By the numbers: Mayor Brown’s wealth fund
Last year, Auckland Mayor Wayne Brown proposed using funds from Auckland Council’s two key assets, Auckland airport and the Port of Auckland, to set up a managed fund to make the council more sustainable financially.
In recent years, the council has dealt with the sudden loss of income when Covid-19 lockdowns hit Auckland hard, and now it’s grappling with the costs of recovery from multiple severe weather events.
On top of that, come inflation and interest rate pressures, and the loss of funding from the regional fuel tax. But the council’s chief executive, Phil Wilson, said the proposed Auckland Future Fund wouldn’t be for the council to deal with short term problems, but to protect against future climate, environmental and financial shocks.
Here’s what the numbers tell us:
163,483,830
The number of shares in Auckland International Airport Limited (AIAL) that Auckland Council owns. That’s about 11% of all Auckland airport shares. Moving the shares to a managed fund would come with a high certainty that most, if not all, these shares would be sold over time with the money invested more diversely.
$2 BILLION-$3 BILLION
The estimated value of an upfront payment for a 35-year lease of Port of Auckland Limited’s operations. That’s a fairly broad estimate, so modelling has been calculated on an upfront payment of $2.1b. The council’s background documents state that this assessment “is based on a number of uncertain factors”.
$856 MILLION
The projected profit to council from the port, if it port operations are not leased, over the nine years from July 1, 2025 to June 30, 2034.
7.5%
The assumed return that the managed fund would make each year, based on historical performance of funds in New Zealand and Australia. It is proposed that 2% of that would be reinvested into the fund to build it up.
$200 MILLION
The amount the council is estimated to receive from the fund each year if funds are transferred from both the airport and the port. However, the current airport shareholding is projected to return an annual dividend of $24m in the next financial year, rising to $40m by 2034.
$1 BILLION
The minimum amount of the fund that could be set aside as self-insurance for an event like a natural disaster. However, it comes at the risk that an event occurs and requires a significant withdrawal from the fund, reducing the fund’s value.
$25 MILLION
The amount the council currently pays every year in insurance premiums, including $5m into an internal, self-insurance fund. Using the fund is expected to reduce insurance premiums by around $12m a year..
40%
The amount of Auckland Council’s income that comes from rates.
7.5%
This is the “central” proposal for a rates hike in the year beginning July 1. However, it is calculated on leasing port operations and creating the managed fund.
Sticking with the status quo at the port could mean an additional 0.7% rates rise.
Other proposals on the table are for a 14% rates rise or a 5.5% rise, in the “pay more, get more” and “pay less, get less” scenarios.
Aucklanders have until midnight on Thursday, March 28, to give their feedback on their council’s 10-year-budget.