Ports of Auckland sale could be back on the agenda

Wednesday, 21 November 2018

The potential sale of the council-owned Ports of Auckland could be revived with the council under time pressure to decide whether to directly own the port's land.

Ports of Auckland (POAL) has been previously valued at more than half a billion dollars if separated from the 53 hectares of waterfront land it occupies.

The port is back on the radar due to new tax regulations which would come into force year, which could prompt the council to directly own all land currently held by its subsidiaries.

If the land was publicly-owned and leased back to POAL, the arguments for retaining the port company would weaken.

* P hil Goff believed to be considering selling Ports of Auckland**

The contentious issue of whether Auckland Council should continue its 100 per cent ownership of Ports of Auckland has surfaced regularly.

It was on the list of ideas considered by two consultants in 2015, who looked at new sources of revenue for the council.

Cameron Partners thought Ports of Auckland, without its land, could fetch a market price of $588 million.

It proposed the land be held either by another company, or by the council directly.

Financial consultants EY took a different tack, looking at the council leasing out the port for 99 years and reaping a net gain of $414 million.

Both ideas were parked while the council considered the longer-term question of whether and where to re-locate the port.

The future role and location of the port is again an issue in a government study of all the upper North Island ports and their futures.

Under new regulations due to take effect on July 1, any land transfers from council subsidiaries to the council itself could be heavily taxed.

Ports of Auckland is one of the country's largest ports.

Consultants PWC estimate a tax bill as high as $391 million on land worth around $1.3 billion.

In simple terms, councillors have to decide whether to transfer land ownership in the next seven months.

'This is exactly the scenario for a sale of Ports of Auckland,' councillor Mike Lee told the Finance and Performance Committee, referring to a possible consequence of separating the port company from its land holdings.

Consultants McGredy Winder told Stuff that changing the land ownership could lead to other, bigger steps.

'Moving in this direction would make it significantly easier for any future council to sell the port operating company,' Peter Winder said.

Winder was the general manager of the Auckland Regional Council in the period when it lifted council ownership of POAL from 80 to 100 per cent.

'The tax issue is only relevant if you want to do something else in the future, and there's only two grounds – one is to put pressure on the port company to use its land holding more effectively and the other is if you were going to sell the port company,' said Winder.

Michael Barnett, the chief executive of the Chamber of Commerce and a former member of the pre-amalgamation Auckland Regional Council, didn't think the council should be rushed by the tax change.

'There should be a bigger purpose than tax – such as accelerating the move of the port, or changing the port structure,' he told Stuff.

Auckland Mayor Phil Goff and the port company's management discussed future ownership in a private meeting in mid-2017, but both were publicly coy about what was said.

'I've made no decisions about the port's long term future as yet, but intend to make progress on this matter over the course of this term,' Goff said in a statement after those talks.

'Included in those discussions were how we proceed after the Ports Future Study, an industry overview, options for interim development of the port and considerations for the relocation of the port,' POAL said.

'We also discussed work that was started under the previous council to evaluate the potential to split the port land from the operating company. This is the first time these matters have been discussed with the current mayor.'

Goff campaigned for office in 2016 pledging only to retain publicly ownership of the land on which the port sits.

The council will need to move quickly to transfer land ownership within the 'family'.

PWC has recommended getting a binding ruling from Inland Revenue confirming how it would view any transfer before July 1.

Auckland Council needed agreement of the board of POAL and of its development company Panuku, which owned land on the western waterfront and marinas with a book value of $740 million.

POAL's board discussed the issue on Monday, but was awaiting direction from the council.

Fast-track public consultation would also be needed early next year, as a land transfer would be a change to its Ten Year Budget, signed off mid-2018.

The Finance and Performance Committee decision allowed council executives to discuss the land transfer issue with the board of POAL and Panuku, and come back to the councillors next month to see whether to press on with the idea.