AT’s Car Park Buildings — Delivering Little Value? (Part 1- Ronwood Avenue)

This is a guest post from reader taka-ite

Background

Last year Panuku Development indicated that they wanted to develop a 450 space multi level carpark on the Gasometer site in Takapuna This proposal came despite no evidence that extra parking was needed in Takapuna, however more of that later.

Public consultation on this proposal was held and this was aligned with the proposed re-development of the Anzac St car park. (It is now a matter of record the Toogood J held the consultation regarding the Anzac car park to be insufficient and he granted an injunction. Presumably the development of the Gasometer car park was similarly restrained. It is perhaps a sad indictment of such a significant project (or two projects) that such little consultation was found to have occurred.)

We have now moved on from that and the final part of the process was that the matter went to the Auckland Council Hearings Committee where it was duly approved.

I was surprised that a proposal that appeared to address a nonexistent need, that was contrary to a consultants report and that was clearly hugely expensive had gained acceptance.

I started to think that I was missing something. Why was the development of this car park so vital? I have worked in the Auckland city area on and off over the last 30 years and the revitalisation of the city has predominantly come from a massive increase in the residential population and increased public transport ridership to the city. Would that have been a better solution for developing the Takapuna metropolitan centre? Auckland Council obviously thought not.

I embarked on a series of OIA requests of Auckland Transport to see what it was that I was missing about the value of car parks. (l consider myself to be an adequate researcher, but I had been able to discover little about the Gasometer project. I could find nothing regarding the exact location, building design, effect on traffic movements, or even cost which seemed to be substantial (It was perhaps unsurprising that Toogood J came to the decision he did).

In a series of posts I will cover the answers to the OIA questions. I will start with an examination of the Ronwood Avenue car park in Manukau because I believe that is the most recently completed Auckland project I shall go on to talk of what happened with the process to arrive at the Gasometer carpark decision I shall look at all Auckland Council’s car park building operations. Finally I shall examine the Auckland Transport Parking Strategy of 2016
and examine whether it is fit for purpose

The Ronwood Avenue Car Park in Manukau

The Beginning

I have reproduced a NZ Herald article from 2012.

“Rates slashed but Manukau’s S14m parking building remains almost empty daily.

A carparking building in Manukau that cost ratepayers $14 million to build is sitting virtually empty and slashing prices to attract vehicles.

The building has been called a “dog” by councillor Dick Quax and lauded by Mayor Len Brown as a transformational project for the Manukau community – few of whom are using it.

When the Herald visited yesterday, the top two levels of the seven-storey Ronwood Ave carpark were empty and there were just 10 vehicles on the top five levels, including five Auckland Council cars.

The first and second floors had 62 and 18 vehicles respectively, but overall the 680-space carpark had an occupancy rate of just 13 per cent

It is understood the occupancy rate has improved since Auckland Transport cut the hourly rate from $3 to $1 and the all-day casual rate from $19 to $6 and $4 for an early bird special. The transport body is matching and, in some instances; undercutting its own on-street rates to lure vehicles to the carpark. The on-street charges are $1 an hour and up to a maximum of $5 for all-day parking.

The $14.05 million carpark opened on June 18 as a revenue-gathering, commercial operation by Auckland Transport An Auckland Transport spokeswoman yesterday said it was performing below budget while the new Manukau Institute of Technology campus – which is leasing 240 carparks – was still under construction.

It was also built to free up valuable land in the city centre for future development to provide another 354 leases and act as a park-and-ride facility for the new Manukau branch line railway station with 86 public spaces.

The pro-public transport Auckland Transport Blog has called the carpark a disaster and an appalling waste of money, and published aerial photographs showing it set in a “sea of car parking” at Manukau central.”

But has the performance of the car park improved since then?

Here are the answers from AT concerning the Ronwood car park building in Manukau.

Like Takapuna, Manukau is a metropolitan centre and so presumably any lessons that AT have learnt here can be applied to Takapuna?

1. With respect to the AT owned Ronwood Avenue car park building please advise the cost to construct this and also the current land valuation

“Cost to construct $14.4 million
Current land valuation $6.05 million

The cost of the carpark was $14.4 million based on the transfer value when AT was created. The current value in our books is $17.8 million based on a revaluation as at 30 June 2017. The current revaluation reflects that optimised cost to replace less an allowance for the age of the asset.”

Many have speculated on this blog as to what it costs AT to develop multi level parking buildings. Here it is, and it seems likely that the land cost in Menukau was likely to be cheaper than in many other places. Building costs have also soared since them

2. What revenue has this building produced for the last financial year (or for a full year if this is not available)? What is the Opex for this period?

Revenue: $825,000
OPEX: $682,000

The total costs (including depreciation) is $682,000 per annum. This comprises maintenance, cleaning, rates, electricity, salaries and security costs The largest operating cost element is rates expenditure at $126,000 per annum other than depreciation of $272,000

Over the next two years we have a work programme which includes capital works to enhance operational performance at the facility primarily a programme to upgrade lighting to LED at a likely cost of $225,000 realising savings of more than $200 000 per year in energy and maintenance costs. Work continues in assessing alternative ticketing system options which would also result in operational expenditure savings.

While on the face of it, it would appear that AT is making a profit on the operation of the car park:

• In the long run, the car park needs to generate enough revenue to fund major refurbishment and eventual replacement
• Charges and restrictions are set by our Parking Strategy based on supply and demand”

I cannot comprehend that AT takes absolutely no account of the cost of capital. Here is an investment of $24 million and the only concern is for revenue to be in excess of operational expenditure

The only aspiration is to “generate enough revenue to fund eventual replacement.” If the replacement life is 50 years then that’s an annual return of only 2% per year. I have been unable to find where this aspiration forms part of AT’s Parking Strategy

(l am surprised that savings of $200k can be achieved for lighting and maintenance costs from maintenance, electricity, cleaning, salary and security costs of only $284k (682 – 272 -126). However far be it from me to question the abilities of AT accountants; rather time for another OIA

3. If the answer is not apparent from the above, please identify the return, dollars and percentage, on (total build cost plus current land valuation).

Annual Return $143,000 (17%)
Return on Assets¹ 0.8%
¹based on 30 June 2017 total book value of $17.8 million
Note — Financial results for the year ended 30 June 2017

Remember that the retun on assets takes no account of land value.

This type of investment is simply one that the private sector would not contemplate as the return on investment is just so poor.

Leaving aside what may or may not happen in the private sector, why, given the apparent failure of this car park, that is very small returns, why would AT want to build in Takapuna?

The Price Schedule – is there a cheaper parking building anywhere in Auckland?

General Commentary.

It would be interesting to revisit why this car park was ever built However, it has been built and surely the purpose now should be to operate in terms of the Auckland Transport Parking Strategy. As Matt has said, if the car park is regularly full then the demand responsive parking policy should be applied. The online figures suggest that current prices should be reviewed. I am skeptical whether this is on AT’s radar.

On Thu 10/5/2018 at 11:45 PM I have 492 unused parking spaces. I am 73% empty. pic.twitter.com/oTI5ZD47E1

— Ronwood Ave (Manukau) Carpark (@ronwoodcarpark) May 10, 2018

The Auckland Transport Parking Strategy sets out the objectives for managing parking. Currently the top priority is to, “Prioritise the safe and efficient movement of people, services on the road network.” The second priority is to, “Facilitate a transformational shift to public transport.” It take a better brain than I have to reconcile how these two different concepts can be applied simultaneously It is I believe strongly arguable that constructing a car park
where there are the best public transport services in the area is contrary to the second objective.

One thing is certain. If the car park continues with the current pricing policy then it is discouraging public transport usage. A two stage return train journey to the Manukau Station costs 2 x $3.30 = $6.60 It is obviously more expensive than parking at the car park all day and therefore the cheap parking prices provide little incentive to use public transport In a later post I will discuss the complete Auckland Transport Parking Strategy and suggest
that it is completely unfit for purpose, although it is confusing as to its purpose.

Conclusions

The Ronwood Avenue car park has been a very poor economic performer over its whole life time and there is no indication that this will change anytime soon Surely it does not meet the standard in the Auckland Transport Parking Strategy that, “any off street parking investment should be commercially viable.”

Auckland Council, AT and Panuku are all supposedly leading Auckland towards a city more focused on public transport, bike and pedestrian solutions. (l use the word “supposedly” because am deeply suspicious of the intent of any of these organisations to deliver on these objectives, the debacle of the last AT budget just one example of this). The way that AT operates the Ronwood Avenue car park gives no Indication that it is trying to increase the use of public transport.

If the Ronwood Avenue car park is any indication of what AT can achieve from operating car parks then the proposed Takapuna Gasometer project is likely to be a complete economic fiasco and a millstone for most ratepayers.

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