Licensing trusts still hold great power but who is holding them accountable?

Thursday, 10 October 2019

Voters traditionally meet local elections with apathy, and this one could yet hit record troughs of indifference. Wade past your choices for mayor, council, local board and health board, and in some areas, you've still got to pick between candidates standing for trusts. What are these down-ballot elections all about?

Trusts were born out of the Prohibition era, formed to control the sale of alcohol in different areas. Only four still hold their booze monopolies. Of the rest, most still own some pubs and bottlestores, but have often also branched out to owning hotels and commercial property, and have negotiated control of huge chunks of pokie machine grants. They wield a mostly unseen but lucrative power.

The election of trustees is often poorly contested. The Birkenhead Licensing Trust, which owns two pubs and allocates about $1.75m of grants each year had only five people stand for six seats this year.

Trusts aren't listed on the Companies Office website, which means the public cannot easily scrutinise accounts. Between 2013 and 2016, trusts across the country were late filing their accounts to the Auditor-General 26 times.

* Shouting, fighting, urinating: pooing patrons shut Ponsonby pub

* The grandmother on a zimmer frame who fights booze and pokies

* The unlikely avengers fighting to shut down pokies

* Trust told don't pay living wage, it's not good PR**

In 2014, then Auditor-General Lyn Provost reported trusts had little oversight, and said she'd 'long been concerned that licensing trusts are one of the least scrutinised parts of the public sector'.

Brent Goodwin has been the cuckoo in the Masterton Community Trust's nest.

Nick Smale, a campaigner to reform the West Auckland trusts, found no government department to complain to when he had issues to raise.

'They basically fall into a gap - the only mechanism for the public to oversee them is to ask questions by LGOIMA [freedom of information act] - and that's a shemozzle - or by-elections. That's the only oversight and accountability, and it is hard.'

So when a trust election actually becomes competitive - indeed, vitriolic - it's probably a good thing. And for once, in Masterton and West Auckland, the trust election debates are as fierce as Goff v Tamihere or Lester v everyone else.

The Farriers pub in Masterton is one of 11 sites where the Trust House group runs poker machines.

In both places, the debate revolves around whether the trusts are misleading the public about who is giving out huge chunks of charitable funds.

'They could do more'

In 'New Zealand's best little city' and the home of the Golden Shears, tough questions are being asked about the community trust.

When the Masterton Community Trust (MCT) lost its liquor monopoly, the trust moved into providing social housing while still owning pubs and running its own pokie machine trust.

The debate here is whether they are doing enough to meet the need for social housing - and the morals of being involved with poker machines while also seeking to 'alleviate poverty'.

Masterton, where a trust election is for once causing a stir.

Through a majority-owned company called Trust House, the MCT possesses 541 houses it bought from Housing New Zealand in 1999 for just $10.3m, an average of $19,000 each. It has slowly disposed of 56 of them, but the remaining stock is now valued at around $70m. Its related companies also own a hydro-electric power scheme, a hotel and some pubs, and operates gaming machines at 11 pubs in Masterton, Greytown, Martinborough, Tawa, Upper Hutt, Pahiatua, Island Bay and Porirua.

Trust House claims to give the community about $4.2m a year. Last year, the poker machines made $9.924m. The law says 40% of this figure must be returned to the community as grants. The trust gave $4.124m, or 41.5%: so were only marginally more generous than they were compelled to be.

Trust House chief executive Alan Pollard's figures are slightly higher, and he says they handed out $250,000 more than they had to, as sponsorships, a 'not insignificant sum'.

One critic, current MCT trustee Brent Goodwin argues that the social housing rents return a $3m surplus, and so that money is used on refurbishing pubs and funding the pokies operation. He's angry that half of that $4m of grants leaves the district (because it was raised from pokies in other areas).

One senior pokie industry official says the trust employs the classic PR approach used by licensing trusts of 'handing out money around town, saying 'look at me, look at what we're doing for the community', without making clear the source of the funds'. (Pollard disputes the public doesn't realise that its pokie money).

Local MP Ron Mark has questioned the morality of the trust's role in pokies. The Problem Gambling Foundation agree. Communications director Andree Froude says: 'It's difficult to understand how ethically or morally this organisation can say it's providing 'commercial strength for social good' when so much of its 'profit' is derived from pokies that cause so much harm in communities.' The gaming business, says Pollard, is entirely separate to its social housing work.

Trust House chairman Jock Kershaw, left, and chief executive Alan Pollard, right, with Building and Construction Minister Jenny Salesa in 2018.

Ex-Wairarapa Electricity boss Alan Lodge is among those running on a reform ticket for the Masterton Community Trust.

Goodwin says there was discussion at a recent board meeting about trying to install pokies into a venue in a Wellington suburb and his colleagues decided it was not worth it because the area was too affluent.

Nick Smale says Trusts are hard to hold accountable.

In January, the trust asked the government to put up $7m towards building a net 75 new homes, prompting Mark to delve into those figures in an incendiary Wairarapa Times-Age column which sparked lengthy debate on the town Facebook page. 'Maybe that's Ron Mark trying to win an election,' says Pollard, who says the trust genuinely want to partner with the government to intensify sites to provide more homes. They're a good landlord, he says, charging rents well below Housing New Zealand rates.

The trust is in good financial health and stewardship under Pollard, who has sold off underperforming pubs and supermarkets and produced record profits. But critics say that means it could do more.

'There is a need for social housing in Masterton, I think everyone accepts that,' says candidate Alan Lodge. 'Rather than doing that, they seem to be sitting there waiting for the government to come up with some money. They do have an obligation to provide social housing and they've not done so. I reckon they could do more.'

Goodwin agrees. 'The trusts' constitution is full of noble, charitable aims, especially around housing and it does exactly the opposite.' The trust's stated objectives include increasing social housing provision and alleviating poverty.

So a once-uncompetitive race now has three rebel candidates, in Goodwin, a cinema owner, Lodge, a former chief executive of Wairarapa Electricity, and National Party official Belinda Milnes (who posted on Facebook that the trust make an 'abysmal return' to the community).

Goodwin is an incumbent, but has been campaigning from within for reform, which has led to him being forced to send a written apology to trust staff after telling the trust's chairman Jock Kershaw in a public bar that a 'bunch of monkeys' could do a better job. Staff have also declined to release financial information he's requested. Goodwin describes his fellow trustees as 'growing fat and lazy' and Kershaw as 'hopeless'.

Pollard issues an uneasy laugh at the mention of Goodwin's name. 'He's one of those people, let me be polite here, who likes to instil debate on various subjects,' he says. 'A lot of the things he's said, in my opinion, are unfounded.'

'It's no secret,' says Goodwin of his rebellion. 'Look at my election profile from 2016, I had a poor view of them - but I told them I would try and work with them, without throwing hand grenades around the place, to improve it. But if it didn't work, I would use the 2019 election to effect change - that's where we are at now. It will be no surprise to anyone… to me, local government of any sort is a f…… battle, so long as you are doing your job, and I quite like a bit of a battle, when it works.'

At the 2016 trust election, there were only enough candidates for seats. This time, there are ten vying for the six positions and the glare of publicity has left Pollard with mixed emotions. 'We're confused at the moment at some of the views. We're disappointed so many people have decided rather than come and talk to us, they've chosen to grandstand or gone to the media.'

Trusts chief executive Simon Wickham outside one of its ten West Auckland pubs.

But a lack of competition, says Lodge, has led to stasis. 'I suppose they have acquired a certain feeling of self-satisfaction. Maybe they think what they are doing is enough. I really think it isn't.'

'Drowned out'

In West Auckland, where some trustees are well into their second decade of power, the licensing trusts have responded to a campaign by a ticket of reformers by mounting a 'blitz' of promotional advertising.

The West Auckland Licensing Trusts Action Group (WALTAG), which wants a referendum on ending the monopoly and is running a small ticket, say as a result its message of bringing transparency has been 'drowned out'. It has also complained to the Advertising Standards Authority, saying the Trusts has breached the principle of 'truthful presentation'.

Trusts' marketing material claims in a 'typical year' it gives back 47 per cent of its profits to the community. Its 2019/2020 budget reflects that - give out $3.5m of a $7.2m profit. But Nick Smale of WALTAG says his analysis of the last five years shows an average return of just 23 per cent of profits before tax.

The ASA has deferred a hearing until after the election. The Trusts says it can defend the claim and that Smale's numbers are wrong.

Smale is dismayed at the deferral. He complains the Trusts has set about a marketing campaign designed to 'drown' WALTAG's messaging.

The 'giving back' claim, he says, is an example of the trusts' 'obfuscation' about its public-spiritedness.

For years, the Trusts took credit for the pokie grants made by a separate organisation, the Trusts Charitable Foundation (TTCF), from machines hosted in its pubs. It was eventually rebuked by the Department of Internal Affairs, and in recent years its messaging has been much clearer. But Smale believes the West Auckland public still doesn't understand the difference, giving the Trusts a PR benefit it doesn't deserve.

'It's not as bad as it was - I would say the organisation itself is better, but the public perception isn't,' says Smale. 'The message has not gotten through at all. I don't think I've run into anyone who distinguishes between TTCF and the Trusts as being separate organisations. Even the people who receive the grants … in fact people whose salaries are paid by TTCF have told me it comes from the Trusts.'

Trusts chief executive Simon Wickham says: 'From a Trusts perspective we have been very clear for a number of years to state only the funds given back to the community that are directly generated from our retail and hospitality businesses and our investments … we don't take credit for TTCF grants … we've made that distinction very clear for many years now.'

Smale believes the Trusts keep some poorly-performing venues open purely to protect those poker machine grants (and the sizeable fees it receives for hosting the machines). Wickham strongly denies this, saying the Trusts has cut pokies in its venues in half in the past five years. Smale is testing the theory by appealing a licence renewal for the trust-owned Te Atatu Tavern, his local pub. He's run a series of observations in which pokie gamblers outweigh drinkers.

The pub makes about $1.16m a year in pokie profits, and would generate the Trust around $160,000 in fees. It sits on a big site, and much of it is shuttered, with its bistro long-closed.

But Wickham says it is a much-loved local and trades well and Smale's objection could halt plans for food trucks this summer.

Smale fears none of his candidates may get elected this time around. He will have to weigh up whether he's ready for another fight in three years' time.