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Finance and
Performance Committee
12 December 2018
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Consultation
on transfers of land within the council group
File No.: CP2018/24076
Te take mō te pūrongo / Purpose
of the report
1. To seek approval to develop consultation options for public
consultation alongside the Annual Budget 2019/2020,
if in February 2019 council decide to consult on a land transfer transaction
with Panuku Development Auckland Limited (Panuku).
Whakarāpopototanga matua / Executive
summary
2. A
report to the Finance and Performance Committee in November 2018 provided
advice on issues relating to the ownership of waterfront assets and the
potential for tax law changes to potentially limit council’s flexibility
for waterfront land ownership options in the future.
3. Since
the November meeting staff have engaged with both Panuku Development Auckland
(Panuku) and Ports of Auckland Limited (POAL) to understand how they would view
any potential land asset transfer to Council.
4. Panuku would like further opportunity to discuss the matter with
council before final decisions on any public consultation are made. They would
be concerned to lose control of the marina assets where they favour retention
of the status quo. They see more merit in considering the transfer of
non-marina assets noting alignment with the broader transform and unlock
programmes which do not require Panuku to own council assets to give effect to
their development objectives.
5. POAL have shared their views on how a different land ownership
arrangement with council could work, noting the need to balance council’s
increased control of land with the commercial objectives of POAL as a
stand-alone commercial entity. While transferring POAL land assets is possible,
the lease arrangement and balance sheet impacts on POAL means that POAL would
need council to recapitalise the port company and so effectively purchase any
land transferred at market value. Structured in this way, no significant tax
liability is likely to arise and hence the timing imperative to consider these
options is no longer present.
6. Staff are aware of the complexity involved in implementing any
transfer of waterfront land holdings in the current financial year. There are
significant time, cost and risk implications owing to the audit, statutory
decision making and contractual processes that would need to be completed. The
recommendations in this report allow for a fuller discussion between Panuku and
the council before any final decision on public consultation is made.
7. The report does not recommend any further work be undertaken to
consider Annual Budget 2019/2020 consultation options for POAL assets. The
Memorandum of Understanding (MOU) in place between council and POAL provides
for annual discussions to be held directly between the governance groups of the
two entities, with the next discussion expected to occur early next year. This
provides an opportunity for any further discussion on land ownership alongside
other strategic issues as they relate to the future use of POAL land.
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Ngā tūtohunga / Recommendation/s
That the Finance and
Performance Committee:
a) approve
the preparation of consultation material to publicly consult on whether the
legal ownership of some or all of the land held by Panuku Development
Auckland Limited should be transferred to Auckland Council.
b) agree
that the consultation material be brought back to the Finance and Performance
Committee in February with the Annual Budget consultation document, for a
final decision on whether to publicly consult on any proposal.
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Horopaki / Context
8. A report to the Finance and Performance Committee in November 2018
provided advice on issues relating to the ownership of waterfront land and
related assets. This included the potential for changes in tax law which
will take effect on 1 July 2019 to limit council’s flexibility for future
waterfront land ownership options. The November report included a full report
on tax implications from council’s external tax advisors.
9. The
report noted that any proposal to transfer ownership or control of a strategic
asset from a council-controlled organisation to council requires public
consultation under Auckland Council’s Significance and Engagement Policy.
10. It
would also require an amendment to the Long-term Plan 2018-2028 (LTP). As
council is preparing to consult on its Annual Budget 2019/2020, the Local
Government Act 2002 states that council should combine any LTP amendment into
the same consultation document. The consultation material must include an
audit opinion, and there is a very tight timeframe to complete the audit work
required.
Tātaritanga me ngā tohutohu / Analysis
and advice
Panuku Development Auckland
11. Panuku is the sole entity within the council group responsible for
urban redevelopment leveraging council-owned property. Panuku manages
redevelopment and property transactions on behalf of Auckland Council.
12. Panuku’s operating model is not premised on owning the land
which it is redeveloping on behalf of Auckland Council. A large part of
Panuku’s operations are in the transform and unlock locations, where the
assets are legally owned by council.
13. Similarly, Panuku does not need to own land to fund its operations
as it receives operating and capital funding from council. As part of the
adoption of the LTP, council approved a three-year reinvestment package to fund
Panuku’s work programme in the transform and unlock locations.
14. Panuku’s ownership of the waterfront land reflects the legacy
arrangements of the Auckland Waterfront Development Agency (Waterfront
Auckland). Waterfront Auckland was established in 2010 and had a specific
objective to redevelop and revitalise the Auckland waterfront to give effect to
council’s vision for the area.
15. The intention was that once the redevelopment was completed, any
Waterfront Auckland assets would be vested in Auckland Council. This is
the typical operating model for urban redevelopment agencies. When a
specific development project is finished, they may take on other development
projects or they may cease to exist. Globally, property-led urban
redevelopment agencies generally have a limited life span of between five and
20 years.
16. Most of the planned waterfront redevelopment is completed or will be
completed within the next 10-15 years. Of the remaining developments,
there are significant components of public space, such as the Headland Park,
and council ownership would be more appropriate for these public spaces.
The change to tax law means there is a case to bring forward this transaction
to safeguard long-term public ownership.
17. It is noted that Westhaven Marina was originally purchased by
Auckland City Council so that the marina would remain in public
ownership. Ownership by either Auckland Council or Panuku would give
effect to this original intention.
Options for consultation
18. The recently-appointed Panuku board chair has raised several issues
relating to Panuku’s waterfront assets that require further consideration
by council and Panuku staff.
19. In collaboration with Panuku, there are three broad options which
staff will develop and assess over the next two months. These are:
· maintaining
the status quo
· transferring
the legal ownership of all waterfront land and related assets back to Auckland
Council
· transferring
the legal ownership of waterfront property which is being transformed, with
Panuku retaining the legal ownership of land and assets related to marine
operations (Westhaven Marina and the associated properties, including some
properties on the western edge of Wynyard Point, Silo Park Marina, Viaduct
Marina, the eastern viaduct, and Te Wero Island and the Te Wero bridge).
20. This work would not commit the Finance and Performance Committee to
proceed with consultation on any proposal but will preserve the
committee’s option to make a final decision in February 2019. This
would also allow the required time for the Auditor-General to provide an audit
opinion on the LTP amendment content.
Ports of Auckland
21. POAL have shared their views on how a different land ownership
arrangement with council could work, noting the need to balance council’s
increased control of land with the commercial objectives of POAL as a
stand-alone commercial entity. While transferring POAL land assets is possible,
the lease arrangement and balance sheet impacts on POAL means that POAL would
need council to recapitalise the port company and so effectively purchase any
land transferred at market value. Structured in this way, no significant tax
liability is likely to arise and hence the timing imperative to consider these
options is no longer present.
22. In any scenario where a transfer of land ownership to council and
associated establishment of a significant lease or concession arrangement
between council and POAL was to be contemplated, the impacts on the balance
sheets of both POAL and the overall council group would need to be carefully
managed.
23. Staff note that the Memorandum of Understanding (MOU) in place
between council and POAL provides for annual discussions to be held directly
between the governance group of the two entities, with the next discussion
expected to occur early next year. This provides an opportunity for any further
discussion on the matter of land ownership and associated commercial structures
alongside other strategic issues as they relate to the future use of POAL land.
Ngā whakaaweawe me ngā
tirohanga a te rōpū Kaunihera / Council group impacts and views
24. The
previous sections of the report set out the views of POAL and Panuku on the
issue of land ownership. Staff will continue to work with Panuku to
advance the development of consultation options and the specific implications
of those options for Panuku.
Ngā whakaaweawe ā-rohe me
ngā tirohanga a te poari ā-rohe / Local impacts and local board views
25. If the
committee decides to consult on the transfer of ownership of waterfront land to
Auckland, staff will seek the views of all local boards.
Tauākī whakaaweawe Māori
/ Māori impact statement
26. Auckland’s
waterfront land is significant to mana whenua. If the committee decides to
consult on the proposal, staff will engage with mana whenua. There is the
potential to maximise engagement with mana whenua through combining public
consultation on the Auckland Water Strategy discussion document, the Annual
Budget 2019/2020 and a proposal for the transfer of waterfront land.
Ngā ritenga ā-pūtea / Financial
implications
27. Staff are working on the basis that any proposed transfer of land
within the council group would need to have no impact on the group balance
sheet, and no impact on rates. Staff will progress the development of
options with Panuku on this basis.
28. Progressing consultation options for the Panuku assets as
recommended by this report would require some external costs to be incurred
between now and when options are bought back in February. The largest
cost will be the cost of the audit review, with total external costs estimated
at between $200,000 to $300,000 over that period.
Ngā raru tūpono me ngā
whakamaurutanga / Risks and mitigations
29. Because
of the tight timeframes for the statutory requirements, any delay in making a
decision means that staff would not be able to complete the necessary work in
time. In addition to the time required to completed audit reviews and statutory
consultation, further time is required to complete legal due diligence and seek
a binding tax ruling from the Inland Revenue Department.
Ngā koringa ā-muri / Next
steps
30. If the committee agrees to the recommendations, staff will report
back in February 2019 with consultation material on the transfer of
Panuku’s waterfront land for a final decision on whether to consult.
Ngā
tāpirihanga / Attachments
There are no attachments for
this report.
Ngā kaihaina / Signatories
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Author
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Alastair Cameron - Manager - CCO Governance &
External Partnerships
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Authorisers
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Phil Wilson - Governance Director
Matthew Walker - Group Chief Financial Officer
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