The details of Auckland's sensible new Future Fund.
As a businessman, it is obvious to me that councils do not plan for financial ups and downs the same way the private sector does. Unfortunately, it’s ratepayers who pay for it. We need steadier annual rates that are less shocking to household budgets.
And now we have a solution. Council’s Governing Body gave the Auckland Future Fund the go-ahead last month [Thursday 16 May]. I’m not one for big celebrations, but I’m quietly chuffed about this one.
The fund will be well capitalised with the airport shares alone, valued at around $1.3 billion. It will now be established faster without the port lease, creating a potential windfall gain of around $20 million next year. And this money will be channelled into a reserve fund to fix and finish community projects for legacy councils that didn’t sell their airport shares before merging into a single Super City. So, everyone’s happy.
And it gets better. Alongside the Auckland Future Fund getting the green light, the Port of Auckland has committed to contributing at least $1.1 billion to Auckland Council over the next 10 years of this LTP. This figure is around $172 million more than the projected net returns from investing the proceeds of the proposed port lease.
In the future, councillors can also consider other contributions to grow the fund, which could include returns from port operations if it makes financial sense to do so.
I’m glad that my councillors voted for logic in the end. Contrary to persisting myths, owning the AIAL shares did not give us any magical control over the operations of the airport, and it had such abysmal returns that it was costing Aucklanders to hold onto them.
Based on independent advice, the Auckland Future Fund’s cash contribution to Auckland Council is expected to be $400 million more than its projected dividends from AIAL shares over the next 10 years. This will be a $40 million dollar saving in rates each year.
Establishing the fund enables us to swap a single asset, the shares in the airport, for a diversified asset portfolio that can be expected to provide a higher and steadier rate of return, as well as being more resilient to shocks that impact the council’s other assets.
It will be established as a trust, which can provide a very high level of protection against raids. We will also be seeking the added protection of legislation.
Times are tough for many people; I’m glad Auckland’s future looks a little better with these deals across the line. (Wayne Brown)
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Mayor.Wayne.Brown@Aucklandcouncil.govt.nz
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