment project, we have set aside $27 billion for capital investment in the next decade. Currently, $5.9 billion of that is unfunded and has to be found.

“I welcome the Government’s commitment to meet the larger share of that, but Auckland will also need to contribute more.

“The 10-year budget needs to consider where we source our share of the funds.

“The interim transport levy is not user-related and does not raise sufficient funds. We can’t simply impose huge general rate increases to pay for infrastructure, so some form of road pricing will be essential.

“We need to build more houses more quickly. The mayoral housing taskforce makes recommendations which we need to move to implement.

“The unitary plan enables land development, but we need to invest in infrastructure to allow houses to be built. This will involve intensification of houses, as well as new developments under the future urban land supply strategy.

“Use of targeted rates as well as special purpose vehicles through Crown Infrastructure Partners will be essential. That also applies to protecting & enhancing our environment.

“Water quality is a top priority. We need to reduce wastewater overflowing into our streams & harbours. Building new water infrastructure will be our focus, including new wastewater interceptors & green infrastructure.

“While the council is looking for new sources of infrastructure funding, we must also get better value for the ratepayers’ dollar.

“It is time to realise the benefits of amalgamation to deliver further efficiencies & economies of scale made possible by the super-city.

“Findings from our group-wide section 17A value-for-money reviews will be critical, and I want the council to develop group-wide shared services.

“APEC [Auckland will host the Asia-Pacific Economic Co-operation forum leaders’ week from 8–14 November 2021] and the America’s Cup defence add impetus to our planning and provide the opportunity to create a lasting legacy for Aucklanders.

“We have the opportunity to make Auckland more prosperous, smart, innovative, inclusive & culturally rich, with a beautiful environment and choice & opportunity for all.

“With this as our vision and the investment we need in infrastructure, we will make Auckland a world-class city.”

Image above: Auckland mayor Phil Goff, on site shortly after his election as mayor last October.

Links:
Mayoral intent for the 10-year budget (long-term plan) 2018–28
10-year budget 2018-28 road map

Attribution: Mayoral release & plan document.

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Councillors air their views, oh, and agree to housing taskforce steering group

It could have taken Auckland Council’s governing body a couple of minutes yesterday to tick off the appointment of a 10-member steering group to ensure the efforts of the mayoral taskforce on housing isn’t lost.

But that’s not the way councillors work. Their habit is to talk about what they want to talk about, not deal efficiently with the business in front of them.

Their questions & debate, for a couple of hours, had nothing to do with who would be on the steering group, didn’t get to grips with the roles of either the steering group or the taskforce, but did venture near some of the direction mayor Phil Goff wants to lead the council on housing issues.

The steering group members, all but one from with the council & council-controlled organisations, will be: The mayor, Phil Goff, deputy mayor Bill Cashmore and 2 councillors, planning committee chair Chris Darby and regulatory committee chair Linda Cooper; council chief operating officer Dean Kimpton, strategy chief Jim Quinn, finance & policy director David Wood from the mayor’s office, Independent Maori Statutory Board chair David Taipari, and 2 senior managers from Auckland Transport & Watercare Services Ltd.

The targets: council process, and central government

The taskforce, on the other hand, drew a wide range of participants from the private sector who identified 2 council-related issues and another which would take considerable negotiation with central government.

The mayor said that if he’d led the taskforce off on some of his pet housing subjects he would have got nowhere: “I had some battles with the minister of housing development [I think that means minister of building & construction, Nick Smith], he didn’t want people there, but we were able to turn him & the Government around, they were able to attend as active participants and they were very active.”

There was a time when relations between central & local government were abysmal, but since the late stages of the last council term Auckland & Wellington have (almost) stopped talking past each other and have jointly confronted a number of issues – though still with a long way to go before regular sensible discussion & resolution occurs.

For instance, Mr Goff said: “Because we don’t have independent revenue, I keep having to go cap in hand to the Government. But the last council, getting the unitary plan through – that gives us credibility to say we’ve got the planning, let’s get on with the infrastructure.”

Topic was steering forward, but talk was about taskforce

The original recommendation before the council yesterday was for the steering group to report to the governing body “periodically”. This was changed to 6-monthly. The mayor talked about the taskforce being brought together again, which he said participants were enthusiastic about. However, that wasn’t up for debate.

The talk yesterday should have been about the taskforce’s recommendations, and who would be best to advance work on them. Instead, councillors commented on taskforce points – fine, but ultimately useless.

The steering group’s primary tasks will be to lead change in council processes that affect housing, ensure the zoning changes resulting from the new unitary plan are effective in opening up more scope for housing development and – the biggest task – negotiating change with the Government.

Jared Boow, housing portfolio manager in the mayor’s office, said in his report to the governing body on the taskforce, it identified 3 key areas where changes are needed to deliver more homes in Auckland:

  1. Remove impediments to the construction sector developing at scale, including identifying investors who can build through the dips to lift construction in the peaks
  2. Unlock the availability of land with appropriate zoning & infrastructure, at the right price, to enable more development, faster, and
  3. Deliver efficient & certain planning, consenting & risk management to reduce costs, enable innovation in construction & delivery and create communities with high quality built & urban form outcomes.

Tactics & systems

Within each category, he said, the taskforce identified a mix of ‘tactical’ interventions that could be done soon, without significant legislative or policy change, and ‘systemic’ interventions that participants believed might take longer to deliver but which would have the potential to have a large & long-term impact on housing supply outcomes.

“In their view, ‘delivering these interventions will require partnership & collaboration between Auckland Council (and its wider family of organisations such as Auckland Transport & Watercare), central government and the development sector’.

“They also point out that focusing on short-term interventions without addressing systemic challenges will not fully address Auckland’s housing supply challenges. They note that their recommended ‘tactical’ changes ‘can help create the platform for deeper policy changes, but are not a substitute for more fundamental change in a market that has not built enough homes for several decades’.”

The taskforce’s report contains 33 recommendations. Mr Boow said 16 of those recommendations were aimed at the council, and work was underway on two-thirds of them.

Among councillor comments & responses:

Cllr Cathy Casey looked for innovative ways to build cheaper housing: “I don’t see that in here [the taskforce report]. My worry is there’s an awful lot in here to do and no prioritising.”

Mr Boow: “One of the first tasks for the steering group is to prioritise.”

Former deputy mayor, Cllr Penny Hulse: “Is the list of to-dos to be done by the taskforce?

Mr Boow: “One thing we didn’t want to do was reinvent the wheel. 16 of the 33 recommendations are aimed at council, two-thirds are work that’s underway.”

Mr Goff said there were 2 fundamental points: “What we didn’t want to happen was to have a report that came out and everyone said, ‘Yep, great ideas’, and then it sat on the shelf. And 2, to ensure there is advocacy to central government. This was a high-powered group and they have said, can we reconvene in 6, 12, 18 months.”

Cllr Hulse: “The missing piece of the puzzle is still the Government & private sector response to this. Was any thought made to appoint an inter-party group?

Mr Goff: “We have asked the Government to appoint a points person to be responsible for liaising with us, and that should be the minister in charge of MBIE (the Ministry of Business, Innovation & Employment). The private sector is a little harder because there aren’t always organisations available. I think the value of the taskforce is the followup that we have agreed to do.”

Cllr Wayne Walker was concerned at the limited nature of what’s on the table: “’Meets the demands of the rate of population growth’ – what are the demands? What hopes do we have of influencing that? Very long-term assets that are normally funded intergenerationally… I don’t know if we’re going to get anywhere, so I endorse the comments Cllr Hulse made about the involvement of the Government in this.”

Mr Boow: “A role of the steering group would be advocacy to government.”

Cllr Walker: “Is this taskforce going to be making some observations around population growth, because you don’t know what you’re going to be responding to?”

Mr Goff: “I’ve got views on demand management & tax, and I wouldn’t have got anywhere with those because they’re not views shared by the Government. We decided to concentrate on things we could get movement on.”

Cllr Richard Hills: “Greenfield tips the balance away from the unitary plan. I think we need to be a little more creative. How are we going to be able to use the Panuku developments better? What can we do to make sure it’s first-homebuyers or affordable housing only, to make sure it’s not just investment properties?”

Council executive officer Megan Tyler on greenfields: “This report doesn’t sit in isolation of any other work you are doing. Rebalancing will be part of the work you do through the long-term plan. I see a great opportunity for you over the next 12 months to decide where the funding of infrastructure is best put.”

Cllr Casey: “One recommendation I don’t think is housing at all and that’s to implement congestion charging. That’s a long way away from affordable housing.”

Mr Goff: “That’s a recommendation of the taskforce. They are what they are. There was broad support for a fuel tax, broad support for a congestion tax. So the reason that it is in a housing report is to enable affordable housing, you need decent transport. There is currently a joint working group between council & government on transport charging.”

Cllr Casey: “This is a wide-ranging remit for a taskforce. The taskforce wasn’t a council report, even a mayoral report.

Mr Goff: “I wasn’t in the position to say no, you can only recommend what we like. It’s not for us to say what should or should not go into this report.”

Casey: “How do we get involvement?”

Cllr Alf Filipaina: “The governing body will end up deciding what we will be pushing for.”

Cllr Bill Cashmore: “We’ve done some of the work already – the unitary plan, the infrastructure shortfalls have been identified and the highlight numbers have been worked through by our staff.

The insufficient builds for many years have probably created a 30,000 shortfall, and that is causing stress. Immigration has also caused stress. We need to know the tools in the toolbox. What we do know is the investment needs to increase if we are to provide more affordable housing and more housing in this city. The financial arrangements we’ve announced in the last 2 weeks I’m not going to take a set position, I want to understand what all the tools are and what the options are. But the decisions to be made by this council? We will make.”

Cllr Hulse – “having lived & breathed housing for the last 6 years and being somewhat jaundiced” – supported putting the mayoral stamp on the taskforce and said it was well overdue: “What I’m hoping is we might end up with a more sophisticated approach. Deputy prime minister, now prime minister Bill English has had reports like this over the last 2 years and there’s been not a lot of action. What are the key changes that would actually change the central government approach to this? The council has almost wrung the cloth dry. But without the Government agreeing to put some serious building targets in place, and what I think is a seriously marginal Housing NZ building rate, if the Government are to make a serious difference they need to make the funding available for infrastructure.

“If we’re going to get houses built we’re going to have to fund infrastructure. We need to change some of the banking methodology and the structure to do that. Developers – how fine many of them are – are there to make money, and good on them. But if the banking sector will not allow that to happen, actually the banking sector needs to assist with that and the Government needs to assist with that.

“But the bit I’m interested in is, who’s going to be sitting around the tables in Wellington. I hope that is what the taskforce is focusing on.”

Attribution: Council governing body meeting.

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Council agrees to sell rest of its financial asset portfolio

Auckland Council’s finance & performance committee agreed yesterday to sell the final $130 million in its diversified financial asset portfolio, but it’s a decision with potential adverse consequences.

The council sold $100 million of the portfolio in May 2016, will sell a further $100 million by the end of the June 2018 financial year and agreed yesterday to sell the balance by June 2018.

The council intends to use the proceeds solely to fund public transport & stormwater infrastructure.

However, turning liquidity to use in developing hard assets could take the council closer to a net debt:total revenue ratio of 270%, and at that point the council would face a ratings downgrade.

Council treasurer John Bishop said in his report a one-notch downgrade would cost $12 million/year in extra interest costs.

Committee chair Ross Clow said the decision to divest the portfolio would help tackle Auckland’s growth: “The fund was originally set up with the express purpose of funding infrastructure across the region when needed. Given the unprecedented challenges Auckland faces, divesting of the remainder of the portfolio and using it to help fund our infrastructure programme is a prudent & sensible financial decision.”

Mr Bishop said in his report the investment fund wasn’t regarded as a strategic asset, and divesting it would give the council the opportunity to repay debt to enable additional investment in infrastructure. “However, replacement liquidity may be required to meet treasury operating limits.”

The Auckland Regional Council established the portfolio, which originally contained its stakes in Ports of Auckland Ltd & Auckland International Airport Ltd, along with an investment portfolio of New Zealand & global equities, bonds & cash. It was used it to establish Infrastructure Auckland, providing seed funds for projects that included the Britomart Transport Centre and the Northern Busway.

It’s been managed recently by 8 external fund managers, with oversight from National Australia Bank subsidiary JANA Investment Advisers Pty Ltd.

Mr Bishop said in his report: “If the portfolio was liquidated to fund a wider Auckland or New Zealand event, it is likely that financial markets would also be negatively impacted. Therefore, when the funds are needed the most, there would be likely downward pressure on the value of the portfolio, meaning the portfolio is a less preferred form of liquidity when compared to cash or committed bank lines.

“Its specific investment objective was to achieve a net return exceeding the consumer price index plus 4% over rolling 10-year periods. JANA estimates an average annual 7% return over rolling 10-year periods. The portfolio has returned 9.1%/year since November 2010, in line with benchmark & ‘market’ returns. The return for the financial year to 31 March 2017 is 5.8%.”

Both EY & Cameron Partners identified the portfolio in their reviews of council funding in 2015 as a commercial rather than strategic asset, meaning continued ownership wasn’t required to ensure delivery of key services or outcomes.

“It was noted that the rationale for holding the portfolio is weak, and it is unusual for an organisation with the objectives of Auckland Council to hold such an asset.”

Mr Bishop said alternative uses for the portfolio funds included repaying debt and accelerating infrastructure investment. However, additional liquidity support might also be required if the portfolio was divested.

“Selling it to repay debt will reduce the risk of a downgrade to the council’s credit rating profile. Under the council’s long-term plan, the ne,t debt:total revenue ratio reaches 265%, meaning little available capacity to undertake further capital investment other than what is already in the long-term plan without breaching this ratio.

“The council’s credit rating agencies have indicated downward ratings pressure if this ratio approaches 270%. Therefore any unforeseen changes to planned operating results, such as a reduction in revenue or increase in debt, could lead to a lower credit rating.

“A one-notch downgrade is estimated to cost the council a minimum 0.15% in higher interest costs, while a bigger downgrade will result in a greater increase. On the council’s current debt portfolio of $8 billion, this results in an additional $12 million/year expense once existing debt is refinanced, more than offsetting the positive return from the portfolio over time.”

Mr Bishop said that as the investment portfolio was reduced, the overhead costs (both internal & external) of administering it became more significant: “Current external overhead costs are about $1.5 million, largely represented by fees paid to JANA & the fund managers. The refined responsible investment policy also requires significantly more oversight of the portfolio, adding additional cost and diverting council staff focus away from more material matters such as managing the council’s debt portfolio, interest rate expense & credit rating profile.”

Earlier stories:
4 April 2008: Auckland Regional Holdings’ “satisfactory” half sees revenue up 45%, profit up 55% to unstated figure
2 March 2004: Auckland gets Infrastructure Auckland $45 million for interchange

Attribution: Council committee agenda & release.

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Hamilton-Auckland commuter rail service wins support “in principle”, Panuku gets more tools

Auckland Council’s planning committee voted more strongly yesterday in favour of investigating a regular commuter rail link between Auckland & Hamilton than the tone of the debate indicated.

The committee had before it a position paper prepared last year after multiple-agency collaboration and received brief input from a lobby group chair, Rob Weir, who’d come up from Hamilton for the meeting and was invited by committee chair Chris Darby to speak.

Auckland Council staff sought committee support for a high level review to identify opportunities & constraints, but there was more debate on the value of such a study if it was unlikely to lead anywhere.

The way forward was determined by an addition by Cllr Cathy Casey to the recommendations for the committee to support the provision of a passenger rail service in principle.

While some thought it ought to be a low priority against a stack of other multi-billion-dollar infrastructure confronting the council, the “in principle” tag worked, the additional clause was supported by 18-1 and the amended recommended was approved unanimously.

That means the proposal will be studied, not necessarily resulting in a regular service.

Extra acquisition tools for Panuku endorsed

The committee also endorsed a proposal that its regeneration arm, Panuku Development Auckland, be able to use – “prudently” – statutory tools such as designation & compulsory acquisition in the areas around the region marked as “unlock” or “transform”.

  • Both the commuter rail proposition and the extension of Panuku’s ability to advance regeneration are worth a lot more attention than the few words above. I’ll write more about both in the next few days.

Attribution: Council committee meeting.

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Transparency campaign gathers some ears

Transparency campaigner Penny Bright took her message to Auckland Council yet again yesterday.

Yet again, in a campaign that she’s fought for 2 decades, resulting in multiple arrests for her (some of those arrests spitefully contrived but not, subsequently, resulting in convictions), but over the years not too much improvement in transparency.

But it was notable at yesterday’s meeting of the council’s finance & performance committee that fewer ears were deaf to her message, and this time Ms Bright actually had some positive words to say about the opening up of council information.

The need for a change in attitude was reinforced in February with the sentencing on corruption charges of former Rodney District Council & Auckland Transport senior manager Murray Noone to 5 years’ jail, and engineering firm Projenz Holdings Ltd director Stephen Borlase to 5½ years’ jail over roading contracts.

Mr Borlase was found guilty on 8 corruption & bribery charges and Mr Noone was found guilty on 6 charges of accepting the bribes. Projenz also paid for overseas travel for Mr Noone and another senior roading engineer, Barrie George, who was sentenced last September to 10 months’ home detention.

Ms Bright told the committee she wanted to see all council-controlled organisations providing the same details of contracts as Auckland Transport now does, and she wanted subcontracts included.

She told the committee: “The court case proved you have 2 levels of corruption, public to private and private to private where back-end subcontracts are placed.

“The court showed the collaborative model was not working. That must also be reviewed because the proven corruption risk – we have the evidence for that.”

Ms Bright said the Public Records Act had been law since 2005 – created, according to the Government summary, “to support the effective management of records in the public sector… to promote government accountability through reliable recordkeeping, enhance public confidence in the integrity of government records…”

She said more recent guidelines from the Office of the Auditor-general on transparency were very clear and added: “I believe those guidelines have not been enforced.”

She also asked when the council would look at council officers holding private consultancies that dealt with the council.

Council chief financial controller Sue Tindal said the committee would have an opportunity to raise questions about these issues at its second meeting of the week, on Friday, when the quarterly reports of council-controlled organisations are presented.

However, that’s an unnecessarily tortuous process. The council could simply revert to the practice used at the former Waitakere City Council of presenting all details from tenders online when a tender was approved, which wasn’t followed at other councils around the region and wasn’t the practice put in place when Auckland Council was formed in 2010.

Link:
Office of the Auditor-general guidelines

Attribution: Council committee meeting, public forum presentation.

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