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Finance and
Performance Committee
20 August 2019
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Disposal
recommendations report - August 2019
File No.: CP2019/06446
Te take mō te
pūrongo
Purpose of the report
1. To
obtain approval to dispose of two council-owned properties for disposal. As one
of the properties recommended for sale is an endowment property, this report
also seeks approval for the allocation of the sales proceeds.
Whakarāpopototanga matua
Executive summary
2. For
the financial years 2018/21, the Panuku statement of intent requires it to
identify properties from within council’s portfolio that are suitable to
be recommended for sale to a combined value of $75 million and to sell $72
million of property.
3. 200
Victoria Street West, Auckland Central, is an endowment property that was
vested in council by the Crown in 1875 pursuant to the Auckland City Endowments
and Reserves Act 1875 (Endowment Act) for the improvement and benefit of the
City of Auckland.
4. Auckland
Council owns the land only, which has a rating valuation of $8.8 million. The
property is subject to two ground leases, held by the same lessee, that
together cover the entire site. The leases were granted in 1916 and are
perpetually renewable at the lessee’s option. The improvements, being a
commercial building with retail and office uses, are owned by the lessee.
5. A
sale of the property is not expressly prohibited by the Endowment Act and the
property can be sold under section 140(4)(b) of the Local Government Act 2002
(LGA 2002), subject to conditions set out in section 141 of the LGA 2002:
· The proceeds of sale
must be used for a purpose consistent with the purpose of the endowment (in
this case, for the improvement and benefit of the City of Auckland); and
· The council must
notify the Minister for Land Information and the Minister in Charge of Treaty
of Waitangi Negotiations of the proposal to sell the land.
6. The
rationalisation process commenced in March 2019. Consultation with the council
and its CCOs, iwi authorities and the Waitematā Local Board has now taken
place. Noting that any alternative use or development potential is constrained
by the ground leases, no current or future council service use has been
identified through the consultation and the feedback received has been
supportive of disposal. As such, 200 Victoria Street
West is recommended for disposal.
7. Legal
advice is that a specific use or uses of the proceeds of sale consistent with
the endowment purpose must be identified before the property is sold.
This report recommends the allocation of up to $5.5 million of the proceeds of
sale from 200 Victoria Street West to the proposed development of a civic space
at 254 Ponsonby Road, Ponsonby, which is the Waitematā Local Board’s
One Local Initiative.
8. If
the proceeds of sale from 200 Victoria Street West are more than the $5.5
million allocated to the development at 254 Ponsonby Road, this report
recommends the balance be allocated to the Victoria Street Linear Park project
in Auckland Central, provided this project is confirmed as being consistent
with the endowment purpose.
9. 15R First View Avenue, Beachlands is a narrow strip of land that has been identified as potentially
surplus to council requirements following a purchaser enquiry from the
neighbouring property owner. The rationalisation process commenced in
November 2017. Consultation with council departments and its CCOs, iwi
authorities and the Franklin Local Board has been undertaken. No current or
future public work use has been identified for the site through the
rationalisation process and the feedback received has been supportive of the
proposed disposal. Accordingly, 15R First View Avenue is recommended for
disposal.
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Ngā tūtohunga
Recommendation/s
That the Finance and Performance Committee:
a) approve, subject to the satisfactory conclusion of any required
statutory processes the disposal of:
i) 200
Victoria Street West, Auckland Central, comprised of an estate in fee simple
being Pt Lot DP 11603 (also described as Part Allotment 23 Section 24 City of
Auckland) contained in computer freehold register NA263/104 in accordance with sections 140 and 141 of the
Local Government Act 2002, subject to confirmation by the Auckland Council
Legal Services team that the projects identified as being allocated the
proceeds of sale are consistent with the purpose of the endowment pursuant to
which this property was vested;
ii) 15R First View Avenue, Beachlands, comprised of an estate in fee
simple being Allotment 90 Parish of Maraetai contained in computer freehold
register NA46A/1020;
b) approve
the allocation of the proceeds of sale from 200 Victoria Street West, Auckland Central to the following projects, subject to
confirmation by the Auckland Council Legal Services team that the projects
identified are consistent with the purpose of the endowment pursuant to which
this property was vested and are in accordance with sections 140 and 141 of
the Local Government Act 2002:
i) up
to $5.5 million to the development of a civic space at 254 Ponsonby Road,
Ponsonby; and
ii) any
remaining balance to the Victoria Street Linear Park project, Auckland
Central;
c) agree that the final terms and conditions of the disposals be
approved under the appropriate delegations.
|
Horopaki
Context
10. Panuku
is required to undertake ongoing review of council’s property
assets. This includes identifying properties in the council portfolio
that are no longer required for service use purposes and may be suitable for
sale, and development if appropriate.
11. Once
a property has been identified as no longer being required for current service
purposes, Panuku engages with the council and its CCOs to establish whether the
property must be retained for a strategic purpose or is required for a future
funded service use. After a property is internally cleared of any service
requirements, Panuku then consults with local boards, mana whenua and relevant
ward councillors.
12. All
sale recommendations must be approved by the Panuku Board before a final
recommendation is made to Auckland Council’s Finance and Performance
Committee. The committee has the delegated authority to approve any
proposed disposal.
13. Because
one of the properties being recommended for sale is an endowment property, a
use of the proceeds of sale that is consistent with the purpose of the
endowment must be identified before the property can be sold. The
council’s Finance team has made recommendations for allocation of the
proceeds of sale from this property.
Tātaritanga me ngā
tohutohu
Analysis and advice
14. The
proposed disposal of the properties in this report is
not deemed to be significant under Auckland Council’s Significance and
Engagement Policy. The disposal of surplus assets to repay debt or fund new infrastructure is contemplated in Volume 2 of the
council’s 10-year Budget 2018-2028 (long-term
plan).
15. Because 200 Victoria Street West is an
endowment property with a requirement under section 141(1)(a) of the LGA 2002
that the use of the proceeds of sale must be consistent with the purpose of the
endowment, legal advice is that a decision on the use of the proceeds of sale
must be made before the property is sold. The projects recommended in this
report for allocation of the proceeds of sale from 200 Victoria Street West were
identified by council’s Finance team by reviewing existing projects
within the 10-year Budget 2018-2028.
16. Additional
property specific information is included in attachments A to
B to this report.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
Internal consultation
17. The Panuku-facilitated rationalisation process for the subject
properties included council department and CCO consultation to investigate
alternate public work requirements or future strategic purposes to retain the
properties.
18. No
alternative planned or funded public work requirement or
future strategic purpose to retain the subject
properties was identified through the internal consultation process. Any alternative use or development potential of 200 Victoria
Street West is constrained by the ground leases. The disposal
of both properties presented in this report is supported by the wider council
group.
19. Additional
property specific information is included in attachments A to
B to this report.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
20. Local
boards are informed of the commencement of the rationalisation process for
specific properties. Following the close of the internal consultation
period, relevant local boards are engaged with. Panuku attends workshops with the relevant local
board and provides information about properties being rationalised in its local
board area. A report is subsequently prepared for the local board
business meeting so that its views can be formalised.
21. The
relevant local boards resolved the following in respect of these properties:
· The
Waitematā Local Board supports the disposal of 200 Victoria Street West.
· The
Franklin Local Board endorsed the disposal of 15R First View Avenue.
22. This
report recommends the allocation of up to $5.5 million of the proceeds of sale
from 200 Victoria Street West to the proposed development of a civic space at
254 Ponsonby Road, Ponsonby. This project is a high priority for the
Waitematā Local Board as its One Local Initiative.
23. Additional
property specific feedback received is included in the local board engagement
section of attachments A to B to this report.
Tauākī whakaaweawe
Māori
Māori impact statement
24. Māori
have an active and specific role in Auckland, including kaitiakitanga
(guardianship) of our land and marine resources. Land has a specific role
in protecting, enabling and building Māori social and cultural capital.
Local marae, kohanga reo, and other Māori entities offer spiritual,
cultural, as well as a range of social, educational, health and justice
services for the community.
25. The
importance of effective communication and engagement with Māori on the
subject of land is understood. Panuku has a robust form of engagement with mana whenua groups across the region.
Each relevant mana whenua group is contacted independently regarding
council-owned land subject to rationalisation and requested to give feedback.
26. Panuku’s
engagement invites mana whenua to respond with any issues of particular
cultural significance the group would like to formally express in relation to
the subject properties. We also request notes regarding any preferred
outcomes that the group would like Panuku to consider in our formal reporting
to council. Possible outcomes could include commemoration or physical
acknowledgment in the form of plaques or other mutually agreed means of
recognition.
27. Panuku
received no notifications of cultural significance from iwi entities regarding
the subject properties.
28. Mana whenua groups are also invited to express potential commercial
interest in the subject sites. In the event the sites are approved for
sale, all groups will be alerted of the decision, and all groups are alerted
once a property comes on the market.
29. Panuku
received a notification of commercial interest from Ngaati Whanaunga, who
registered an interest in 15R First View Avenue, specifically enquiring whether
the site could be an opportunity for a future “Kokiri”
development. In response Panuku replied to Ngaati Whanaunga confirming
its interests had been noted on the property file and advised that the subject
site has limited development potential due its size. No further response has
been received. If approved for disposal, Panuku will follow up with Ngaati
Whanaunga.
30. Additional
property specific information is included in the mana whenua engagement section
of attachments A to B to this report.
Ngā ritenga
ā-pūtea
Financial implications
31. Capital
receipts from the sale of properties contribute to Auckland Plan outcomes and
the 10-year budget (long term plan) by providing the council with an efficient
use of capital and prioritisation of funds to achieve its activities and
projects. In the 2019/2020 financial year, the 10-year
budget (long term plan) has $24 million for the disposal of non-strategic assets. The total value of
the properties presented in this report is $8.81 million.
32. As 200
Victoria Street West is an endowment property, the proceeds of sale must be
used for a purpose consistent with the purpose of the endowment, which is
described as “the improvement and benefit of the City of
Auckland”.
33. It is recommended that up to $5.5 million of the proceeds of sale
from 200 Victoria Street West
be allocated to the proposed development of a civic space at 254 Ponsonby Road,
Ponsonby. The proposed development of 254 Ponsonby Road is a two-stage
project, with an estimated total cost of $11 million and estimated cost for
stage one of $5.5 million.
34. If the
proceeds of sale from 200 Victoria Street West are more than the $5.5 million
allocated to the development at 254 Ponsonby Road, it is
recommended the balance be allocated to the planned works for the Victoria
Street Linear Park project provided this project is confirmed by the Auckland
Council Legal Services team as being consistent with the endowment purpose.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
35. If the
subject properties are not approved for disposal, Auckland Council will not
realise the approximate $8.81 million sale proceeds.
36. Additional property specific information is included in the internal
consultation section of attachments A to B to this report.
Ngā koringa ā-muri
Next steps
37. Should
the Finance and Performance Committee approve the proposed disposals, Panuku
will undertake the following:
· a disposal of 200 Victoria Street West in accordance with conditions
set out in section 141 of the LGA 2002, and;
· a plan change seeking to change the Auckland Unitary Plan zoning of
15R First View Avenue from Open Space - Informal Recreation Zone to Residential
– Single House in line with the adjoining properties.
38. The
ground lessee of 200 Victoria Street West has expressed interest in acquiring
the land. Additionally, both the adjoining land owners of 15R First View
Avenue have enquired about acquiring the site. These will all be explored
further should the Finance and Performance Committee approve the proposed
disposals.
Ngā tāpirihanga
Attachments
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No.
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Title
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Page
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a⇩ 
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200 Victoria Street West, Auckland Central property
information
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11
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b⇩
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15R First View Avenue, Beachlands property information
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19
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Ngā kaihaina
Signatories
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Authors
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Rachel Hume - Portfolio Specialist, Panuku Development
Auckland
Robert Irvine - Head of Group Financial Planning
Anthony Lewis - Senior Advisor, Portfolio Review,
Panuku Development Auckland
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Authorisers
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Letitia Edwards - Team Leader Portfolio Review, Panuku
Development Auckland
Marian Webb - Manager Portfolio Strategy, Panuku
Development Auckland
David Rankin - Chief Operating Officer, Panuku
Development Auckland
Matthew Walker - Group Chief Financial Officer
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Finance and
Performance Committee
20 August 2019
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Submission to the Productivity
Commission Local government funding and financing inquiry: Draft report
File No.: CP2019/15424
Te take mō te
pūrongo
Purpose of the report
1. To
seek approval for the Auckland Council submission on the New Zealand
Productivity Commission (2019) Local government funding and financing: Draft
report.
Whakarāpopototanga matua
Executive summary
2. Central
government asked the Productivity Commission to conduct an inquiry into local
government funding and financing. The Commission has released a draft report as
the second stage of their process towards a final report due by 30 November
2019.
3. The
Commission finds that the current funding and financing system measures up well
against the principles of a good system and is broadly sound. Therefore, the
current system should remain as the foundation of future funding and financing
for local government.
4. While
the present system is sound the Commission considers that new funding tools are
required to address cost pressures to:
· fund infrastructure to support growth
· adapt to climate change
· cope with growth in tourism
· take on additional responsibilities delegated by central government.
5. The
Commission has also concluded that councils are not transparently weighing
benefits and affordability in determining how the rates burden is shared
amongst ratepayers. The commission recommends that councils be required
to review their rating systems within five years based primarily on benefits
and to remove all differentials and UAGCs. The draft report also supports
a national rates postponement scheme and the removal of the rates rebate
scheme.
6. The
draft council submission identifies the unique challenges of Auckland’s
scale and the additional economic and social responsibilities this
carries. It asks the Commission to consider options for devolving funding
tools to the council, including the return of the GST on rates, to reflect
these responsibilities and to allow the impacts of rapid growth to be better
managed.
7. The
draft submission also addresses the proposed changes to rating and the
recommendations for new funding tools made by the Commission. The
council’s response to the other questions and recommendations are
included in the draft submission as Attachment One: Response to questions and
recommendations.
8. Officers
consider that new funding tools proposed mostly address the funding pressures
identified by the Commission and by the council in its February submission on
the Commission’s Issues paper. The draft submission supports these
proposals and makes some additional suggestions for the Commission to consider
including in their final report.
9. Officers
do not agree with the changes proposed to the rating system and the removal of
the rates rebate scheme. The draft submission does not support these
proposals and sets out the reasons for this position. The
draft submission supports a national rates postponement scheme but does not
support the proposed removal of the rates rebate scheme.
10. Council
staff have engaged with staff from Auckland Tourism, Events and Economic
Development (ATEED), Auckland Transport and Watercare Services Limited during
the drafting of the submission. Local Board views have been incorporated
throughout the submission. The Independent Māori Statutory Board (IMSB)
and mana whenua were notified and engaged with when the Draft report was
released. Officers understand that the Mana Whenua Kaitiaki Forum is
considering making their own submission.
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Ngā tūtohunga
Recommendation/s
That the Finance and
Performance Committee:
a) approve
the submission on the New Zealand Productivity Commission Local government
funding and financing inquiry Draft report (Attachment A of the agenda report).
b) delegate
to the Chair of the Finance and Performance Committee and Group Chief
Financial Officer to authorise any minor amendments and corrections to the
submission.
|
Horopaki
Context
11. Central
Government has asked the Commission to conduct an inquiry into local government
funding and financing and, where shortcomings in the current system are
identified, examine options for improving the system.
12. Mechanisms
for rating Māori freehold land and Crown land, the valuation system and
practices, substantial privatisation; and recommendations that would directly
affect representation or boundary arrangements for councils are excluded from
the inquiry.
13. Hon Grant Robertson, on behalf of the Tax Working Group, recommended
in April 2019 that the Commission expand their terms of reference to include in
their inquiry whether a tax on vacant residential land would improve the supply
of available housing for New Zealanders. The Commission has consequently asked
for submissions on this issue so that advice can be provided to the Ministers
in the final report.
14. The Commission has released a draft report as the second stage of
their process towards a final report due to be presented by 30 November 2019.
The council’s submission on the Draft report is due by 29 August
2019.
15. This
submission should be read alongside the council’s submission on the
Commission’s Local government funding and financing: Issues paper. The
February 2019 submission on the Issues paper outlines the growth challenges
that Auckland faces.
16. Both
Local Government New Zealand and the Society of Local Government Managers are
making submissions on the Draft report.
Tātaritanga me ngā
tohutohu
Analysis and advice
Overall
conclusions
17. The
Commission finds that the current funding and financing system is both simple
and economically efficient compared to alternatives. While the system is
sound the Commission finds that new funding tools are required to address a
range of cost pressures.
18. The
commission finds that there is no evidence that rates have become less
affordable over time. However, the Commission suggests that legislative changes
are required to make the current funding system more equitable and transparent.
19. Auckland’s
scale means we are making decisions that have economic, social and
environmental impacts on a national level. The council works with
multiple agencies to tackle these issues but the current processes are
slow. Our size would allow us to accelerate decision-making and
investment if we had the right funding tools. The draft submission
recommends that the Commission considers options for devolving funding,
including options for returning a share of GST revenue to the council, to support
the operating and capital costs of infrastructure investment.
Financing and funding growth
20. The
Commission also finds that councils need new funding and financing tools to
help them deal with the specific cost pressures of being required to fund
infrastructure to support growth, adapt to climate change, cope with growth in
tourism and take on additional responsibilities delegated by Central
Government.
21. The
Commission makes five recommendations regarding the funding and financing of
infrastructure to support growth. The submission mainly supports these
proposals and makes some suggestions for change.
22. Officers
agree with the recommendation for continued development of a Special Purpose
Vehicle (SPV) model that would allow councils to access capital without any
impact on their balance sheets. Auckland Council has been working closely with
Central Government on the development of the SPV model.
23. The
Commission also recommends that the government make a payment to councils to
support growth based on completed building work. This payment would have a
small positive impact on the council’s ability to access capital for
investment in infrastructure to facilitate that growth. The submission
supports this proposal and also recommends that the Commission considers other
mechanisms for additional central government funding to support growth.
24. Other
mechanisms could include additional investment in regional infrastructure like
roading in growth areas. This would directly address the constraints debt
limits are placing on capital investment. Our infrastructure planning
could also be improved by greater certainty around NZTA funding which could be
achieved at no cost to the government.
25. Officers
consider there are economic and administrative issues with applying an
additional tax on vacant land and unoccupied dwellings to encourage growth. A
charge set on this basis does not support the Commission’s recommendation
that rates be set based on the benefits that properties receive from council
services. A tax on unoccupied dwellings is difficult to justify for local
government funding purposes as there is no alignment between unoccupied
dwellings and the services the council provides.
Adapting to climate change
26. The
Commission considers that central government has a key role to play alongside
councils in addressing climate change. Central Government will need to
aid local government decision-making by setting information gathering standards
and legislating to guide the development of land in at risk areas. Funding from
central government will also need to be provided to support investment in
roading, stormwater and wastewater to manage climate change impacts.
27. The
impacts of climate change will present many councils and communities with
environmental threats and funding challenges beyond their capacity to manage
alone. Despite its relative scale Auckland is no exception. Officers agree with
the Commission’s key recommendations and the draft submission supports
these.
Coping with growth in tourism
28. Officers
agree with the Commission’s recommendation for legislation to be
introduced to enable councils to implement an accommodation levy to recover the
tourism induced costs of providing local mixed-use facilities.
The draft submission supports an accommodation levy and recommends that it should
also be able to be used to fund council expenditure on visitor attraction and
major events.
Additional local government responsibilities
29. The
Commission recommends that central and local government further develop their
relationship, especially when considering proposals to expand the
responsibilities of local government. This would ensure greater consideration
was given to the financial implications of government decisions that add to a
councils responsibilities and costs. The council has already been working
closely with central government on several initiatives including the Auckland
Transport Alignment Program.
Equity and affordability
30. The
Commission considers that who benefits should be the primary basis for
allocating of the rates burden. Ability to pay should be considered as a
second step. Councils should be required to review their rating systems
on this basis removing all differentials and UAGCs within five years. The
commission also recommends that the rates rebate scheme be removed and a
national rates postponement scheme established.
31. Officers
consider that elected members should make the decisions on the balance between
benefits and affordability. The Local Government Act 2002 already
requires councils to consider issues of benefit before weighing
affordability. Auckland undertook a major overhaul of its rating regime
following its establishment. Rates standardisation resulted in large
shifts in the distribution of the rates burden and officers consider
Aucklanders will have little appetite for more of the same. Removing all
rates differentials would raise residential rates in Auckland by approximately
22 per cent. The submission does not support these proposals.
32. The
draft submission supports a national approach to rates postponement to support
ratepayers who are asset rich but cash poor. The draft submission does not
support the removal of the rates rebate scheme unless the same support was
replaced with a satisfactory alternative as it is popular with Aucklanders.
Three waters
33. Officers
agree in principle with the proposed regulatory regime for three waters to
enforce minimum standards and improve the performance of the sector.
34. Aucklanders
prioritised spending to improve water quality across the region during
consultation on the 10-year Budget 2018-2028. At the same time Watercare
has committed to major investments to maintain the security and quality of the
regions water supply and wastewater management systems.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
35. Staff
from ATEED, Auckland Transport and Watercare Services Limited were engaged with
regarding the sections of the draft report that related to their organisations.
The views of the organisations have been considered in the submission.
36. The
content of the submission has been communicated to and agreed on by the
following departments of Auckland Council:
· Auckland
Plan Strategy and Research
· Chief
Economist
· Financial
Control
· Governance
· Growth
and Housing
· Healthy
Waters
· Regulatory
and Enforcement
· Treaty
Settlements.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
37. All local
board members were advised of the submission process in a memorandum on 4 July
2019.
38. The
memorandum informed local board members that a report would be prepared for
consideration in their July meetings. Local board members were also invited to
provide comments and feedback for inclusion in the submission.
39. Staff
have incorporated the local board views received into the relevant sections of
the submission and included all comments in full in Attachment Two: Local board
views of the submission.
Tauākī whakaaweawe
Māori
Māori impact statement
40. The
way in which councils are funded and financed will affect all Auckland
ratepayers and residents, including Māori. The draft submission considers
the impact on all ratepayers and residents of the Commission’s proposals.
41. In
its draft report, the Productivity Commission asked a question on costs to
local government associated with fulfilling Treaty settlement obligations (such
as the establishment of co-governance arrangements involving council and mana
whenua) and asks to what extent they should be considered business as usual
costs to local government or new costs. The council’s response is
provided in Attachment One: Response to questions and recommendations.
42. The
council is committed to supporting the implementation of Treaty settlement
redress in a fair manner. The council supports a cost-sharing approach between
councils and the Crown rather than the current approach of modest and one-off
Crown contributions to cost.
43. Other
issues raised by the Commission include adaptation to climate change and
management of the three waters. These issues have relevance to mana
whenua and the draft submission addresses both issues.
44. The
Independent Māori Statutory Board (IMSB) and mana whenua were notified and
engaged with when the Draft report was released. Officers understand that the
Mana Whenua Kaitiaki Form, representing the nineteen iwi of Tāmaki
Makaurau, is considering making an independent submission.
Ngā ritenga
ā-pūtea
Financial implications
45. There are
no financial implications in deciding to make a submission. However, there may
be financial implications if central government chooses to implement policy
changes.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
46. There are
no risks in deciding to make a submission.
Ngā koringa ā-muri
Next steps
47. If
approved, the Auckland Council submission on the New Zealand Productivity
Commission Local government funding and financing: Draft report will be sent by
the deadline of 29 August 2019.
48. The
Commission will prepare the final report, with consideration of all
submissions, and present the report to Central Government by 30 November 2019.
Ngā tāpirihanga
Attachments
|
No.
|
Title
|
Page
|
|
a⇩ 
|
Auckland Council Submission on the New Zealand
Productivity Commission Local Government Funding and Financing: Draft report
|
29
|
|
b⇩
|
Response to questions and recommendations
|
47
|
|
c⇩
|
Local board views
|
57
|
Ngā kaihaina
Signatories
|
Authors
|
Saree Thomson Peachey - Finance Graduate
Andrew Duncan - Manager Financial Policy
|
|
Authorisers
|
Ross Tucker - General Manager, Financial Strategy and
Planning
Matthew Walker - Group Chief Financial Officer
|
