Auckland Council’s finance & performance committee has accepted a proposal from Auckland Council Property Ltd to step up its involvement in the supply of housing and also in town centre regeneration.
But, the council-owned company’s chief executive, David Rankin, assured Cllr Dick Quax before yesterday’s decision was made, it didn’t mean the company would turn into a fullscale development company.
What it did mean was more efficient & rational handling of landholdings, including land left over after infrastructure projects have been completed.
Mr Rankin told the committee: “We have no development profile, we are simply using the land as a lever to get value & achieve the council’s other objectives, like housing.”
But he said none of the company’s more extensive work required before council-owned properties could be sold had been resourced to the extent needed from the time the new council & its council-owned organisations were set up in 2010.
Cllr Cathy Casey thought the ACPL proposal was premature, and should wait until the council’s review of the organisations it controls was completed. However, council chief executive Stephen Town said: “Our assessment was, there was a lot we could do to enhance the way we operate in this group, and we wouldn’t need to be waiting for the end of the CCO review to do that. We’re looking simply to put forward mechanisms that allow ACPL to operate at a faster pace and get better results for us.
“This is the very sort of thing you’re seeking our group & organisations to do – how can we be more agile without a risk profile we’d be uncomfortable with? We’re very keen to get going and don’t want to wait to the end of the CCO review.”
The company wants approval “for the actions required to enable ACPL to significantly expand the scope, scale & speed of its involvement in projects to increase the supply of housing in Auckland and create value for the council through increased town centre regeneration, and enabling combinations of service & non-service uses of council-owned properties.
“The result of this expansion will be to reduce the burden on rates through surpluses generated and by creating new funding sources for existing planned capital works.”
Mr Rankin said in his report that, increasingly since its formation, “ACPL’s statement of intent has been amended to increase the shareholder’s emphasis on the company leading housing development projects. These projects are in partnership with private & third-sector parties and will improve the supply of housing in Auckland.
“To date, the model has produced results from using surplus council property. However, other possibilities exist. They include more proactive investigation into, and use of, all or part of council service sites, more site aggregation activity by ACPL where there are market obstacles, and the acquisition of sites with private or third-sector partners. These activities will enable development to occur and the exit of the council’s capital within a reasonable period of time.
“This proposal details how ACPL could expand the scale of its operations, and move more quickly on housing projects to increase the supply of housing in Auckland. While not limited to the relatively affordable price segment to the market, there is an emphasis on this part of the market in ACPL’s focus & activities.
“To assist the council to control its growing rates & debt, ACPL can create value for the council by assisting to enable both service & non-service uses of council property. Effectively this can provide a new funding source to assist with paying for planned renewal & new capital works by creating saleable assets and reducing the need to borrow, or by funding renewals or facilities through mixed redevelopment of a current service site such as Wilshire Village.”
Mr Rankin said ACPL would need access to more resources including staff, contractors & specialist advisors, budgets for investigatory work and a streamlined ability to acquire sites. To achieve this he proposed a change in council delegations, so the ACPL board would have authority to proceed up to $15 million, the council’s chief executive, chief financial officer & finance committee chairman could decide on projects in the $15-25 million range, and the committee would retain authority for projects above $25 million.
Other financial aspects included extending the repayment period for funds from the council’s strategic development fund budget from 2 to 4 years for each project, and debt-funding all spending – capital & operational, including accrued interest – to mitigate any volatility impact on rates, repaying it within 4 years.
ACPL would fund a $5 million/year development budget from sales of surplus properties.
After Cllr Quax commented, “I’m not exactly sure what the entire plan is with this,” Mr Rankin gave a few examples: “We have a site in Flat Bush Rd which is the residue from a bigger site for a park. We have received professional valuation advice that, if we spend $100,000 to connect up to water mains, it will add well over $100,000 to value.
“One of our assets is a very dated 1970s mall which the council wants to update before we sell. That‘s what this development budget would be used for as well.
“One thing is about physical work, the other is about the staff time put into a proposal. For example, Wilsher Village in Titirangi – we’re aware of at least another dozen sites where similar developments might be possible. We currently don’t really have the funding to do that activity.”
Cllr Quax: “So it’s not entirely a development process that you’re trying to set up here, where you buy land that’s not in our portfolio?”
Mr Rankin: “The strategic development fund was set up for some site acquisitions, so that’s part of this proposal. A couple of years ago there was a site aggregated in Green Bay. Over time we’ve ended up owning a big chunk of land, but there was a missing bit in the middle. We’ve decided to buy that bit.
“We do not have any intention, nor do we have the money, to do building stuff. Adding to that land – and if developers bring us proposals potentially to unblock a centre – our focus is on the land.
“An example we are looking at is Otahuhu. The council has identified there are blocks of land we own and there are blocks around that we might buy.”
Cllr Quax: “Land around Pakuranga Rd, for example, which is perhaps beyond the scope of the Ameti (Auckland-Manukau eastern transport initiative) project, would you be looking at that as an urban regeneration opportunity?”
Mr Rankin: “We’ve done some work (there) at the request of Auckland Transport, but the opportunities didn’t stack up commercially. Examples where we’re buying land are for stormwater at Takanini – why wouldn’t we get the rest of that block because it’s suitable for housing?”
To finish, Cllr Quax explained his quest for assurance: “In the report it talks about their expanded mandate, limitations of its development scope, so I wanted to be absolutely 100% sure before I vote on this that this is not a development role best left to the private sector rather than facilitate the private sector. We know how risky development is, we see it on a daily basis in the business pages.”
Mr Town: “We are not proposing that ACPL change its takeup & acceptance of development risk. They are not changing the mandate around the way they operate, just a way to do them faster and get better results for the council group.”
Cllr Quax: “On that basis, and assurances from the chief executive & executives of ACPL, I’m happy to support this.”
Attribution: Council committee agenda & debate.