USING AUCKLAND'S ASSETS TO GET AUCKLAND MOVING

  • Jack Elder
Prime Minister

Prime Minister Jenny Shipley says she's delighted to announce that the Auckland Mayoral Forum, the chairs of the Auckland Regional Council (ARC) and the Auckland Regional Services Trust (ARST) and Auckland business representatives are supporting a proposal for using Auckland's assets to get Auckland moving.

"With this support, the Government proposes to replace the existing ARST with a new organisation, called Infrastructure Auckland, which will have the sole purpose of investing in transport and stormwater infrastructure.

"Today's announcement offers us all the opportunity to solve some of the infrastructure problems that have been outstanding and have been causing growing concern. I look forward to continuing to work with Auckland interests as we put this proposal into effect," Mrs Shipley said.

With the exception of Watercare, the ARST assets will be transferred to Infrastructure Auckland.

The assets currently held by ARST include shares in the Ports of Auckland Ltd, Northern Disposal Systems Ltd, America's Cup Village Ltd, Regional Forests Ltd and the Yellow Bus Company. The ARST some time ago began the process of selling the Regional Forests and the Yellow Bus Company, and this process will continue for these two assets. The proceeds will be transferred to the new entity.

"Infrastructure Auckland will invest the income from the assets in approved projects. It may only consider selling assets and using capital for investment where there is not sufficient income available and then only after it has fully consulted the people of Auckland. The consultation process will have to be in line with the Local Government Act and the provisions set out by the Coalition Government," Mrs Shipley said.

Watercare will be transferred directly to territorial authority ownership, with each getting a share equivalent to the number of water connections in its area. The current prohibition on the sale of Watercare will continue.

"Auckland has a great deal to look forward to in the lead-up to the new millennium. I welcome the commitment to the future made by those in Auckland who have been working with the Government on this proposal over recent weeks," Mrs Shipley said.

The Government plans to introduce legislation as soon as possible establishing Infrastructure Auckland.

(Background document attached)

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BACKGROUND NOTES: INFRASTRUCTURE AUCKLAND
GENERAL COMMENTS ON THE INFRASTRUCTURE AUCKLAND MODEL

What is the objective of Infrastructure Auckland?
The overarching objective of this new organisation, Infrastructure Auckland, is to fund public good priority transport and stormwater infrastructure for the benefit of the people of the Auckland Region.

In particular it will have the following dual roles:

Not to acquire new assets but to efficiently fund, by way of grants, the public good component of priority regional transport and stormwater infrastructure projects.

Commercial management, that is, to maximise performance of its investments.

When will Infrastructure Auckland be established? When will ARST be abolished?
It is envisaged that ARST will be abolished on 30 September 1998 when Infrastructure Auckland will come into being. The legislation will provide for this date to be extended by Order-in-Council if necessary.

Which of the Auckland Regional Services Trust's assets will be transferred?
With the exception of Watercare, all of ARST's assets and surplus money will be transferred to Infrastructure Auckland - this includes Ports of Auckland Ltd, Northern Disposal Systems Ltd, Regional Forests Ltd, and the Yellow Bus Company (or the sale proceeds from the sale of RFL and YBC if sold prior to the establishment of the entity); America's Cup Village Ltd and the existing cash surpluses. (Watercare is addressed separately - refer below.)

How was a decision on this model reached?
Ministers worked in consultation with the elected local authority representatives of the people of Auckland and other interests to reach a decision that uses Auckland's assets in the best interests of the city as a whole.

Will this result in the privatisation of the assets?
It will be up to Infrastructure Auckland to determine whether or not capital is required to fund some of the infrastructural grants.

The Coalition Government requires Infrastructure Auckland to first consult the people of Auckland, before making any decisions on the sale of any of its assets.

Wouldn't it be easier to give additional powers to the current trust i.e. the ARST?
The ARST was established for a different purpose from Infrastructure Auckland. Infrastructure Auckland is being established with the objective of making grants for the public good component of transport and stormwater projects, not to repay debt. It is right therefore, that a new entity, with a new identity, be established.

TRANSITIONAL ARRANGEMENTS

What transitional arrangements will need to be put in place?

The transfer of all ARST assets and surpluses to the new entity;

Appointments of existing ARST members (6) as initial appointments to Infrastructure Auckland (all replaced by December 1999) along with three members appointed by an Electoral College representing the local authorities;

Preparation of a trust deed by the Minister of Local Government in consultation with the Electoral College and the ARST to be given effect by Order-in-Council.
MEMBERSHIP AND GOVERNANCE ARRANGEMENTS

Who will comprise the membership of Infrastructure Auckland?
Infrastructure Auckland will have 7 members after a transitional period. The members will be appropriately qualified commercial trustees, appointed by an Electoral College representing the local authorities.

What are the primary objectives of the Electoral College?
The primary objectives of the Electoral College will be to:

Appoint appropriately qualified commercial trustees to Infrastructure Auckland including the Chair, subject to specific criteria;

Monitor performance of the trustees; and

Negotiate the trust deed.

Does the Electoral College have any other direct powers or controls over Infrastructure Auckland?
The Electoral College would have no other direct powers or controls over Infrastructure Auckland or its business.

Who can be appointed as trustees to Infrastructure Auckland?
The appointment of trustees will follow a transparent statutory process including the preparation of a job description and an advertised recruitment process. Specifically, the criteria for appointment will include:

A prohibition on the appointment of members or officers of a local authority; and

Persons to be appointed for their knowledge and experience with commerce, economics, law, accountancy, infrastructure, transport, and capital intensive industries.
Each territorial local authority and the ARC are to appoint one member to the Electoral College. Allocation of votes is as recommended by local authorities.

What accountability mechanisms have been put in place?
Infrastructure Auckland will be required to prepare a long-term funding plan (10 years) detailing the projects to be funded over the period of the plan in consultation with the Auckland local authorities and Aucklanders (having particular regard to the Auckland Regional Land Transport Strategy and any regional stormwater plan).

Infrastructure Auckland will also have to set an annual policy for distributing grants for the following financial year and notify the Electoral College of that policy. The grants policy will have to have regard to the purpose of Infrastructure Auckland and its funding project criteria.

Will Infrastructure Auckland be obliged to manage the assets in accordance with commercial principles?
Infrastructure Auckland will be expected to manage its assets in accordance with sound business practice.

PROJECTS

What types of projects will be funded by Infrastructure Auckland?
Infrastructure Auckland is required to focus on transport and stormwater projects. The initial priority will be transport.

Will Infrastructure Auckland fund already-planned services or only new ones?
Infrastructure Auckland will only be permitted to make grants for new services, not planned services for which funding has already been identified.

Will projects, relating to things other than transport and stormwater, be considered at a later date?
No, under this model projects relating to things other than transport and stormwater will not be considered at a later date. However, Infrastructure Auckland will be reviewed by the Minister of Local Government after 10 years and any subsequent legislation could consider this. This review will be undertaken in consultation with the Electoral College.

Evaluation Criteria
While the transport and stormwater projects will be considered in the context of the conclusions of the Auckland Regional Growth Forum, the transport projects will also be evaluated within the broad context of the Auckland Regional Land Transport Strategy with funding decisions not to be inconsistent with this Strategy.

Specific transport projects will be subject to rigorous project evaluation criteria. Stormwater projects will also be considered in the context of the stormwater strategy being developed by Auckland local authorities.

Infrastructure Auckland will be required to seek independent assessments of project evaluation criteria for proposals over a certain size.

What will happen if roading reform takes place?
Some of the evaluation criteria applying to Infrastructure Auckland may need to be revisited if roading reform takes place.

Have new planning mechanisms been put in place as part of this model?
The Auckland Regional Council (ARC) is to be empowered to develop a regional infrastructure strategy for the Auckland Region.

DISTRIBUTION OF FUNDS

Is distribution of funds to be by way of grant or may it also include low interest loans?
Distribution of funds by Infrastructure Auckland is to be by way of grant only. As this entity will be funding the public good component of the infrastructure projects in which it invests, there is little or no financial return from these components. It is not considered appropriate to become involved in the creation of low interest loans.

Will Infrastructure Auckland distribute capital and income?
Grants from Infrastructure Auckland may include distribution of both income and capital. However, grants will be made from income before grants from capital can be considered and this expectation will be made clear in the legislation. Grants from capital may only be made if the project is justified and after a public consultation process been undertaken.

Who will be eligible for grants from Infrastructure Auckland?
All potential providers of transport and stormwater services, both public and private, can make applications to Infrastructure Auckland but Infrastructure Auckland is required to designate a local authority or group of local authorities as agent to manage the public good component to be funded by Infrastructure Auckland.

Will the grants be for capital and operating expenditure?
Infrastructure Auckland will primarily fund the capital component of projects but the trust deed will set the parameters for the funding of operating expenses in exceptional circumstances.

Who will pick up the residual liabilities beyond the life of the fund?
The recipients of grants from Infrastructure Auckland will be required to pick up any residual liabilities beyond the life of the fund.

WATERCARE SERVICES LIMITED

What is the status of Watercare Services Limited?
Watercare is to be transferred directly to territorial authority ownership on the basis of retail connections, pending the outcome of the Government water and wastewater review.

The current prohibition on the sale of Watercare is to remain. Apart from the transfer of ownership (and consequential amendments), all other provisions currently applying to Watercare (e.g. the requirement to maintain prices for services at the minimum levels; the limit to performance of functions and conduct of business in relation to bulk water-supply, sewerage, and treatment and disposal of trade wastes) will be transferred and remain unchanged, pending the outcome of the water and wastewater review.

What form will the company take?
Watercare will continue to operate in its current form as a LATE (local authority trading enterprise) with the obligation to operate as a successful business, accountable to its shareholders.

Won't this legislation pre-empt decisions on the Integration Study? (i.e. result in vertical integration?)
The legislation will not enable vertical integration to take place. This, along with the Watercare specific constraints in the Local Government Act, will be reviewed as part of the water and wastewater review over the next 18 months.

Why not transfer ownership of Watercare to Infrastructure Auckland?
Transfer of ownership of Watercare as proposed was agreed by the Auckland territorial authorities. Furthermore, Infrastructure Auckland has the wrong focus to own a body such as Watercare which is effectively being transferred to a "holding pattern" pending the outcome of the water and wastewater review. Infrastructure Auckland's focus is on making grants.

THE AUCKLAND COMMUNITY TRUST

What happens to the Auckland Community Trust under this model?
It is proposed that the Auckland Community Trust be abolished.

What happens to any funds that have been transferred to the Auckland Community Trust?
The legislation will provide that any assets or liabilities held by the Community Trust be transferred back to the ARST prior to its abolishment and prior to the transfer of assets to Infrastructure Auckland.