Fighting the big guy: West Aucklander's battle to end booze monopoly
Thursday, 28 March 2019
Nick Smale just wanted somewhere good to have a beer with his mates, and the hulking old 1970s Te Atatu Tavern didn't fit the bill.
But the Tavern was the only pub on the Te Atatu Peninsula, an upwardly-mobile west Auckland suburb of 12,500 people. And rival publicans couldn't open up, thanks to the iron grip of the West Auckland licensing trusts, which control all alcohol sales on that side of the city.
The two trusts – Portage and Waitakere – are among the last four of what was once a national network of licensing trusts, given a legal monopoly on running pubs and bottle stores in their area. The Trusts are run by elected officials, but turnout is usually low.
West Auckland had a chance to get rid of theirs in 2003 but a public referendum – driven by supermarket chains who wanted to sell alcohol in their stores – gave 58 per cent support to retaining the trusts.
**READ MORE:
* Trusts invest $10m in property**
Now Smale is trying to organise another referendum to allow competition. It's a tough ask: he needs 28,000 registered voters – 15 per cent of the total – to sign a petition asking for change. And the trusts say they will 'work hard and spend accordingly'. He thinks up to $1.2 million of public money to fight any referendum.
The trusts haven't made it easy for Smale.
A series of information requests under the Local Government Official Information and Meetings Act to understand more about how the community-owned body operates have been met, he says, with obfuscation.
Some were refused because the information might be used for 'improper gain or advantage'. Smale points out that a definition of improper in this context is 'illegality or moral turpitude', which in turn means 'depraved or wicked'. 'Righto, that's nice,' he says.
He'd asked a lot of things that you would imagine a public body looking after community money should be happy to answer.
He asked how much rent the trusts received for having pokie machines and TABs in their pubs – he was referred to the TAB and given an explanation of how pokies operate, but no numbers. He asked how much directors were paid ('a fee commensurate with their responsibilities'). For a list of the properties the trust owned (the trusts said if he paid $15 a time, they would supply title deeds).
He asked how much one property sold for – they wouldn't say, although by the time that response arrived, the figure was actually in their annual financial report. He asked what funds their $13m of investment money was held in, and was told it was 'commercially sensitive'.
He asked for the report behind a claim on national TV by the trusts chief executive, Simon Wickham, that 70 per cent of Westies supported them. He says they declined on the grounds of commercial sensitivity and to protect respondents' privacy (Wickham won't give it to Stuff either).
He asked about the assets and liabilities of a company owned by the trusts – West Auckland Trusts Services – and was told they had none; then saw a financial report listing West Auckland Trusts Services as having $12m of each.
In 2014, the attorney-general observed that licensing trusts are under no 'comprehensive oversight'.
Smale is awaiting an Ombudsman's enquiry into his requests, but fears the trusts' policy of not refusing to answer, but giving 'deflecting' answers may stymie him. 'The Ombudsman has no remit to check the information provided by the agency is true, they just have to provide an answer.'
Smale's fellow referendum campaigner, lawyer Sam Learmonth, says: 'You shouldn't have to be firing off requests to the Ombudsman to get answers about money that's held on behalf of the community … it should be ringing alarm bells'.
The deserted $5.5m pub
On a sunny Friday lunchtime, the only drinkers in the Te Atatu Tavern are, ironically, the trusts' own office staff, including Wickham, farewelling a departing worker.
A low-slung, old-style tavern, full of bar leaners, pokies, and a chips-oriented food menu, it sits on a 8000-square metre site, surrounded by crumbling asphalt car parks and including a long-deserted bistro, that's valued at $5.5m by Auckland Council.
Wickham says the Tavern has a 'strong mandate' from locals, but accepts the trusts will at some stage have to 'realise the value' of the site. Since Smale began his campaign, however, the trusts have acted: a minute's walk away is their newest bar.
The trendy Mr Illingsworth is doing much more business today; alongside it is a boutique bottlestore. The trusts are trying to modernise.
Wickham says a monopoly doesn't make them immune from the business cycle and a need to transform, and that's what they've been doing since a 2012 decision to renovate their bottlestores and move towards gastro-pubs.
Critics say they're not moving fast enough.
What does it mean for the average punter? A very limited choice of pubs, likewise for bottle stores, and not being able to buy alcohol in supermarkets.
Beer writer Michael Donaldson, a west Auckland resident who has signed the petition, says barring the trusts' pub and bottlestore in his suburb, Titirangi, the trusts' venues are awful.
'Any monopoly is bad - the liquor stores all have the same branding, same stock, not much range of craft beer: it's the same-old, same-old, no-real-enthusiasm sort of feeling,' Donaldson says.
'In my personal opinion, all their other [pub] venues are usually rats…, divey, full of pokies … there's a lack of choice and variety.'
Donaldson says west Auckland could be a craft brewbar hotspot, given the number of local breweries, if only the rules were relaxed.
A handful have found ways around the laws, such as opening breweries with attached tasting rooms. 'There's a little mushrooming of places that can subvert the trusts' control but we are talking of 0.01 per cent of beer bought and consumed in the area.'
Smale says it would make more sense to open up the booze market, and transform the trusts into a community trust focused on smart investment and maximum community grants.
'I view the trusts as like Kodak – they've not seen the world has moved on from the 1970s when they were set up,' Learmonth says. 'They're not run by people who know hospo, they're run by people who are not experts.'
What actually underpins the trusts' pub business is poker machines.
They have a healthy property portfolio, $13m in investments and about $6m in cash. But their 2018 accounts reported $9.47m profit on their bottlestores and $3.17m on investments (though Smale says there's some accounting trickery at work which has left $6m costs unmentioned that would take the gloss off these figures).
But they made just $806,000 on their pubs: a slim return on 11 venues sitting on hugely valuable real estate he estimates is worth $30m.
Even thinner when you consider the trusts collected $1.5m in site rental for hosting their pokies.
Wickham says they've cut machines by 50 per cent since 2014 and expect their pokie income to drop, but it actually rose in 2018.
It's what Donaldson hates the most. 'They promote gambling in west Auckland and getting vulnerable people hooked into gambling – they say they are a community-based organisation but I think the bulk of people don't want pokie machines.'
In 2011, a Stuff investigation explaining how the trusts often conflated their work with the community grants made by a separate organisation called The Trusts Charitable Foundation – the outfit that actually owns the pokies.
It's the foundation that make grants from the pokie profits, not the trusts. Despite that, and rebukes from the Department of Internal Affairs, the trusts often claimed it was them dispensing those millions. The chairman of both foundation and of the Portage Trust is Labour powerbroker and senior Auckland councillor Ross Clow.
In the decade to 2011, the trusts claimed to have given back $80m to the community. They hadn't, the pokies had. In 2010, the trusts' combined donations were just $38,000.
Since then, it's clear they have improved their act. They no longer overtly lay claim to grants they didn't make (though people remain, understandably, confused). And over the past five years, partly after sustained media pressure including a campaign by the Western Leader after the trusts announced a $10m splurge on property investment, they've ramped up their charitable giving.
This year, Wickham says, they will donate $3.5m, including $2m to a new special care baby unit at Waitakere hospital, and is confident of hitting $5m a year in grants by 2020.
'We felt we could do a lot better, and set about trying to do it,' he says. 'No doubt we are giving back more than we ever have, and I am confident we will give back more going forward.'
In 2017, the trusts launched the heavily-promoted Million Dollar Mission, where westies were asked to vote for community groups to get a share of a $1m pot. Another $1m was offered in 2018 and again this year. But why did it take them so long and so many years of minimal returns to act?
It's actually hard to examine the trusts' charitable giving. Their grants and sponsorships are bundled along with head office costs into one line item in their accounts – 'admin expenses'.
Wickham, however, points to their standalone Million Dollar Mission website, which shows the money being allocated in $5 increments, and says: 'I don't think you could get more transparent'.
David v Goliath
The referendum battle shapes as an uneven fight.
Smale and Learmonth are part of a loose confederation of 12 locals calling themselves the West Auckland Licensing Trusts Action Group (Waltag). They have no funds and no formal structure.
Learmonth says: 'I'm optimistic we will get there, but it's certainly not been as easy as I think we initially thought it would be.'
In 2003, the pro-referendum movement was backed by the supermarkets. It took a leaflet drop at all schools and an 11th hour handout of free fire extinguishers to get the trusts home (they came labelled with both trusts' logos and the slogan 'Portage and Waitakere Licensing Trusts working together for you', but were paid for with pokie money).
This time, the supermarkets are staying clear. Documents seen by Stuff suggest the trusts suspect Waltag are stooges for the supermarkets.
While New World agreed to let the group collect signatures outside their stores, Countdown declined. Its spokeswoman, Kiri Hannifin, said: 'We do not wish to be seen to be favouring one position over another, or influencing our customers' views … our position has been, and remains, one of neutrality.'
And the trusts intend to fight their corner, hard. 'We would want to make sure West Auckland knew exactly what they were voting for on an informed basis, and part of that would definitely be communications,' Wickham says.
The trusts' argument for their future is a free market would dent their grant-giving ability. If the supermarkets and breweries were allowed in, Wickham says: 'I wouldn't be confident about those local profits being able to stay local under that model.'
They also argue there would be a massive growth in bottlestores, and Wickham says 'not all of them would meet the standards of responsible retailing'.
The Auckland Regional Public Health Service is equivocal. They're aware there are 'concerns about the quality' of the area's pubs but they don't have a formal position on the referendum – but they add that there are fewer bottlestores out west, and while there's no direct evidence, it's 'proven that the more alcohol outlets there are, the greater the harm from alcohol'.
But the referendum is the only way for Waltag to debate the value of West Aucklanders keeping the trusts.
'It would be good if there was a mechanism to have an honest conversation about the trusts and what they do contribute,' Learmonth says.
'I've always thought if it was such a great idea, why doesn't the rest of New Zealand do this?'