Upper North Island ports inefficient, detriment to NZ, Government working group told

Saturday, 27 April 2019

Three gigantic cranes were added to Auckland's port in October 2018.

An interim report looking at the future of ports in the upper North Island has highlighted their inefficiencies - but has not yet recommended how to fix them.

Ports of Auckland, Port of Tauranga and Northport in Marsden Point are critical to the country's freight movement, and account for about half of New Zealand's total export volume and two-thirds of its import volume.

A working group led by former Far North mayor Wayne Brown released the first of three reports on Saturday after seeking advice on a range of legislative, bio-security and network issues, while also canvassing the views of major stakeholders.

Ports of Auckland is the country's largest importer of vehicles. In the year to June 2018, nearly 300,000 cars were imported, an increase of 43 per cent from 2014.

The report has yet to go to cabinet, and is described as 'non-decision-making', but did outline some of the inefficiencies of the current system.

**READ MORE:

Port of Tauranga is New Zealand’s most significant port by volume, accounting for 43 per cent of New Zealand’s total export volume in the year ended June 2018.

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Northport exports mostly logs (85 per cent) and the remaining exports were made up of woodchip, laminated veneer lumbar, sawn lumber, veneer, triboard, kiwifruit and steel.

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* Government eyes a shift north**

The working group found unanimous support for a fully functional rail freight system. At present Northport is serviced by trucks putting a strain on road networks.

In fact, a number of stakeholders told the group they objected to the current upper North Island ports being described as a 'system', and said the trio compete with each other and do not co-operate, to the detriment of New Zealand.

That had resulted in around around 40 per cent of Ports of Auckland's export TEU - 20 foot containers - and Port of Tauranga's import TEU being empty.

Goff said it was vital the working group assessed the impact to Auckland consumers and businesses by moving Auckland's port to each alternative location.

The group was also told the status quo provided few incentives for logistics and freight companies to work together to achieve efficiencies, and instead the competing behaviours lead to system inefficiencies and non-strategic investments.

The Government has previously signalled support for moving Auckland's port to Northland, but the group says there is no point making further investment in Northport without investing and developing the train line to Auckland.

'Our discussion with stakeholders lead us to believe that the Bay of Plenty and the Waikato have benefited from rail infrastructure and investment provided by Government at no capital cost to the end user, which Port of Tauranga was able to capitalise on,' the report stated.

'Conversely, it is generally agreed that the lack of rail infrastructure and connectivity to Northport has hindered Northland's economic development. Some stakeholders noted the similarities of Northland to Bay of Plenty in terms of productive capacity, and thought appropriate investment in Northland could produce results similar to those observed in the Bay of Plenty.'

However, Port of Tauranga's chief executive Mark Cairns challenged the group's assertion that it came at no capital cost to the end user: 'This ignores the $267m in rail costs paid by Port of Tauranga since 2010.'

Cairns hoped other facts, assumptions and implications contained in the interim report would be addressed before the next report was issued in June.

'The progress report identifies well-known issues such as the need for increased investment in road and rail networks and the historic financial under-performance and inconsistent reporting by some ports,' he said.

The working group outlined issues with the way the ports presented their financial information and underlying valuations; in Auckland the group suggested further calculation could increase land values and uncover a hidden subsidy.

'The Ports of Auckland reports [the land] has a book value of approximately $735m ($955/sqm), the land with a value of $343m ($533/sqm), the pavement with a value of $75m ($117/sqm) and the wharves with a value of $316m ($2518/sqm)', the report stated.

'Ports of Auckland reported land value of $533/sqm is lower than that of comparable industrial land in the Auckland Central Business District. In recent times, neighbouring land sales have been between $2500/sqm and $7500/sqm giving total land values between $2bn and $6bn, based on best alternative use.'

A letter from the Auditor General to all New Zealand port companies in June 2018 urged more work was undertaken to ensure that implicit subsidies such as land value were clearly stated.

Auckland's Mayor Phil Goff agreed a review of land values and assets was necessary so that all were 'comparing like with like', but said they were not the critical questions the report should look at.

'As a progress report only it does not present an analysis of options, the business case for each and the impact of each option on Auckland, the region and the country,' he said on Saturday.

'The relocation of the port out of Auckland's city centre has some clear advantages. It would ultimately open-up 77 hectares of central city and harbourside land and wharves for alternative and potentially more valuable uses.

'As in other international cities, it could enhance the attractiveness of Auckland as a place to live, work, enjoy and to visit. It would also reduce congestion caused by freight movement and pollution from associated activities.'

However, a city of 1.7 million people, making up 35 per cent of New Zealand's population, needed to have the most cost effective and efficient way of delivering goods and services to its people, he said.

Goff added it was vital to assess the impact to Auckland consumers and businesses of moving Auckland's port to each alternative location.

'We also need to ensure that the working group on the supply chain strategy considers the value of the investment Aucklanders have made in their port and the dividend return they get from it which in past years has been $50m – equivalent to a 3-4 per cent rate increase if that dividend is lost.

'I support the work being done by the working group, but as it acknowledges, the impacts of where and when the port is moved are far reaching and must be grounded in robust evidence.'

THE WORKING GROUP ARE CONSIDERING A RANGE OF INFRASTRUCTURE OPTIONS INCLUDING:

* A rail spur connecting the North Auckland Line to Northport

* A second route between Auckland to Tauranga

* A freight corridor through West Auckland

* A West Auckland Inland port

* An expanded or moved Southdown inland port

* A new mega-port in the Firth of Thames

* A vehicle servicing and import facility at Northport

* Inland hubs for logs and exports within Northland with refurbished local rail lines

* A New Zealand dry dock

* An upgrade to the North Auckland Line (and spur to Northport) to double track and double stack, or to high service single track with passing loops

* The electrification of rail services and alternative truck and rail machinery.