“The lack of expertise and experience in monitoring commercial entities was made clear.”
John Crawford, former chief executive of Auckland Council Investments Ltd (ACIL), NZ Herald 12 July 2022
Last week, there was an article in the NZ Herald describing the failures of Auckland Council to manage its largest commercial assets. John Crawford was the former CEO of Auckland Council Investments Ltd (ACIL), which managed these assets until was removed in 2018 (ironically to save money). He is an assistant Commerce Commission commissioner and former head of Treasury’s Crown Ownership Monitoring Unit which monitored entities with a combined value of more than $100 billion so he knows a bit about this issue.
The Ports of Auckland and Auckland Airport are important gateways for both the region and country. The Ports of Auckland dominates our city harbour, importing and exporting cargo and people to the world. Auckland Airport is the third busiest in Australasia, with ¾ of all international visitors to New Zealand arriving through the terminal. They're also both strategic assets for Auckland Council who is the sole shareholder of the port and largest shareholders of the airport.
To reduce our reliance on rates and put a stop to endless rises, we need Auckland Council to diversify its income streams. This means better utilisation of the commercial assets that they own on behalf of Auckland. Both of these assets should represent key pillars in this approach - however, we've seen too many examples of poor oversight from Auckland Council. John Crawford believes that this is the result of a lack of experience at Council by staff and elected representatives - based on what I’ve seen, it’s hard to argue.
In April 2020, Auckland Airport blindsided its largest shareholder with a massive $1.2B capital raising. Auckland Council who, despite owning ⅕ of the company doesn’t have anyone on the Board or even actively monitoring the company. Caught short of cash and with little options, Auckland Council found its control diluted from 21.9% to 18% as well as a significant devaluation of the shares. Council staff reported that they’d lost an immediate $18m and missed a $70m gain from the subsequent rise in the airport's share price. As Auckland Council struggles with a lack of funding, its largest commercial asset was devalued and undermined, and some councillors still voted against any action. Councillor Chris Darby argued but failed to convince councillors to write to AIAL's board, or to review council policy on its airport shareholding. Instead they agreed to a commission a report.
Meanwhile the Ports of Auckland have poured millions of dollars into an automation project that has ended in failure, with $65M in software written off plus a further $70M on upgrading equipment to cope without automation. Not only has the project wasted eye watering amounts of money (approximately 60% of their annual revenue), but it has distracted the organisation while their poor safety record that has claimed too many lives.
Mayor Goff and his council have responded by conducting yet another review. I wish I could believe that council will learn from this costly mistake, but given its recent history I’m not expecting much. John Crawford notes that back in 2018 “the lack of expertise and experience in monitoring commercial entities was made clear to the mayor’s office, the council executive and a number of councillors.” Yet here we are, once again highlighting the need for people around the council table who have the focus and discipline to drive good outcomes for Auckland.
Auckland Council isn’t a business, but it owns significant commercial assets and has the ability to drive incredible economic growth. Done poorly, it will continue to cost us again, and again.