Six months of fuel tax nets Auckland $78 million
A special Auckland Council finance committee meeting tomorrow reveals how much fuel tax Aucklanders have been paying and which big council projects are in trouble; and today the council deals with plans to bail out Eden Park.
Auckland’s Regional Fuel Tax raised $77.7 million over its first six months in operation – nearly three million less than forecast by Auckland Transport, but also nearly three million more than rough estimates made during its introduction.
Auckland Transport only managed to spend $39.9m of that, and has $37.8m in reserve. The Auckland Council’s quarterly figures say the reason comes down to the time required by AT to gear up to the higher investment levels.
When the 11.5 cents a litre tax was introduced on July 1 last year the projected revenue over 10 years was $1.5 billion – expected to taper off slightly as more people get into electric vehicles. The Auckland Council still used a figure of $150m a year, but AT forecast a slightly higher take of $80.6m for the first six months.
The money funds a programme of intense transport development in Auckland across 14 different areas. It will ramp up over the 10 years as big projects such as Penlink and the Mill Rd corridor, which had $2m and $7m spent on them in the second quarter respectively. The Eastern Busway took the lion’s share of the tax-funded spending this quarter, with $18m.
AT’s operating revenue was higher than budgeted for, partly because of a NZTA operating grant of $9m and partly because of speeding motorists – infringement revenue from the period netted $4m. The organisation underspent slightly on forecasts but that’s expected to even out by the end of the financial year thanks to increasing public transport costs. (AT’s budget for the year is $348m.)
Auckland Council had an operating surplus for the first six months of the year of $1,639m; an increase of $63m (or six percent) on the same time last year. The rates take was $80m higher, partly because of the 2.5 percent rate rise and partly because population growth increased the rating base by two percent. Extra targeted rates for water quality and the environment also helped boost the figures, although they were offset by the removal of the interim transport levy. The vast amount of complex and intensified building going on in the city was reflected in higher development contributions - an increase of $7m - and user fees ($32m).
Aotea Centre and Zoo expansion behind target
Elsewhere, the figures revealed the Aotea Centre refurbishment is having problems. The 30 year-old centre has been closed for its first ever major do-up, but Regional Facilities Auckland says it will be asking for more money to cover the cost of “compliance with the Council’s evolving consent requirements around the façade and weather tightening works which continue to cause delays to this project”. It will seek the money through the Council’s project risk fund, or through the 2019/20 annual plan budget refresh.
The delays revolve around “challenging consent requirements” after the ‘Grenfell’ issue, where aluminium composite panels used as cladding were linked to Britain’s tower disaster. The centre is not on the Council’s list of 147 Auckland buildings with similar type panels. However plans for the centre are having to be re-worked to meet the revised consenting requirements. While the exterior fit-out is delayed for up to six to nine months, the centre is losing out on events, including “two large theatre events” that have had to be postponed. It is also having to weather additional costs due to extension of time claims.
The Auckland Zoo’s South East Asia precinct is another development that is causing headaches for the RFA’s bottom line. The $60m development is the largest renewal project in the zoo’s history, and is due for completion now in the 2019/20 financial year.
The works “continue to have a significant negative impact on revenue generation than originally budgeted”, according to the report. The construction going on has undermined the perception of value at the zoo, so it has put its prices down to compensate.
Eden Park Rescue
The Q2 figures are in a report to be presented to a special meeting of the Council’s Finance and Performance Committee on Wednesday, but today the future of Eden Park will be discussed.
The council will consider $63.3 million of financial support for the ailing stadium, incorporating existing loans and guarantees it already provides. It plans to take over the current ASB $40m loan to the park, along with $7m working capital facility, and combine that with an existing $6.5 million loan from council.
The bailout includes a new $9.8m interest-free loan to allow the Eden Park Trust Board to fund its programme of essential capital works. The ageing turf is well past its replacement date, and upgrades are needed to the north stand and kitchens.
Mayor Phil Goff has been quick to reassure ratepayers the money is a hand-up to Eden Park, "not a hand-out. The money is repayable". The council does not own or control the park.
“What it does allow is Eden Park to continue as Auckland’s venue for international sporting events in rugby, cricket and other sports for the medium term," he said.
There is a catch - the council wants a closer working relationship with the Trust and RFA so there is more coordination with its stadium strategy.
But a report to the committee says if the loan is not taken over by the council, "there is high likelihood of the guarantee being called and council needing to try and recover the amount owed through its guarantee security, likely to be a long and expensive exercise". It says the 'do nothing' option would mean incurring interest costs of $15m over 10 years, plus $46.6m already written off, which equals $55m of new funding with "little prospect of any recovery at the end of 10 years". Interest costs would be ongoing.
The report spells out the dire state the Trust is in.
"Eden Park Trust’s current capital structure is very materially challenged as it does not allow for necessary capital expenditure obligations nor meaningful debt repayment.
"[It] continues to pay interest only on current debts and only minimal debt repayment. Forecast performance in the year ending 31 October 2019 will worsen based on fewer fixtures .... cashflow forecasts are not expected to improve. Net deficits continue and have been occurring since at least 2013.
"The 10-year maintenance capital expenditure plan of $62.8 million has no funding.
"Regulatory settings and the operating environment are hampering opportunities to improve Eden Park Trust’s performance."
The Trust wants to change those settings and as such it has indicated it will seek resource consent so it can hold six concerts a year as of right, instead of going through the expense of fighting for each event with a group of the suburb's vocal neighbours. If that happens it's expecting a significant improvement in financial performance within three years. The additional profit could be around $2-3m a year from 2021.