On Thursday 17 May, the Mayoral Proposal for Auckland’s Long Term Plan 2024-2034 was passed by Auckland Council, 20 to 1. It is set to be formally adopted by the Governing Body at its June 27th meeting.

The entire process took 8 hours, with the vast majority of that time revolving around the only contentious topic of the day: the proposed Auckland Future Fund.

After several very, very long debates, and the failure of three separate amendments to delay or stop it, Auckland will be getting its very own regional wealth fund.

What have we actually gotten?

The Mayoral Proposal outlines the expectation for the Future Fund as:

  • A new regional wealth fund for Auckland to secure its long-term financial
    future and make the most of its strategic assets, while reducing risk by
    diversifying our asset base
  • Initial $1.3 billion investment of Auckland Airport shares, with the potential
    for future investments (including from the Port)
  • Enable Auckland to “swap” a single asset for a diversified asset portfolio
    that can be expected to provide a higher and steadier expected rate of return
  • Strict protections to preserve the real value of council’s intergenerational
    strategic assets so they continue to benefit future generations
  • Better returns expected to contribute $400 million more over 10 years, or an
    annual savings to ratepayers of 2.2% of rates
  • Over time, will deliver increased investment in Auckland – as can be seen
    with wealth funds around the world

It’s a bit different from the original proposal last year as the port lease is off the table, and it is no longer planned to be used as a self-insurance fund.

But why was it so contentious?

The short answer was because it involved using Council’s shares in Auckland Airport.

There was much said on the day about that, but, broadly speaking, the opposition to selling the remaining airport shares fell into a few different areas:

  • Concerns against privatisation, and lack of protection
  • A desire to retain a stake in a strategic (regional and national) asset
  • Skepticism about financial returns
  • Alternative assets had not been looked at, for feeding into the fund
  • Wanting further work on the proposal

Whereas support fell under these areas:

  • Diversification of assets
  • Expectation of higher returns
  • Adequate protection against privatisation
  • Alternative revenue stream to rates
  • Expected benefit to future generations

Initial returns in year one (estimated around $20 million) will be directed towards community projects in the two legacy council areas that did not sell their airport share prior to the super city; Manukau City and Auckland City. Year two onwards it is predicted to provide steady returns, partially reinvested to maintain and grow the fund. It could provide a sustainable and growing new source of revenue divorced from the politically charged nature of council rates.

If this plan succeeds, there’s an important question to answer.

What should this fund and its subsequent new source of revenue be used for?

In my mind, the point of the Future Fund should be, as its name suggests, to invest in the future – as much as possible. It’s almost certain long term thinking will apply within the fund to grow and maintain its asset portfolio, but I would argue Auckland Council should use any returns it receives for projects that are future-focused, rather than paying for present day services or short-term costs. Earmarking this new source of revenue to that principle would ensure the benefits and purpose of the fund are always focused on the long term. It would also help Auckland build for the future, especially considering the fact that any future-focused project will likely be climate-focused. An obvious area would be transport, as rapid transit projects in bus and light rail, bike lanes, pedestrianisation, or even developing low traffic neighborhoods, would all be fantastic ways to improve Auckland for the years to come.

Te Ara I Whiti ©Patrick Reynolds 2016

I would also raise the point that, assuming it would still maintain financial stability and growth, the Future Fund itself could (and should) invest in projects that directly benefit Aucklanders. Urban Wealth Funds overseas can be successful in funding transport projects by profiting off unlocked opportunities for development. While these funds can often have specific goals regarding say, the creation of housing, or expansion of transport networks, it seems to me that if we take a look at the proposed principles of the Future Fund it would not exclude it from seeking some beneficial projects in Auckland to invest in. It may even incentivise that.

The legislation and trust deed can establish the following principles that must be
a) the AFF is a long-term fund which should be managed and applied for the benefit
of the current and future communities of the Auckland Region:
b) the AFF should be managed and applied with the intent of maintaining or
increasing the real value of its capital over the medium term:

If the Future Fund is to be “managed and applied for the benefit of the current and future communities of the Auckland Region”, then could it look at housing or commercial development projects as a part of its diversified portfolio?

As an example off the top of my head, the Future Fund could look to invest in tearing down the Dominion Road Flyover, and, after master planning by Eke Panuku, create in its place a mixed use development that could itself be incorporated into the fund as an asset. This way, the benefits of public land development would remain in public hands.

CCMP Dom Road Junction Concecpt
Concept of Dominion Road redevelopment from the City Centre Masterplan

Given the fate of Auckland’s previous diversified fund, my hope is that the privatisation concerns of those councillors opposed to the funds use of the Airport shares turn out to be unfounded. On face value it seems like the protections that are proposed, that would be built into both a trust deed and new legislation, will be strong enough to last long into the future and allow the Future Fund to succeed. How specifics are progressed over the coming months is going to be vital, but even with some uncertainty I think I’m optimistic about this. The opportunities this could unlock for Auckland’s younger and future generations feels like a refreshing step in the right direction. We just need to make sure we don’t trip.

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  1. Me and a mate have discussed this idea a little more in the past, a sovereign style fund for Auckland could solve almost all financial problems.
    The most important part is setting it up in such a way that it minimises mismanagement.

    But I would be open to say double our rates, and use the difference to invest in the fund directly. Do that for a decade, or so, and then you could reduce rates quite substantially. As debt would’ve been paid off, and the fund would be a nice big pool of investments.

    And before people say, families cannot afford it, yes they can because the mortgage % point rise increased outgoings substantially more than doubling the rates would be for most people, and somehow we managed.

    1. “But I would be open to say double our rates”

      But that would be political suicide unless a national govt forced local Councils to do that (and why would they want to take the heat).

      And while many people WOULD be able to shoulder the burden of dual rates (whether or not they scream bloody murder), a lot of marginal (i.e. not rich, but property-owning) residents could be severely impacted at suddenly having to pay thousands more of dollars a year. You could even have a significant likelihood of mortgage defaults etc.

      Decades of wrong spending (sprawl, sprawl, sprawl…) and underspending (who needs new pipes, the old ones are fine!) are a serious problem needing investment, but you can’t just ignore the impacts…

      1. Doubling might be a stretch, depending how many years it took to reach that level. 10% per annum may be credible. Note that every other Council in the country is needing a substantial rates increase this year. Political palatability is the only reason for setting a low rates increase in Auckland. A lot more should be done nationally to control, the overheated rent increases that ae the real problem for people (other than landowners and moneylenders).

      2. The point is, we are somehow shouldering the burdern of increased mortgage rates, and those are not mere thousands increases, they are more like a 10’s of thousand increase, the argument is that somehow we have shouldered that.

        Possibly you could increase once interest rates go down?

        This is hypothetical idea. But you could campaign on something like “we’ll double, no triple your rates, but in 10 years, your rates will be $0 forever” As you could fully replace cities funding with a properly manged fund.

        1. if you believe that politicians will do what they say they would in 10 years if only you give them a vote and some money now then I have a train tunnel to sell you that will solve all Auckland’s transport problems.

  2. Heartening to hear of revived interest in demolishing the over-built Dominion Road/New North Road interchange. This would indeed be self-funding (nine years ago council officers reckoned that the value of the land freed up would be about $100 million versus about $10 million to replace the multi- level structure with a bog-standard at-grade intersection. Their preliminary investigations suggested that the 3 hectares of surrounding real estate (now a bit of a waste-land) could serve as the kernel of a new community of many thousands of residents and a similar number of jobs but the concept went no further because it would require millions in up-front investment even though it would in the medium to long term generate a much greater return to Council. The flying viaduct over the top is now over half a century old and in need of some maintenance so I hope that sanity prevails and nobody suggests wasting millions on rehabilitation rather than removal.

    1. Yeah just get on with it. $10 million is pocket change isn’t it, considering the land that gets freed up. Insanity.

      1. Quite something eh. These kind of ‘cheap’ wins that are scattered around the place get pushed back for decades, while badly needed stuff like regional rapid transit plans can blow out by billions and people can just fine with it.

        The Viaduct Bridge is another example. There is nothing so permanent in life as ‘temporary’ infrastructure.

    2. You gain a triangle on New North Road under the flyover of about 3,000sqm worth about $13million and a couple of wedges big enough to park cars on. That isn’t worth the cost of demolition and building a new intersection.

      The fund doesn’t exist yet and already people are in like a robber’s dog wanting to spend it.

        1. Somebody got paid to sit there and draw that image in the City Centre Master Plan. Someone who thought the only thing preventing intensification was a crappy old ramp. Or maybe they just don’t like trees.

      1. After allowing for the replacement intersection, it’s a net gain of 17,000m2 across four large rectangular sites.

        The only thing holding this back is old traffic engineers who can’t bring themselves to remove a grade separated intersection, no matter how much of a blight it is.

  3. This reminds me of the sign outside Waitemata / Britomart Train Station, of the door across from the lovely scent of freshly baked pastries…”…soon the future…”

    It is such a strange idea “the future”….pure uncertainty philosophically.

    The future fund, could just lose one letter, and become….”FUTURE FUN”

    Now that would be good use of those not so young people blablabla-ing about boring money number divisions of their heads!

    bah humbug

  4. It will be squandered again, just like Phil Goff wasted the hundreds of millions handed over to Auckland Council by the ARC for future needs. He used it to pay debt to make him look good.

    1. The biggest things Phil Goff waisted was opportunities and time.

      The first Mayor of Auckland Super City was Len Brown.
      Len Brown ferociously, and ultimately succesfully, argued for the CRL.
      He did this against fervent opposition from the roading lobby, and their tame Ministers of Transport in the then National Government. The same ministers who enlarged both the Northern and Northwestern Motorways without any bus priority, inspite of the already totally unpredicted success of Northern Busway.
      It took John Key to side with Len Brown, and override his Ministers, to finally get a delayed start on this project.

      Unlike his predecessor, and it now appears his successor, Goff though was devoid of any vision, and was far too afraid to upset anyone. A seat warmer, pleasant, but ultimately useless. Consequently vast amounts of money and precious time were wasted, on ultimately unproductive consultations.
      Nothing was really achieved in his reign except some interesting discussions and lots of glossy reports.

      For wasting resources, though the prize must go to the last mayor of the old Auckland City Council, John Banks who sold the bulk of the shares in Auckland airport, to fund nothing more permanent then a couple of years of council rates being lower then the costs of council provided services.

    2. “He used it to pay debt to make him look good.”

      I don’t know enough about the facts of this as to whether it’s true, but there’s this interesting thing – if you paid off debt, they will allow you to take on more loans. Funny, huh?

  5. Miffy’s comments are very wide of the mark. He suggests that removing the Dominion Road interchange will free up just 3,000 square metres of land but the Auckland Design Office report in September 2016 calculated 33,360 square metres (approx 30,000 net of road works) and assumed a bare-land value of about $2,000 per square metre which since then has nearly doubled for sites on the CBD fringes. Hence my ballpark figure of $100 million worth of income for council in return for investing about $10 up-front. A bit of a no-brainer really. Note that this concept was first discussed by Josh Arbury in his Transport Blog (later to become Greater Auckland), a bit before the super city.

    1. Land in that area is worth about $4200 per sqm based on 25 Minnie St next door. The ramp that would be knocked down is on a site on New North Road of about 3,300sqm not 3ha but 0.33 ha. The other four corners would each yield next to nothing. To get to 33,360sqm you would have to include the park between Haslett St and Bright Street, the empty site on Ace Place and a bunch of neighbouring sites the Council doesn’t own. (Or maybe they missed the decimal point). The park and empty site are already there and the Council can develop them any time they are prepared to fight the neighbours. The actual 3,300sqm site is only available if it doesn’t have to be offered back to a previous owner. But I invite you to go on the GIS system and measure it.

      1. I would expect the reason that the council hasn’t developed those sites, and the reason that the value of the property on Minnie St that you cited is supressed, is because they’re right next to a whopping great interchange, which would make for a miserably loud and unpleasant place for non-industrial developments

      2. The ramp? It’s the whole interchange with four ramps.

        There is an empty road reserve site on the southwest corner by Ace Place that is 3,000m2 alone, that would bring in $12 million today. If it wasn’t road corridor in the shadow of a flyover, but a site with two street frontages on a normal road on the CBD fringe a couple minutes walk from a CRL station, it could be worth double that.

        Add in the other three corners, and the smaller sites around… and then consider that the self storage shed and auto mechanics might feel like redeveloping too.

  6. Miffy’s comments are getting a bit tedious: the council owned land on the NE corner is just 7,160 sqm, but the other 3 corners total 17,320 sqm and there are several orphaned privately owned sites totalling 5,492 sqm which would be best incorporated into a 3 hectare precinct development centred on the new intersection. In an ideal world neighbouring private properties would be included in a comprehensive development but New Zealand doesn’t yet have the sort of legislation common in other counties such as Australia and USA which allow the organising body (in this case Auckland Council) to gain from the value uplift of agglomeration rather than allowing it to be captured by adjoining property owners who have not contributed to the process. Read the ADO report.

    1. https://www.greaterauckland.org.nz/2014/12/02/tearing-down-the-dominion-rd-interchange/ shows what they included to get to 3ha. It includes Ace Place and the properties within it. Without that the southwest is useless. The north west is long skinny and includes a park that provides amenity for local residents. The northwest is the triangle we discussed and two long thin bits best used for landscaping. Your buddies at AT would gouge a wide footpath, front and back berms and maybe a cycle lane so not much left. Maybe I was a bit harsh on the south east, It is at least rectangular. It would be a good spot for a light rail stop. But there isn’t actually 3ha useable and it isn’t going to make the rest look like the CCMP nonsense picture.

  7. The biggest monkey on the back is the rail which was completed stupid and another socialist Phil goff put the city in this predicament now he has gone with another high paid job they need to clean the swamp instead of keep punishing the ratepayers

  8. Norway has their massive & growing fund setup in 1996, now worth about $NZ 4,213,949,599,631.
    … held on average 1.5% of all of the world’s listed companies, making it the world’s largest single sovereign wealth fund in terms of total assets under management. This translates to over US$295,000 per Norwegian citizen.

    “The Government Pension Fund Global was established after Norway discovered oil in the North Sea. The fund was set up to shield the economy from ups and downs in oil revenue. It also serves as a financial reserve and as a long-term savings plan so that both current and future generations of Norway get to benefit from our oil wealth.”
    “Each year, the Norwegian government can spend only a small part of the fund, but this still amounts to almost 20 percent of the government budget.”

    1. So you’re advocating oil exploration and exploitation as a path to wealth for New Zealand? Or perhaps you were thinking of some other natural resource we could exploit instead?

      Norway is going to need every penny of that fund to maintain its citizens in the lifestyle to which they have become accustomed once the oil runs out and/or demand for oil drops off.

  9. Support the Dominion Road Flyover, but other future projects could be the isthmus light rail *cough cough* of course. I would like to see the fund accumulate a bit first though as the post says, so it truly is a *future* fund.
    Other projects could be to finance the removal of Eden Park and redeveloped, into a mixed use area, retain ownership or sale proceeds to be come part of the fund perhaps.
    Upgrade & redevelop Mt Smart Stadium as the alternative. Make a nice walking link 600m east, to a new southern line station about 700 m south of Penrose. Would have trains stopping only when events are on.
    Future of Onehunga line could be light rail, move Te Papapa station west to Church St (dead end Captain Springs Rd) & add another station to around about Maurice Rd for the stadium.

    1. I too think Mt Smart has been overlooked as an alternative to EP.

      Fairly central,.space to burn, 12mins from the CBD via southern line, one change for eastern and western lines. Ability to add stations, make a more direct walking route from the southern and Onehunga lines, bus access via the SHs, no noise restrictions, ability to create a tow ship with medium and high density living.

        1. SH20 from the West drops you a stones throw from a new stadium near Mount Smart. The Mayor’s Avondale to Southdown line with do it even closer and by rail.

          I guess it’s not central if you don’t bother considering the wider region. It’s got far better transport links for all than EP ever will.

      1. Central to what? Not the centre of the city. Not as close to a train platform as Eden Park. No local entertainment precinct. You have to overlook a lot of stuff to get Mt Smart to even compare to Eden Park as things stand, and that’s before you get into the actual redevelopment costs, which would be up there with Eden Park for a stadium of national stature (50k+).

        And as much as I think we can’t afford a new stadium compared to redeveloping Eden Park into a proper indoor venue, the railway station land project at least makes use of some otherwise poorly used central city land that is going to be forever piecemeal and hard to generate commercial returns on due to its leasehold ownership.

        1. Yeah but we can only have 6 concerts there a year. Of course as time goes on and industry decamps south, we’ll end up with a stadium surrounded by residential. Then the residents that won’t want the concert noise just like what happened at Western Springs & Eden Park except I don’t think they were ever industrial areas.

        2. I like the railway Quay Park area idea I like too though bit harder to achieve maybe. Both that and Eden Park though are using valuable more central land that would not be used for everyday purposes – just events from time to time. Mt Smart is very accessible with cross town light rail, newer south of Penrose Station and also via SH 20 motorway ie further west & Manukau.
          “And as much as I think we can’t afford a new stadium” the point is you sell Eden Park land for mega bucks to fund it all and have some money to spare. You could rezone near Kingsland & develop some walkable neighbourhood right up to it.

        3. Quay park is my preferred option, I just don’t think any of the waterfront ones are going to happen.

          And with a bit of forward planning, all your issues are solvable, Buttwizard.

          And as for central, it’s pretty central for the region. Only the North Shore look troublesome but even then it’s just a transfer from the Northern Busway/ferry onto a train.

        4. The only way you can sell EP to fund a new stadium is if the EP Trust agrees and then they would become “owners” of the new stadium.

        5. KLK: It’s sure as hell not central to the West either. It’s kind of hard to argue that it’s central versus the status quo of Eden Park or the other alternatives – in fact it’s the least ‘central’ of any of them.

          And as much as I think the residents probably bristle at the thought of more Eden Park events, if the choice became between a stadium that gets used at best 10% of the time or a high density development (which it would have to be to justify the cost exercise in the first place) then I think they’d stick with the devil they know. Worth remembering that if we had ‘proper planning’ then you wouldn’t be able to complain about a stadium that’s been in the same place for decades to the extent it became no longer viable to operate. Seems we could just solve that problem rather than kicking the can literally down the road.

          Of all the alternatives, I still like the Quay Park option the most, but if it doesn’t happen then it would be good to see a decent master plan for the area that made similar use of the space.

        6. Putting a roof on Eden Park would cost the same as a clean slate design. May as well build that someone closer to the city allowing the stadium to actually be used in the evening.

          The sooner EP is disposed of the better.

  10. “Given the fate of Auckland’s previous diversified fund,”

    Wasn’t it pissed away specifically funding public transport and stormwater projects?

    An investment fund needs to invest in businesses that run at a profit not a perpetual loss. Only then can it use its returns to fund unprofitable things.

    Also if the dominion road project is self funding and will quickly generate back more than it costs you really don’t need any wealth fund to fund it do you? just a willing developer and a short term loan.

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