YMCA forced to pay back $1.1 million to Auckland Council in seven-year City Rail Link saga

Sunday, 7 July 2024

Auckland Council negotiators say their hands were forced into vigorously defending a fanciful claim by the YMCA despite the costs involved in doing so.

In the end YMCA walked away with $1.7 million, but they also had to give a million back.

A court ruling in May saw the end of a seven-year saga over the City Rail Link (CRL) project acquiring the right to tunnel beneath YMCA’s Greys Ave fitness centre and hostel for Auckland’s $5.5 billion underground rail line.

With CRL having to acquire the underground rights for 200 properties, the costs had the potential to be a runaway train.

YMCA went to the Land Valuation Tribunal in 2021 where it accused CRL of a series of “low ball offers”. They had been negotiating since 2017.

The tribunal ordered the council to pay $800,000 for the subsurface acquisition and $1.2m for a restrictive covenant and “injurious affection”, for a total of $2m.

A source close to the project said that was a substantial win, being double what council’s valuer had anticipated.

However, YMCA was unsatisfied with that and made an appeal in the High Court seeking a whopping $17m.

“YMCA and its lawyers should have known full well that was way out on a limb. It was a sore thumb amongst the others,” the project source said.

“It was pie-in-the-sky thinking, and delusional to think they would get that windfall.”

It backfired. The court knocked back YMCA’s payout from $2m to $858,400, and YMCA had to return the funds which had already been paid.

“It was worse than a knock-back, to me,” YMCA’s valuer Nigel Dean told the Sunday Star-Times.

“I find it quite bizarre that in its infinite wisdom the High Court would [overturn the tribunal].

“Let me put it to you this way, Parliament has announced it’s going to review the Public Works Act, and all I can say to that is hallelujah.”

Dean stands by his $17m valuation. It was based on YMCA theoretically being able to build an apartment building with 300 parking spaces in an underground carpark.

Putting a value on underground land is relatively new in New Zealand, but it is accepted that tunnelling beneath a property restricts what can be built on top of it.

“These would have been better-quality apartments, because they are up on a hill with views, so to get the best sale value you would actually need to have [underground] carparks,” Dean said.

The project source said that was “farcical”.

“Where in Auckland does an apartment building have a multi-level parking basement?”

The Star-Times asked YMCA chief executive Julian Baldey whether it had overreached or if council had “low balled” in its negotiations.

“At this stage I’m not going to make any comment. The reason being that council is still a client of ours, and so I just don’t want to be quoted in the paper saying anything,” he said.

In addition to receiving fitness grants, YMCA manages 10 sites owned by the council, and in its latest financial statement it has pinned its hopes on winning a share of 33 more.

In 2023, YMCA North Incorporated had a deficit of $473,000 after also losing $1.8m the year before, and it has borrowed a $2.5m long-term loan to stay afloat.

Nigel Dean said the rail compensation could have been a good windfall, but acknowledged such claims were relatively untested in court.

“The difficulty about this is, if you throw lots and lots of money at it and you get the very best lawyers and all the rest of it, you can actually scare the court and I think that’s what’s happened here,” he said.

CRL paid for Bates McKee, a valuation expert from Seattle, to be put up in Auckland with the intention of making him their star witness on underground acquisitions. This didn’t go to plan, with the tribunal ruling his evidence was “irrelevant”.

“They tried to convince all the valuers to rely on this expert, that’s how desperate they were to fight these compensation claims, to be candid,” Dean said.

“CRL has spent gazillions fighting claims and they’ve been remarkably successful, but how can a non-profit like the YMCA afford to employ the sort of resources that are put against them by CRL, who had an unlimited budget?”

In an official statement supplied by CRL to the Star-Times, a spokesperson said it had spent $1.3m in its legal defence, on top of $1.7m it was ordered to pay YMCA for costs, acquisition and injurious affection.

“This entire process has required significant time, money and resource from both parties,” a CRL spokesperson said.

“Given the amount at issue, and the potential precedent-setting nature of the case, Auckland Council had no real option but to vigorously defend this proceeding. This approach has been justified by the outcome in the High Court.”

Auckland Council’s director of infrastructure, Barry Potter, said it had been value for money.

“Although we’d rather resolve differences with private landowners through negotiation, when the asking price is too high, we have a responsibility to follow due process and get a fairer outcome for ratepayers.”

The City Rail Link is due to open for passengers in 2026.

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