Should Councils be able to force ratepayers to provide venture capital to fund high- risk projects competing with private enterprise?
My answer is an emphatic NO!
Let’s consider three areas of Council expenditure where this is happening:
1. The Film Industry
2. The Boat Building Industry
3. White Water Rafting
The Film Industry
In 2002 Waitakere City Council (WCC) bought the old ENZA Coolstores at 40 Henderson Valley Rd, for $3.85m. They had potential as Film Studios and were to be managed by Waitakere Properties Ltd. Bob Harvey commented “We are aiming to make the local film industry not only bigger, but sustainably bigger: a place where the Spielbergs of this world want to come on a regular basis.”
In 2003 WCC spent $880,000 soundproofing Henderson Valley Studios.
In January 2005 two companies were incorporated – Prime West Ltd and Prime West Management Ltd. The sole director of both companies was Andrew Maher.
In May 2005 the public were excluded from a meeting of WCC at which a proposal was discussed re the Film Studios. The Council was to sell all its land and complex at 40 Henderson Valley Rd at valuation, $6m, in exchange for a 40% share in Prime West Ltd. Input of $9m was sought from a private investor who would take a 60% stake. A grant of $1m was anticipated from NZ Trade and Enterprise. (The fact that the Council would have less than a 50% share absolved it from the responsibility of providing financials for the public.)
In June 2006 60,000 paid up shares of $100 in Prime West Ltd were issued to Waitakere Properties Ltd (a subsidiary of WCC). 75,000 shares were issued to Tony Tay Trust Ltd, thus bringing paid up capital to $13.5m There was also a $1m MRI grant from the Government.
On 10 November 2008 a report to the Finance and Operational Performance Committee of WCC by Prime West Ltd stated “The net worth of the company as at 31 March 2008 was $13,650,988.”
In 2009 Tony Tay had some issues with the tax department. Bob Harvey said he wasn’t fazed by the news.
In June 2009 the Waitakere Properties Ltd Annual Report revealed Prime West Management was insolvent.
In December 2009 Prime West Ltd and Prime West Management Ltd amalgamated for a zero financial consideration. The new company name was Auckland Film Studios Ltd. (AFSL)
In June 2010, following the Tony Tay Group being placed in liquidation I raised my concerns with a number of WCC councillors. I was told it was not the sort of thing discussed at a Council meeting. There would be a CAF meeting on 6 July and councillors would be briefed there. I have since found out CAF meetings were informal meetings held for Waitakere Councillors for which no minutes were kept.
I sent a number of questions to the CEO and on 7 July Bob Harvey was reported in the Herald as saying “This will have no effect whatsoever on the film studio. The future of the studios is guaranteed. We are fully booked for the next three years.”
On 8 July I raised my concerns at a meeting of the Henderson Community Board.
On 1 November 2010, 7 Auckland Councils amalgamated. The CCO, Auckland Council Investments Ltd (ACIL) took over the responsibility of handling Auckland Film Studios Ltd. In the second week of November I expressed my concerns to Gary Swift, CEO of ACIL. He told me he had no right to question what had happened prior to 1/11/10. I disagreed.
On 19 January 2011 I personally visited the new CEO of Auckland Council, Doug McKay. I expressed my concerns to him re Tony Tay’s involvement in AFSL.
On 1 February 2011, Tony Tay Film Ltd went into liquidation.
On 4 February 2011, I received an email from Doug McKay
“FYI. As you predicted. Where to from here is what’s exercising my mind. Any ideas welcome.”
On 9 February, following advice from Doug McKay I lodged a LGOIMA request with Wendy Brandon, General Counsel for AC, seeking further information re AFSL.
On 10 February I addressed the Accountability and Performance Committee on the AFSL issue.
On 1 March 2011, Penny Hulse, Deputy Mayor, AC, commented “If the company gets into trouble we still own the land and buildings.” This is not so. The land and buildings were sold in June 2006 in exchange for shares in Prime West Ltd but it illustrates the dangers of Councillors rubber stamping documents placed before them that have huge financial implications for ratepayers.
On 3 March I rang to enquire as to the status of my LGOIMA request and was told by Jennifer Lamm, solicitor, there were several boxes of material to go through.
Two weeks later, on 16 March, I spoke to Bruce Thomas who told me “Next to no material has been located to date.”
On 18 March I received a letter dated 16 March from Wendy Brandon refusing all aspects of my request for information.
On 20 March I lodged a complaint with the Ombudsmen.
On 3 August it was announced Auckland Council would buy Tony Tay Film Ltd’s share in AFSL for $1.5m.
4 August 2011. With AFSL now being a 100% council owned CCO, the public were now entitled to accounts so I applied to the Secretary, Graham Wakefield, for them.
On 8 August I spoke to Richard Fisher from the Ombudsmen’s office who told me they were still awaiting a reply from Council re my 20 March complaint.
Some Figures for AFSL:
31/3/09 Net loss $2,245,519
31/3/10 Net loss $557,742
Total Assets 31/3/08 $14.968m
It appears no Councillors saw the accounts to 31/3/11 before voting on 28 July 2011 to purchase Tony Tay Film Ltd’s share in AFSL.
31/3/11 Net loss $2,354,587
Total assets $8.347m
On 13 September 2011Beverley Wakem, Chief Ombudsman, wrote to advise me that she had formed the provisional view that “it was open to Auckland Council to refuse your request pursuant to section 17(f) of the LGOIMA.”
On 1 February 2012 ATEED (Auckland Tourism Events and Economic Development Ltd) circulated a document entitled “Request for expressions of interest for development of Auckland screen infrastructure.” There has been talk of a new “bigger and better” Film Studio of about $50m funded by ratepayers.
31/6/12 Net profit $434,175 (15 months)
Total Assets $8.502m
30/6/13 Net profit $707,089
Total Assets $9.280m
It is noteworthy that without the 42% revaluation in land from $4.24m to $6m, a profit would not have been recorded.
· In 2005 projected annual returns from the Film Studios were 6 – 14% pa
· In 2008 a 2.5% dividend was paid to WPL (Shareholder for WCC)
· In 2009 a 3% dividend was paid to WPL
· In its last three years of operation WPL paid no dividends to WCC (In other words ratepayers have never received a cent).
The Boat-building Industry
In 2000 a Mayoral taskforce was set up to create a vision for the future of the Hobsonville Airforce Base.
In 2002 the Government and Waitakere City Council, amidst strong criticism, fast-tracked a deal for Sovereign Yachts, chaired by Canadian Bill Lloyd. Cabinet issued a special instruction to the Defence Department to sell 4.3 ha of land for about $480,000 to Mr Lloyd. The estimated market value of the waterfront property was $11.6m. It was claimed 350 jobs would be created for New Zealanders.
In June 2009 Sovereign Yachts was in receivership.
Two months later the Western Leader reported “An $80 million marine industry hub in the heart of Hobsonville is one step closer to becoming a reality.” The Chief Executive, Greg Parker, of Waitakere Properties Ltd, a subsidiary of Waitakere City Council, claimed there could be creation of up to 2000 jobs for west Auckland residents.
In March 2011, as a result of a High Court decision, Auckland Council was ordered to buy back the 4.3ha of land owned by Hobson Bay Holdings, of which Mr Lloyd was a director, for $15.225m plus penalty interest plus GST.
In August 2011 an out of court settlement was reached. AC would not disclose details due to “commercial sensitivity.”
In September 2011 ACPL (Auckland Council Properties Ltd) revealed plans to spend $67.9m over the next 10 years to develop a 20 hectare marine industry cluster known as Yard 37.
By May 2013, it was revealed $1.6m had been spent on consultancy fees for Yard 37.
By June 2013 only one company had set up business on the 20 hectare council-owned land.
White Water Rafting
On 26 July 2000 the Counties Manukau Pacific Trust (The Trust) was set up for the establishment of a “multi-purpose complex.”
On 15 May 2001 an umbrella agreement between MCC and The Trust provided for all net proceeds from the land adjoining the Telstra Clear Pacific Event Centre (PEC) be granted to the Trust.
In 2002 MCC approved a capital grant of $8.74m to the Trust.
In 2003 Eldamos Investments purchased land adjacent to the PEC subject to certain conditions. It on-sold some of the land known as Lot 4 to the Augusta group.
On 21 May 2007 Eldamos advised MCC it could not meet its agreed timetable. Council officers recommended repurchase of the land for $10,955,294 plus GST. It was stated “The Long Term Council Community Plan provides for Council to facilitate business investment in the City. Buying back the land will enable the Council to, again, control the development that occurs on it and help facilitate business investment on this site in the City.
In September 2008 the Trust lodged a resource consent application for a community buildings and sports facilities complex. It was not publicly notified until December. When people found out a white-water rafting and kayaking course on public land was proposed there was an up-roar.
As a result of a High Court Case held on 2 March 2009 brought by the Trust against MCC, in the Summary, Judge Cooper stated “I reject the Trust’s claim for a declaration that any further net proceeds from the sale of the Residue Land to a subsequent purchaser is beneficially payable to the Trust.”
The Trust sought $40m of ratepayer money for its $60m White water rafting project.
Thankfully MCC Councillors voted 11-5 against the proposal.
In 2012 the White water rafting idea resurfaced – this time with Auckland Council.
In October the council voted 11-9 to allow the Trust to build the facility at the PEC, “subject to public consultation.” The Trust would receive $20m from the sale of council land and undertook to raise a further $10m itself.
In January 2014 Sleepyhead purchased 834 Great South Rd and 10 Pacific Events Centre Drive from Council for just over $20m. The entire proceeds from the sale are to go to the Trust.
Ratepayers, we’re regarded as docile animals, we’re seen as cash cows. We can be milked for whatever “worthy” project comes along. In the lead up to the Super City we were promised accountability and transparency. In many cases the only people who receive a return from these “worthy causes” are the directors, the managers, the consultants and the lawyers. When the poor old mug ratepayers ask for financial accountability they are invariably blocked on the grounds of “commercial sensitivity”.
It’s time we all turned ourselves from cash cows into raging bulls!