This is a guest post from reader Aaron Schiff
Ports of Auckland wants to expand the cargo port in the Auckland CBD, and Auckland Council will soon make a decision on this, apparently without having done a detailed study of the relative merits of the expansion plans versus alternative options. Decisions about something as significant as the port deserve in-depth analysis.
The cargo port currently occupies around 77 hectares of waterfront land in the city.
A port allows New Zealand to trade with other countries and that’s a good thing, but it doesn’t come for free. Over the timeframe relevant for analysing port development (decades), the resources used by the port (land, labour, etc) could be put to alternative uses. So the right way to think about the port is as a cost. If fewer resources could be used for port activities for the same total amount of international trade, more resources will be available for other things (over time).
One of the big costs associated with the Auckland port is the opportunity cost of the land it occupies. Much of this land was reclaimed for the port, but given it exists, the relevant question is the best use of this land from now on.
Waterfront land in the central city would be more valuable in alternative uses compared to stacking containers and parking imported cars. The value of the port’s land in current use is estimated for rating purposes at around $400 per square metre. Conservatively, this is around one third of its value in alternative uses, based on the value of similar waterfront land in Auckland.
Another significant cost is land transport to and from the port. Freight travels by road or rail through the city to the port, much of it from distribution centres in south Auckland. There are high costs associated with this transport infrastructure, and trucks and freight trains generate noise and pollution in Auckland. No one knows if these costs could be reduced by diverting some freight through other ports.
We do know that Ports of Auckland is inefficient compared to international ports. The following charts derived from the NZ Productivity Commission study of international freight show that international ports use land twice as intensively as Ports of Auckland, and productivity on other measures is also relatively low. This suggests that consolidating freight volumes at other ports could reduce costs.
Intensity of land use at sea ports (2006-2008)
Index of sea port productivity measures (2010).
There are also spill-over costs associated with the port itself: noise and air pollution, and visual effects.
The closest substitute for the Auckland port is Tauranga. Northport could also be a viable alternative with an upgrade of the northern rail line. It’s important to remember that changes in freight activity at Auckland will also mean changes in activity at Tauranga and other ports. Changes in costs elsewhere, including opportunity costs and spill-over costs, therefore need to be compared to changes in costs in Auckland. The intensity of competition between ports is also relevant for the transport prices faced by exporters and importers.
Other alternatives involve building new port facilities outside the Auckland CBD. This would involve a large one-off construction cost, which should be compared to potential savings of other costs, including opportunity costs and spill-overs, over time.
Ports compete in a market, but market forces are unlikely to result in good outcomes in this case because (a) significant costs are spill-overs that affect people outside these markets, and (b) ports involve large fixed costs so there are barriers to free entry and expansion in these markets.
So some degree of government involvement in decision-making is probably needed, although it would also be interesting to consider if a good outcome could be achieved by privatising the Auckland port and allowing it to sell some land if that made commercial sense.
While a lot of the effects of expanding or shrinking Auckland’s port occur in Auckland, some effects occur outside of the Auckland region, and some involve transfers of costs between regions. Auckland Council doesn’t have a mandate to consider these effects, but better decisions might get made if analysis and decision-making is done at the national level.
The right question for such analysis is: what is the appropriate location of port activity in order to minimise the total cost of it? There are lots of trade-offs and the only way to consider these properly is a detailed cost-benefit analysis before making long-term decisions about the Auckland port’s future.
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Another issue is how to go about valuing the ports land. This article is over a year old now (http://www.stuff.co.nz/business/opinion-analysis/6840839/What-to-do-with-port-land) but it says that the ports land is valued based on it’s current zoning as “industrial”. Would be interesting to know how changing zoning to retail/commercial/residential would effect the land valuation.
My main issue with allowing the port to grow on it current site isn’t so much environmental or aesthetic.. but how are they going to get increasing volumes of cargo in and out of the centre of Auckland? My preference would be for PoAL operation to shrink over the next few decades while container/bulk cargo volume is slowly transferred to Whangarei and Tauranga.
Compare the rateable land value of port land with #1 Queen St. That will give you a good comparison of value.
Moving even some of Auckland’s sea freight traffic to Marsden Point means either upgrading the North Auckland Line or building the Steven Joyce Memorial Highway with extension all the way to Whangarei. One of these options is affordable, the other utterly ruinous. However, it’s the ruinous option which is the only one that would get support from the current regime. Which means that using North Port needs to be ruled out until such time as we have sane government.
In a tweet, PoAL pointed me to new productivity stats from MoT that show an improving trend: http://www.transport.govt.nz/ourwork/TMIF/Pages/FT022.aspx
But productivity is only one part of the issue, other questions about land use and transport costs need analysis.
From a regional jobs perspective, moving the port to Whangarei/Northland would be beneficial. Northland must be one of the most attractive places to live in NZ from a climate perspective, yet the lack of jobs means no one moves there. Move the port and the supporting industries that follow will create employment.
It would then free up the valuable land in the CBD.
Adding to this, this needs to be driven from a central government.
All the talk about those evil ‘Landbankers’ – POA is the worst. They dont do anything with the port as it returns a reasonable income, while in the mean time, significantly increases in value.
huh? The port is an operating business. A land banker buys land and sits on it. POAL could probably use their land more efficiently, and might have to if they’re refused the option to expand, but they’re not a land banker because they are using the land for something beyond holding it for value appreciation.
They are also Council-owned, so lets turn down the “they are evil financiers!” rethoric.
I have a strategy for the port.
* Pretend it’s a valuable and important asset, that needs to be hugely expanded with lots and lots of reclaimed land
* In a few years, once it’s clear that this was a waste of money, go broke. The council will sadly announce that it can’t afford to bail out the port and, regretfully, needs to sell off the land (including the large amounts just reclaimed).
* Make all the right noises about how the port management was totally irresponsible, and fire them (the council will need to give out large golden handshakes as a quid pro quo).
* Intensively develop the whole area as an extension of the CBD, with rail access from a new station near The Strand, and the proposed Tamaki Drive light rail running through the middle of it.
I think it’s a win for everyone. You’d never be allowed to reclaim land just for private development, but the port can reclaim land without too much bother. It’s inevitable that the port will shrink, over time, but if we do this right, we’ve got a new CBD-sized amount of land in a brilliant position. The council would make a fortune and it would be great for Auckland’s growth.
The best part about my plan, is that for all I know, it’s what the council is actually doing, and even if it isn’t, they could still start now, or even do it by accident.
“It’s inevitable that the port will shrink”
Big statement with no shred of evidence.
“There are lots of trade-offs and the only way to consider these properly is a detailed cost-benefit analysis before making long-term decisions about the Auckland port’s future.”
Indeed. So will Auckland Council or the central Govt actually do this analysis?
Or will that bunch of failed talkback radio host wannabes (ie Auckland’s elected councillors) just make a decision based on which of their constituents have whinged the loudest?
Good post — is there any consultation or ways we can submit to the council before decisions are made?
Small point: your productivity comparison graph is awful! Try something like http://s22.postimg.org/5wujqxqu9/port_Productivity_page_1.jpg instead…
Thanks Dan, was trying to highlight the difference from the mean, but I see your point!
Lance Wiggs has a few suggestions for building up the CBD:
http://lancewiggs.com/2013/08/07/building-up-auckland/
I’m mused that he characterizes carparks as brownfield.
As opposed to characterising them as what? Greenfield? They’re largely surrounded by utility infrastructure, even if they’re not directly connected to that infrastructure themselves, and they’re already built in the strictest sense of the word.
The storing of imported cars seems to be the most wasteful use of the land. Would be interesting too see what portion of business that the cars take up. The land used for storing cars is also the most valuable as is very close to Queen St.
If this portion could be lost to Tauranga or Northport then a fair bit of land could be freed up.
Surely the land is more valuable than the car import business.
Those large Warehouses you see on Quay St also seem a total waste of space too, no containers should be packed on wharf anymore.
Much greater use should be made of Wiri, and maybe another couple of inland ports set up.
Almost all the containers are on the far Eastern wharf (Ferguson). The Port can keep that bit but give up the wasteful use of land to the west.
Poal just seem to find it much easier to go for reclamation, rather than more innovative solutions.
I think some containers need to be at the port so that they can be moved around the country and world to where they are needed. It’s probably cheaper and most efficient to send them by sea than by rail. Since Auckland is a major import port there is probably an imbalance of empty containers that need to go elsewhere.
I agree, but looking at the aerials you can see most of the containers are stored at the comparatively small eastern end of the port.
This area can stay, but cargo should be stored at the port for as little time as possible, and should not be packed/unpacked at the port.
Another interesting trend is trans-shipping. Containers are swapped from one ship (maybe from the South Island) and placed on another (say for Asia). This requires large areas of on port storage, but has very little economic benefit to Auckland at all. Do we really want to lose our harbour for trans-shipping?
Good point. Since cars cant be stacked and I’m guessing they can’t be moved en masse, the would be a huge drain on space and efficiency. I’ve heard that there is not an appropriate charge on car storage either. And while most cars may be headed to the Auckland market, they of course can get here on their own.
There is actually one large caparking garage already, and I do remember hearing they wanted to build more.
Interesting enough some cars are just transshipped too, and they take up space on the wharf. For example a ship might rotate – Japan – Australia – NZ. Some Australian bound cars have to be offloaded here to get all the NZ bound ones off, and then NZ loads up machinery we have built bound for Aussie.
Ports of Auckland also handle bulk cargo. Recently have been handling coal, ironsands, grain, Palm Kernel. Clearly contracts that are better suited for Tauranga, as cargo bound for Waikato anyway. You can tell when one of this ships is in as there are non-stop tipper trucks clunking along Beach Road.
This is a really dumb use of inner city land.
Hi Luke, we don’t have any car parking buildings on the port. But yes, that is how you could stack cars. Cars aren’t stored on the port, they are taken off site withing a day or two. We get a heap of cars across the port though, up to 6000 in 36 hours, so yes it can sometimes look like it’s a big car yard. It’s roughly 50:50 new and used at the moment.
one of things likely to be driving the low land use intensity is parking for used import vehicles, few countries have this king of trade
Two important points to consider:
1. It costs the same to export a container via Port of Tauranga’s Auckland Metroport as from Auckland. PoT absorbs the $100+ cost of getting the container to wharf by rail.
2. A container arriving in Auckland via PoT is worth the same value to the AK economy as one via PoA according to the PWC report.
“Ports compete in a market, but market forces are unlikely to result in good outcomes in this case because (a) significant costs are spill-overs that affect people outside these markets, and (b) ports involve large fixed costs so there are barriers to free entry and expansion in these markets.”
I think you have made some large logical leaps here. There is currently healthy competition between NZ’s ports especially POAL and POT. If, as you say, the land is worth more without the port, the question is: why is the port not taking this path as a profit maximizing firm? Well one answer might be that the principal agent problem is fairly acute in this case. Management isn’t going to advocate for the winding up of the business. So, why aren’t the owners? Presumably because they are driven by political imperatives and are not profit maximizing. So in my view the best outcome would be obtained by privatizing the port in conjunction with rezoning to CBD zoning.
very good points.
Would you not simply re-zone the land first and see what happens? POAL might consider options for alternative use of the space simply on that basis …
I was working on the assumption that the council is one entity and would simply rezone if it was interested in redeveloping. But you might well be right – the planning bit of the council should rezone such that the asset management bit can start thinking about the best use of its asset.
I’d worry a bit whether a private port would fully take account of spillover costs, eg associated with transport of freight to and from the port, but it’s certainly worth exploring whether privatisation would lead to better decision-making about port resources than current arrangements.
I guess my main argument is that the opportunity costs of retaining the status quo or expanding the port don’t appear to have been fully analysed relative to alternative scenarios.
It’s interesting to contrast the relative lack of cost-benefit analysis regarding the Auckland port with the fairly extensive analysis that the Ministry of Transport is doing in relation to the Clifford Bay interisland ferry terminal, for example.
Yes given how socialised the transport networks are in NZ (particularly road) I see where you are coming from. A road pricing system for Auckland would help to drive better outcomes here no doubt.
My thoughts are – the port owner holds a lot of cards and could unilaterally drive good outcomes. If you look at Northport – the value of investment there is contingent on POAL scaling back. So POAL (or the POAL owner) could presumably invest in North port at a price of equity agreeable to both parties (on the basis that POAL intends to wind back). This provides capital for development at Northport. And this venture could then go to Kiwira and say – we will send X many containers a day onto the line. Kiwirail could then make an informed desicion about whether to invest in the necessary upgrade. And indeed the venture could provide equity capital for this if the numbers worked out. So the POAL owners can then capture the surplus of unlocking the port land AND the value to North port from the diverted demand. I would have thought all such arrangements would be easier executed if the port was privatized though.
Great points Swan. The demand for port services will not disappear and that’s not an outcome that anyone should want given the benefits that come from international trade. The question is about the best location of this activity to minimise total costs.
Using a HUGE amount of CBD-edge land (and, face it, we’re talking about the same area as the entire CBD) for a port is about the lowest value thing you can do with it. It’s also anti-urban with the vehicle and rail traffic and the disconnection of the city from the harbour. It’s also prime apartment and office land with views of the harbour that are currently wasted on crane drivers and stacked containers. That’s all just wrong. Try to imagine Sydney with a container terminal a few hundred meters from the Opera House. It’s bad enough that the Australian navy are parked around the corner. Or try to imagine London with imported cars parked up near Big Ben. Sydney’s port activity has gone to Botany Bay and Wollongong. London’s to Folkestone and Southampton. Auckland needs to follow their example.
I agree.Imagine what could be done if this was a focus area-freed up as a coastal promenade.Linking Tamaki Drive to the Viaduct etc. Then if you did something with Queen St also. Converted all this ready for the next America’s Cup. It is prime land and position. Im no expert but can the Manukau Harbour one be upgraded.
Actually I saw a photo of what Auckland used to look like about 1900 -Queen St one open boulevard leading straight down to a wharf, no cars and no container terminal. It actually looked pretty good. What were we thinking?
If you redeveloped the port from CBD-based heavy industry to something more suitable for the site, then you’d also want to look at the area south of Quay St, east of Vector Arena. It’s a vast ugly waste of space. The rail triangle is about the size of four city blocks, and the rail line east of the rail triangle is wider than the motorway running through St Marys Bay. Maybe you could underground the rail lines, and redevelop the area to connect the port re-development to Parnell and improve the connection to the CBD. Narrow Quay St while you’re at it. You’ll need streets leading off Quay St in to the port re-development… add another street or two to connect the area better to Parnell and you’re most of the way towards turning Quay St from a virtual expressway in to a normal city street.
Here: http://joelcayford.blogspot.co.nz/2013/07/ports-of-auckland-enough-already.html
Progressively close Port of Auckland & transfer all activity to Tauranga. Freight can be railed or on trucks to the inland container terminal, south of Auckland. This will free up the existing rail line that carries freight to be converted to full passenger rail, thus head Ak towards metro service eventually. Freed up Port of Auckland land could be sold to fund public transport infrastructure, after Tauranga Port expansion is complete.
If it can’t go to Manukau Harbour probably a good idea. the fact is we don’t we need that much money for our transport infrastructure if we open up our current road network for public transport get the patronage up fast then no problem for a while until the extra 1M people then we do definitely need the Congested Free Network improvements and good that is going ahead but to solve the current problem no not really.
No disrespect and the good organisation of the Ports of Auckland. In fact I know a couple of people that work there. It was just poor advance planning lets face it. What a natural asset the Waitemata Harbour , at the bottom of town along the foreshore….really.
Regarding possible re-siting Port of Ak to say Manukau. OK, but have you considered draft in this harbour (Manukau). Container ships are getting bigger, require deeper draft. Result, IF, Manukau not deep enough (now or in future), then will require EXPENSIVE dredging with accompanying complaints of NIMBY’s, etc etc. We have had the same problem in Melbourne with Port Phillip Bay dredging. And we are planning to move Southern Hem’s biggest port to Hastings, in Melbourn’s East.
Now, I still think Tauranga is the go. It’s not really that far, can be served by rail &/or freeway to Wiri terminal area. Come on Ak, think outside the square. Look, Manukau idea is OK, but consider the dredging costs of Manukau & problems of other stakeholders who will pop up their heads five minutes after any announcment.
Either way though, whatever you do… clear that unsightly existing port of Ak. Great opportunity for a park, Bring Ak back to the water instead of industrial infrastructure.
Carl I agree with you on all fronts and the park in the forgotten zone would be a major turn-around added with a very wide coastal promenade (peds/bikes/roller blades whatever-cafes/bars etc/. About water depth a good point but thought Manukau was already bringing in a surprising amount of containers. Would be interested on some intel if this is a major limitation or not?
Hi Steve – our port on the Manukau, Onehunga Port handles zero containers. The last container service there finished late last year when Pacifica replaced their old ship with a larger vessel. See: http://www.pacship.co.nz/index.php?fn_mode=fullnews&fn_id=4&page=news_articles
“Working smarter has seen us reduce our footprint by 72.6 hectares”
Was west haven marina really an active port terminal in 1989? That seems to be the biggest chunk of that 72 hectares.
I think auckland definatly needs a port,just for all the imports.So many north island distribution warehouses are in auckland.I personally think they should just sell that port.
I’m beginning to think the opposite. Use Tauranga, Northport , the inland port, and strengthen the rail links.
There’s a lot of work going on right now about the future of POAL in Auckland, and whether provision for expansion should be incorporated into the Unitary Plan for notification. I was immersed in some of this discussion as an ARC Councillor, and now as an independent planner working on the future of Auckland’s waterfront. Here’s a few blog postings that give some background into various aspects including freight logistics….
http://joelcayford.blogspot.co.nz/2011/11/whats-poal-really-for.html
http://joelcayford.blogspot.co.nz/2013/04/great-port-debate-continues.html
http://joelcayford.blogspot.co.nz/2011/11/wherefore-ports-of-auckland.html
http://joelcayford.blogspot.co.nz/2013/04/waterfront-regeneration-and-city-ports.html
I have always thought investment in a city based container terminal was madness. Lots of very good points are raised already above on this subject but I (even as a road transport promoter) would love to get rid of the heavy container trucks from the CBD. It would make the cycle path from the CBD to Parnell a lot less stressful.
If the council didn’t want a rugby stadium in the city, how the hell can they justify the noisy eyesore that the container terminal is?
Move it out of town, sell the land to recover the costs, and protect the Harbour which is one of Aucklands biggest assets.
But the main container terminal uses a very small footprint, just the far eastern end. Can get rid of 2/3 of the land, and 75% of the frontage by shifting the bulk freight to Tauranga/Whangarei. Any container growth can be handled by using more inland ports to store containers that arent required on port in the next half day.
POAL are famously inefficient- they even have a staff carpark and headquarters building between the two halves of the container port! No sign that they are sweating the land they already have.
++or develop te land and sell it on.
The Westhaven Marina isn’t a problem, the yachts make a pleasant addition to the city water front. Its the freight that should be moved out. In its place we could build a bigger overseas passenger terminal and a mix of residential and commercial real estate.
Agree Phil. The yachts /pleasure craft make it..lets face this is the City Of Sails and we are known for this great harbour particularly with Americas Cup exposure. Being on it or around it is probably one of our cities greatest natural assets. Agree about phasing freight off this harbour, I’m not saying freight is not very important but not central frame the main attraction. A complimentary well designed integrated passenger terminal with commercial/residential-pockets of cafes/bars etc, and work in a high end masterplan of the space behind-a park and some green space/trees/coastal promenade very important. That Barcelona type Linear park heading along then down towards the coastal promenade? Could that make a square with eventually Queen St? Quay St? when all modes 100%?? A real real big picture look would be good, I don’t really know? but thinking potential…wow!.
What about moving the port to nearer the distribution warehouses? I wonder if it’s possible to develop a new port somewhere between west Manurewa and the airport? It’s still a sheltered area (Manukau harbour) yet containers / cars don’t need to be transported from valuable land in the centre of the city. There is also great access to the southern motorway from there. I guess the big issue would be whether the harbour is deep enough? Maybe the sale of the central city land might even cover the cost of building a new port?
Coastal promenade joining Tamaki Drive to the Viaduct with cafes/bars etc overlooking the harbour. Then further back to the east of Vector Arena over the top of the train tracks and half of Quay St put in an enclosed soundproof football stadium. Then we are really talking.
Or if visually we can’t make this work height wise. Still a football field with grass banks/etc. And the big games limited obviously to afternoon. At least becomes more of a multi-use/ focus area.
In the area east of Vector Arena. Actually the more I think about it a grassed park, some similar features to Wynyard quarter with interconnecting shared paths to the coastal promenade, high frequency network links , (rail underneath?) etc would be the main focus. If we can fit in a football field or 2 or 3 (maybe future prov for seating? even if not so high) or just trees planted around in some relaxation areas/picnic areas even better. I don’t think we can make it worse?
Its the same with out darwin port leased it to a Asian company , not a good sign this is for the beautiful countries like Australia and Kiwis
Cheers
James
http://www.youpack.com.au