Auckland Council (Auckland Future Fund) Bill

Members, the House is in committee on the Auckland Council (Auckland Future Fund) Bill. We begin with the debate on Part 1. This is the debate on clauses 3 to 6, “Preliminary provisions”. The question is that Part 1 stand part.

As we enter the committee of the whole House stage to consider the Auckland Council (Auckland Future Fund) Bill, I want to briefly acknowledge the significance of this legislation and the important work that lies ahead in this stage. This bill lays the foundation for one of the most significant financial instruments that Auckland Council has ever established.

The Auckland Future Fund is designed to protect and grow the value of key public assets for the long-term benefit for both current and future generations of Aucklanders. I’m looking forward to engaging constructively on the clauses and any proposed amendments, to ensure that this fund delivers the security, transparency, and sustainability that Aucklanders rightly expect.

Thank you very much, Mr Chair, and, firstly, congratulations to the member Dr Carlos Cheung, who is sitting in the committee chair for the first time. What an opportunity, and well done to him for bringing this bill to the House. It’s some very good forward-thinking. It’s great to see a future fund with details, which is very, very positive, and I commend the member in charge of the legislation.

I’ve got a number of questions for this part. My first one starts at clause 3, which is in and around the purpose. I’m keen to understand from the member if he can explain why the purpose in clause 3 refers to ensuring the Auckland Future Fund “continues” as a long-term financial investment, given that the fund has only just been established in statute.

I strongly support the establishment of the Auckland Future Fund and the protections that this bill provides, but the word “continues” suggests that the fund potentially already exists, which it does in the Auckland Council’s long-term plan. But I want to ensure the committee understands that this bill is providing statutory protection for an existing council initiative, rather than creating something entirely new. So I’d welcome the member’s answer to that question.

Thank you, members, and to Tom Rutherford for his question. The fund is to provide a strong return to the council to fund the services and infrastructure for the future. When the Auckland Council set up the fund, they actually asked to get a local bill to add an additional layer of protection to the fund. This is what this bill does, by requiring a 75 percent majority of councillors to agree to reduce the failure of the fund.

One of the questions is, you say, why are we doing this, why does this continue? I think, if you look back to the history of Auckland Council, when it was first set up, there used to be a fund that was set up during the old term by Christine Fletcher. This was called a “rainy day fund”, but it’s actually called a diversified financial assets portfolio. That actually comes from the old legacy council. However, because there was no protection—there was no additional layer of protection for this fund—the fund was disestablished, and the money was actually being used for paying short-term debt and council spending. This is why we are feeling it is important here today to set up an extra layer of protection to make sure this fund continue to benefit people in Auckland.

Labour supports the bill and its provision of statutory protection for the Auckland Future Fund. This will help futureproof the fund and provide Aucklanders with confidence that the fund’s investments will be protected.

Labour acknowledges and commends the hard work and creativity of the mayor, Wayne Brown, and Auckland Council in drafting this bill. The council has demonstrated professionalism and a strong commitment to ensuring that Auckland will have the capital funds to support the city’s future growth. There’s also another political party that proposed a very important future fund in recent days. Thank you very much, Labour Party!

Anyway, we did try to propose to the other side of the House that this debate should be taken as one, because there is very little in the first part and there is no disagreement across the House. Sadly, there seems to be an attempt here to filibuster on this bill, unnecessarily because actually the general public like it when we do support pieces of legislation. Mr Cheung has had the wonderful advantage and benefit of being gifted a bill from Auckland Council that is supported by everyone in this House. I won’t speak any more to Part 1, because it is absolutely supported.

Well, in part, I agree with the member on the left-hand side—we actually acknowledge Wayne Brown for all his hard work—but I think she forgets that it’s about teamwork. It’s not about people. We also need to acknowledge Councillor Christine Fletcher. We also want to acknowledge Christopher Swasbrook, the chair of the Auckland Future Fund, for all the hard work as well, and also all the officers who were involved in drafting this bill as well.

I think that member mentioned the future fund. Well, I think that makes a huge difference. Why are some of them against so many people? The Auckland Future Fund is not about storytelling; it’s not about writing an essay like what the other side do—they write essays and pretend they present a policy. This is a real policy. You can see that with the policy. You can read a lot of detail to show people what’s going on with this legislation.

Also, I think this member probably doesn’t work on those details, so she doesn’t understand that that’s a lot of hard work. Even though this is a local bill, a member of Parliament still needs to work very closely with the council staff to make sure all the feedback that is received by the public can feed back to the council and to try to amend the bill and make sure the bill will benefit Auckland in general.

Oh, what a great day for Mount Roskill. What a great day for Auckland. I commend the member in the chair, Carlos Cheung, and I congratulate him. I have certainly appreciated his continual advocacy the whole way through this process for the last few months. A staunch advocate he is for Mount Roskill in Auckland at that, as well.

I would like to ask him a question in regard to clause 3, which is the purpose clause of the Act. He touched on one aspect in his previous answer where he talked about wanting to, sort of, futureproof. He might have been referring to the supermajority of 75 percent in clause 11, and I’m sure we’ll get to that in the future parts of the Act. I think that is an important provision.

The question I have is the fundamental one. As I read the bill, it seems this is the most appropriate place to address this, because it is the purpose of the bill. The question that I would actually like to hear from the member himself is around the purpose and the need for legislation, because there are many ways funds can be set up. You can get AI to write jargon for 12 pages and call it a future fund, apparently—that’s OK. But do we need to go through the whole process of having legislation? I know that we’ve been through the first reading, and then we’ve gone through a full and robust select committee process, and then, of course, we’ve had the second reading, and you say, “Well, we’re not far from the end now. Why wouldn’t we finish?” That’s not my question. My question is really about—

Hon Carmel Sepuloni: What is your question? It sounds like filibustering to me.

TIM COSTLEY: It’s great to hear from the other side, because we didn’t hear from them during the select committee process—it would have been really nice—but we did hear from Carlos Cheung, and what a great advocate he is for Auckland.

My question is: does this require being kept in legislation? Because I can see the case coming where a change, for whatever reason, is needed, whether that’s changing that supermajority from 75 percent to 67 percent—a two-thirds majority. Is it going to go to 80 percent? We’re going to have to come back and we’re going to have to do what we did with the McLean Institute (Trust Variation) Act, and we’re going to have to take months to work through this. We all remember the stories of Allan McLean and his journey from Wales to Australia to New Zealand and the process that that took us through. We’ll be back here doing the same thing in no time for this. In fact, we just did that for Auckland Council when we worked through the “Takapuna Boating Club Ice Cream Bill”. So is it really necessary that we come through the whole process at Parliament?

Hon Carmel Sepuloni: Is it really necessary to listen to this speech that is just trying to eat up time?

TIM COSTLEY: I just want to address this now once I—

Hon Carmel Sepuloni: At least if you’re going to filibuster, do a good job.

TIM COSTLEY: It’s like white noise, but I’ll start again. Is it really necessary to go through this now and to have this in legislation? Because once it’s there, it will be nigh impossible to get rid of, and I can just see us coming back time and time again to change that. I’d like to hear from the member: firstly, does he think that’s necessary? Secondly, does he have, sort of, assurances that we’ve got all the settings right—this is the last chance to look at them—so that we won’t be coming back to make change after change after change and so that we have some certainty that we can move this through the House?

The last point that I was wanting to make is, you know, are we setting a precedent here? We’ve been hearing about the Golden Triangle from Tim van de Molen, from Ryan Hamilton. I would argue that the Kāpiti-Whitby area is a great area of growth, and we’re going to see a lot more over the coming years. Are we going to see those councils wanting to set up their own future fund—one that will have some detail in it—and then we’re going to have to put all of those through legislation? Is there a more broad framework that we could have considered to do this once and for all that might open the gate for others?

So I’d like to hear, firstly, about the need for it. Have we got the settings right to ensure we’re not going to do it again? Finally, is this precedent setting? Thank you.

Yes, as I say, this Auckland Future Fund is a long-term development to try to benefit the people in Auckland. I think the main point is that the wording is important—the “long-term”. By long term, we’re maybe talking about 10 years as a period of time, but we know there are a lot of factors that can affect the direction of local government. For example, every three years there are local elections and there will be a change of councillors. I think that every time there’s a change of councillors, there is a chance that the direction of their priorities will change, and, for this, we want to make sure that this fund is set up in the long term and won’t be affected by other factors such as elections or a change of direction as well.

At the same time, in order to set up a supermajority of 75 percent, you do need to bring it to the House for legislation, and this is the main reason we bring this bill to the House as well. At the same time, you say, “What will happen in the future if we want to make a little amendment as well?” I think this is also up to the councillors as well. As I say, if they have over 75 percent, if a 75 percent majority of councillors agree, they will be able to change the legislation again.

Thank you very much, Mr Chair. I want to come to clause 4, which is in Part 1, around “Interpretation”. I’ve got a couple of questions in here. Clause 4(1) defines the “Auckland Future Fund” (AFF) as including “any funds or assets (or both) that the Council adds to the AFF”—which is the Auckland Future Fund in the future. I’m keen to get an understanding from the member in charge, Dr Carlos Cheung, around whether he can indicate whether the Auckland—

Shanan Halbert: Which clause?

TOM RUTHERFORD: Oh, “Which clause?”, Shanan Halbert asked. It’s clause 4(1), in and around “Interpretation”. I’ll just read it to you, actually. It says, “In this Act, unless the context otherwise requires,—Auckland Future Fund or AFF—(a) means the fund established by the Council as part of its Long-term Plan 2024–2034; and (b) includes—(i) any funds or assets (or both) that the Council adds to the AFF;”—which was the part I was talking about—“and (ii) capital and income retained in the AFF”.

Shanan Halbert: Where are all the Aucklanders?

TOM RUTHERFORD: “Where are all the Aucklanders?” Why does it matter about legislation and whether I’m from Auckland or not? Why should that be a piece around whether—

Hon Carmel Sepuloni: Because it’s an Auckland fund.

TOM RUTHERFORD: Yeah, but this is a place for parliamentary people to come and actually do legislation. Why should it matter about the place that I come from? Why should it matter which part of New Zealand is my place of origin, around whether I can or cannot speak on legislation? If I want to ask the member in charge to improve the legislation and to scrutinise it, it shouldn’t matter whether I come from Auckland or not. Actually, I take offence at a member saying “Where are the Aucklanders?”, and asking why I have a right as a non-Aucklander to ask questions and scrutinise this legislation. Maybe that member might want to get to his feet and take a call on this exact bill and do the exact same thing. For shame—for shame, from that member. No wonder he is on the list and didn’t win his electorate seat back. Now, if I could actually get back to the point I was trying to ask of the member—

CHAIRPERSON (Greg O’Connor): That’s a really good idea, actually.

TOM RUTHERFORD: Yeah, well, if he keeps heckling and interrupting me—

CHAIRPERSON (Greg O’Connor): Well, that’s just a really good idea, without any explanation.

TOM RUTHERFORD: Yeah, thank you very much. My question is around how clause 4(1) defines the “Auckland Future Fund” as including “any funds or assets (or both) that the Council adds to the AFF” in the future. Can the member indicate whether the Auckland Council has identified any other specific assets, beyond the Auckland Airport shareholding, that might be potentially transferred to the fund?

I note that the explanatory note mentions that the fund will initially be capitalised with Auckland Airport shares and may be further capitalised with other assets. Understanding whether other assets are being considered would help us assess the potential scale and importance of the fund over time. I commend this member and the council for their forward-thinking approach, which is commendable.

My second question is: can the member also clarify the breadth of what structures for governing and managing the AFF could include under clause 4(1)? Could this encompass, potentially, a trust, a council-controlled organisation—a CCO—a committee structure, or other arrangement?

The bill does provide some sensible flexibility for Auckland Council to choose the most appropriate governance model; however, I think it would be helpful if the member could clarify for us the range of options that are available under this definition, particularly as the council may change structures over time as they see fit. I’d welcome the member answering both of those questions for me.

Once again, thank you to the member for the question. So, to talk about funding, yes, initially, the fund was capitalised by selling the airport shares, but at one stage I think there was a debate in Auckland Council about whether they wanted to put the Port of Auckland shares into the fund as well. I think that’s the reason why they left it open on the wording like this.

Also, I think there’s some good news to tell other members as well, not only the airport shares—now, obviously we know that the airport shares, when they sell, they make extra profit from what they expected—but also recently Auckland Council have been willing to put another $45 million from the special dividends from Port of Auckland into the Auckland Future Fund as well. That’s why you see that the Auckland Council is leaving it open—so, in the future, they are happy to put more extra assets or more funding into the Auckland Future Fund in order to benefit the people in Auckland.

Now, if we just talk a little bit about the structure of the Auckland Future Fund, the Auckland Future Fund is basically like a council-controlled organisation. The overall direction will be given by the Auckland Council, but at the same time they run independently from Auckland Council. Three board members—very experienced board members—are being appointed to manage the fund and make all the investment decisions as well. All three board members will, based on the direction or the guidelines given from the Auckland Council to make their investment, make sure they benefit people in Auckland as well.

Recently, there’s also been some good news to tell the member as well. The Auckland Future Fund Board actually recently appointed Vontobel Asset Management as its global investment manager, with the responsibility to manage that $1.3 billion in funds on behalf of Auckland Council. Vontobel Asset Management company is a global company. They’ve actually got offices all around the world—I think in 23 different countries—and they have a very good track record in the investment sector as well.

I also say that this is from a tender process, which is a very competitive tender process, in which we actually got 21 participants try to put in—they wanted to work with Auckland Council. Then, from that, we actually managed to choose the best one, which is called Vontobel Asset Management company, to help Auckland Council to manage this global investment.

I think it’s really clear that there is support for this bill, and there is very little in Part 1, nothing controversial, and certainly nothing that the Opposition seeks to debate on this particular bill, which is really a big part of what the committee stage is all about. It’s our opportunity to debate detail. Now, where we all agree—isn’t it wonderful? That doesn’t happen very often. I do worry that the other side is just eating up time in this debate for the sake of it.

CHAIRPERSON (Greg O’Connor): Ms Sepuloni, you have the opportunity to move that the debate close.

Hon CARMEL SEPULONI: I know.

Thank you very much, Mr Chair. My previous questions have been on clause 3, which was the purpose, clause 4, the interpretation, which the member in charge just answered my two questions on, and I thank him for that. I now want to come to clause 5, which is Decisions of Council.

In the legislation, it says, “In this Act, decisions of the Council are made by the governing body (as defined in section 4(1) of the Local Government (Auckland Council) Act 2009).” Clause 5 specifies that decisions are made by the governing body, which would be Auckland Council. Can the member confirm that this means that these decisions require proper governing body meetings with things like notice, agendas, and public access as per normal council procedures? Many of us would know that you would go on to your local council website to find what is being discussed at your upcoming council meeting many days in advance of it—so ensuring that things like agendas and public notices are available to the general public and that people can attend in person if they so wish.

Transparency requirements are important, in my view, for maintaining public confidence in the fund. I would like to know from the member that he is going to reassure us that major decisions about the fund won’t be made behind closed doors but will follow the normal democratic processes that apply not only to Auckland Council’s governing body but, actually, to the expectations that we have through the Local Government Act of all our councils across New Zealand, to ensure transparency and openness to their ratepayer base and to the public, so that they know when meetings are happening, what are points of discussion, and then resolutions from the meeting once that meeting has concluded as well. I’d be keen to hear from the member around what is expected on the transparency front from the council on this, please.

I thank the members for their questions. Like I say, public confidence and transparency is one of the most important things when we are using our taxpayers’ or ratepayers’ money, so I think it is very important to let the public know what’s going on. This is why an Auckland Future Fund and trust will actually have an annual report coming out to give detail on what is going on, what is the investment, how is the return going—not only the annual report but also a six-months report, as well. Also, every three months, the board of trustees will also report to the council, as well, on the progress of what’s going on with all this investment. That will give the general public more confidence, to see what’s going on with their fund, as well.

It gives me great pleasure to give rise to the voices of those in Tāmaki-makau-rau, a city of wonder, life, culture, and its own strong identity. I am proud to rise as the member of Parliament for Tāmaki-makau-rau to lend my voice for the first time in this matter and in particular on this bill, the Auckland Council (Auckland Future Fund) Bill.

Now, contrary to what you’ve heard in this House, especially for those in the Opposition, let me be very clear: Te Pāti Māori and the member of Parliament for Tāmaki-makau-rau oppose this bill, and I will explain why. But before I do, we acknowledge—Te Pāti Māori and I acknowledge—that economic prosperity is important and critical to the future of Tāmaki-makau-rau and to all those who live, play, and visit our region. I acknowledge that the Auckland Council is doing good and important mahi to futureproof our region for future generations. However, I implore this Government and all those who hold power to determine how the lives of every single Aucklander is impacted now and into the future to honour your obligations under Te Tiriti o Waitangi; uphold your responsibilities as a partner. I will even go a step further to urge you to be like Māori. Māori have never breached Te Tiriti o Waitangi. So please rise and be the Treaty partner Aotearoa and Auckland deserves and needs today. It’s not a hard ask. All it takes is to put the people and the planet before profit.

In this instance, I and Te Pāti Māori are not saying, “Put Māori before everything and everyone else”, where this bill is concerned. No, we are not. We are urging you to include Māori in your decision making, especially when it impacts a significant portion of the Māori population. How does the Government pride itself on being unapologetic, on prioritising the economy for the benefit of all New Zealanders, when it does not factor in, nor make room for, nor even bother to include all New Zealanders?

Let’s go back to the establishment of this Auckland Future Fund (AFF). Auckland Council sold its Auckland Airport shares, a sale that went ahead without consultation with Māori—and not just any Māori: Ngāti Whātua and Waikato-Tainui. They were not afforded the respect that they deserve by being a prominent voice in consultation and decision making, but rather included as an afterthought. This bill lacks governance structure. In fact, it lacks any statutory requirements for Māori representation. When referring to the protection of intergenerational wealth, Māori must be a part of the decision making on what gets sold, how funds are invested, and who benefits from the returns. I mean, a global investment manager—has that been appointed here? Where and what is the long-term investment strategy? How will tangata whenua, tangata Tiriti, and tangata moana who reside in Tāmaki-makau-rau actually benefit from the funds?

I do have specific questions for the member to ask, and it goes back to clause 3, Part 1. The quoted text from the legislation is this: “The purpose of this Act is to ensure the AFF continues as a long-term financial investment for the benefit of the current and future communities of the Auckland region.” My question: why does clause 3 not explicitly reference Māori communities or the Treaty of Waitangi, given the bill’s stated purpose to benefit current and future communities? Would the Minister or the member support an amendment to include Māori as Treaty partners in the purpose clause?

I have another question. It is in regards to clause 4, Part 1. The quoted text from the legislation is this: “structures for governing and managing the AFF means organisational structures for governing and managing the holding, direction, and operation of the AFF.” The question is: would the member, the Minister, support adding definitions for “mana whenua Treaty partnership” or “Māori advisory group” to clause 4 in Part 1 to clarify the role of Māori and the governance and management of the AFF? And may I remind this House that in Tāmaki-makau-rau, we boast one-quarter of the entire Māori population—250,000 Māori call Tāmaki-makau-rau home. How is this justified as representative of every Aucklander and New Zealander when their voices aren’t here? Please explain.

Thank you, member, for raising that question. Obviously, this is an Auckland Future Fund. It’s going to benefit everyone in Auckland, including different ethnicities as well, including Māori, Pasifika, Asian, European—basically everyone living in Auckland.

I think one thing we need to understand about this bill: this bill is about adding an extra layer of protection to the fund, to make sure the fund isn’t being misused or mismanaged. Overall, to invest the returns of this fund or how to make a decision is still guided by the Auckland Council. They’ve got quite a few different documents to guide them, including the statement of intent, Auckland Future Fund policy, responsible investment policy, and also Auckland Future Fund distribution policy, and the deed of trust, as well.

So, as I say, since we are guided by the statement of intent, we can also refer back to one of the Auckland Council’s outcomes. We can know this, on the long-term future plan, we have six outcomes which Auckland Council tried to focus on, and Māori identity and wellbeing is one of them. But we can say that, due to the activities, I think the Auckland Future Fund may not directly contribute to this outcome. However, I think managing the risk and providing a strong return to council enables the achievement for this outcome across the group, as well.

I want to remind the member, as well, the council actually has representatives from Houkura Independent Māori Statutory Board on the selection process for future fund directors. So they do have a say on who they want to employ, how those directors have the vision to benefit the Māori community as a whole, as well. So they actually have the obligation to ensure there’s an opportunity for Māori to contribute to decision making.

At the same time, I just want some more good news to inform the member as well. The fund is actually achieving a Māori outcome plan, and the council has an independent board to monitor how council is considering the Māori perspective. I also want to give you more good news, as well: recently, Auckland Council have increased their Achieving Māori Outcome Budget by 10 percent next year, to support projects like marae infrastructure, energy, and climate resilience. So I think all this funding has a vision to benefit everyone in Auckland, including the Māori community as well.

Thank you, Mr Chair. I must congratulate the member for taking the bill to the committee stage. I want to, firstly, just set the scene about the purpose of the Act, and I’ve got some questions for the member. I’m interested in the purpose clause being a long-term financial investment for the benefit of current and future Aucklanders. Now, as a member of the West Auckland community, I know that we have a large number of community assets that are aged out. Our one swimming pool, for example, built for the 1990 Commonwealth Games in Henderson, the West Wave pool, was for a population of around about 120,000 people. The population is now well over 200,000 heading towards 300,000 in West Auckland. So, what I would hope, Dr Cheung, as a benefit of this fund, is that investment in community assets like new swimming pools, for example, and new community facilities would be possible. I’m interested in your perspective as to whether facilities like that would be one of those things that would benefit current and future communities.

I’m also interested in the fund acting as a long-term financial investment vehicle. It’s all very well to say we’re going to put a billion dollars or so from the proceeds of Auckland Airport shares into the fund, Dr Cheung, but Auckland Council is sitting on billions and billions of dollars of lazy assets. It’s got maybe $2 billion to $3 billion worth of port assets, and if they were put into the fund—and you did mention it—they could potentially generate fantastic dividends for Aucklanders every year. Then we have around $2.6 billion of vacant land and buildings that Auckland Council owns. So, Dr Cheung, do you think that the Auckland Future Fund will be able to realise its potential if it’s only got one asset in it or, essentially, $1 billion from the sale of Auckland Airport shares, or do you see this as a very smooth vehicle to start bringing in these other assets, actually recycling assets, into things Aucklanders need, like community facilities? Dr Cheung, I’d just like you to focus on those questions first, please.

Thank you, member from West Auckland Simon Court, for raising the question. I actually have a similar request to the mayor as well. As we all know, Mt Roskill has recently been suffering from flooding, as well. We really want to have an upgrade of our stormwater infrastructure and also on the transportation infrastructure as well. However, this bill is about adding an extra layer of protection to how the fund is being invested. How to use the return of the fund is up to the Auckland Council. They are making the decision on which area they want to invest in. This is why I say it’s so important that everyone needs to go to vote during the local election. Make sure you vote for someone who can represent your values, someone who can actually fight for your constituency, for some more investment in your area.

But do you know what? In saying that, every three years, as well, I think the council will have a meeting to look at the direction, look at the return of the funding as well, to make sure that they’re still kept in the right direction. I think there’s multiple safeguards there to make sure that the funding works properly.

Also, to address your second question, which is “Is it just only one funding or multiple fundings?”, as I mentioned in my answer to the previous question from our colleague Tom Rutherford before, I think the Auckland Future Fund, at the moment, is capitalising by the sales of the airport shares, but I think this is only the start of this journey. In the future, the council has the opportunity or has the choice to put more excess into the fund as well, to make sure that they keep growing the fund, and to make sure that they have the high returns so that they can benefit Auckland as a whole.

I move, That debate on this question now close.

Thank you, Dr Cheung, that’s very helpful. I just want to explore what you consider to be the long-term financial investments for benefit a little bit further, and I just want to provide the context. The Government is planning, through the National Land Transport Fund and other initiatives—potentially a city and regional deal—to invest heavily in Auckland’s infrastructure. Just this week, an announcement was made to invest in the East-West Link, an incredible piece of highway infrastructure that’s going to get tens of thousands of heavy trucks off local roads around Onehunga, Ōtāhuhu, and other suburbs in south-east Auckland—a project that is maybe five or six years overdue, which is about the term of the previous Labour Government that stopped it.

Now, Dr Cheung, this project could cost somewhere in the region of $3 billion to $4 billion, and I’m interested in your views on whether the Auckland Future Fund could be used to co-invest in projects where Auckland Council and its communities receive a benefit in order to make the overall dollar go further. We’ve got the Mill Road project, and of course the north-west busway, which will lead from Auckland City out to Massey and Westgate, and out to as far as Kumeū and Huapai, eventually. So, Dr Cheung, do you think that the Auckland Future Fund could essentially become another public in the public-private partnership model so that Auckland Council invests its money and we can actually get more infrastructure up sooner? Do you think that’s a possible use of this fund?

Thank you to the member for raising another question. As I mentioned before, how they use the return on the investment is the council’s decision. In saying that, the fund can be used for reducing the rates increase. It can also be put on infrastructure as well. There are a few things, so I think I’ll just try to use this opportunity to mention how the model of this fund works, to give a little bit of extra confidence to the member here, Simon Court, to know that the fund will be going in the right direction.

On behalf of the council, basically, we are trying to adopt 80 percent growth and 20 percent income of the portfolio to meet the council risk advertised. We want to make sure that the fund will grow, but at the same time minimise the risk as well. The member will be interested: what happens if the fund underperforms? Will that affect the future planning of infrastructure or increase the rates? I’ve been informed by the council that if the fund underperforms it won’t be affecting the rates. So they won’t increase the rates in order to cover the loss of investment. I think that is a very good initiative for this Auckland Future Fund, making sure the fund keeps going and matching the development of Auckland and making sure we have enough funding to grow the city as well.

Also, like I mentioned in the second reading as well, that also creates—I think this is a new model as well, because currently, I think, for most of the local councils, all their funding is based on rates, based on debt, and also based on central government as well. So if this model actually works, I think it will open up to the rest of the country how councils can actually raise funds to make sure all the future development, all the funding, is sustainable for their development as well.

Thank you, Mr Chair, for the opportunity to take a call on this important bill before the committee this afternoon. It’s my first opportunity to do so. I want to speak about clause 6, “Relationship between this Act and other legislation applicable to Council financial management”. I was interested in reading this particular clause, wondering about the depth in terms of the detail that’s included here, given some of the lack of detail in other documents I’ve read this week regarding funds.

I just wanted to ask you whether, when we talk about other legislation applicable to council’s financial management, accountability, and use of funds, why a range of other Acts that relate to exactly that point, the role that councils play in terms of financial management, accountability, and use of funds, weren’t also specifically detailed as subclauses—including, for example, the Public Records Act 2005, which relates directly to financial document retention, and, obviously, that is something very relevant in relation to council financial management when you are buying and selling assets. As we’ve learnt in the House earlier today, actually, the importance of funds being successful—they both buy and sell their assets; so just understanding the retention of records in relation to that being an important component, potentially, of the council’s financial management, and, therefore, a piece of legislation that may need to be specifically acknowledged and reflected.

Another one in terms of that context, the Local Authorities (Members’ Interests) Act 1968, the role that plays. You know, these funds can invest in things that may be local and there may become challenges where we have elected members who have interests in those, and that might be worth considering.

Also, the Local Government (Auckland Council) Act 2009. It’s specifically relevant to the Auckland Council, and, therefore, a piece of legislation when it comes to the financial management, accountability, and use of funds of Auckland Council, of the Auckland Future Fund itself, may be another relevant Act that needs to be taken into account.

Of course, the Public Finance Act itself is all part of the wider scope of public finances, and that is something that captures council’s interests. In relation to that Act, of course, as well, we have the overarching Companies Act 1993 for CCOs—council-controlled organisations. The fund may invest in companies that could get caught in terms of that definition of a “council-controlled company”.

I’m just wondering if any of those Acts should be specified just to ensure completeness under that clause 6(1)(b). Thank you.

Thank you, member, for the question. Yes, it’s true that Auckland Council does have a history of fund mismanagement, and they have been raising a lot of funding from our ratepayers as well. For example, I mentioned there used to be a fund called Diversified Financial Assets Portfolio, which was supposed to be a long-term fund, but due to mismanagement, the fund was disestablished and they’ve been used for short-term repayment, the short-term debt, and all that council spending as well. This is exactly the reason why we want to bring this bill to the House here right now, because we want to make sure the purpose of the fund will remain the same for the long term.

We want to make sure that the fund will benefit Aucklanders in the long term, not only the current generation but also the future generation as well. This is why we are bringing the bill here, to make sure that if they want to change the direction of the fund or want to change the initiative of the fund or how they invest the fund, they need to make sure they have 75 percent—which is called a supermajority of councillors—to agree. Otherwise, they can’t just use the fund for other purposes. I think that’s answered the question for the member: why this funding now? We are here setting the bill for Auckland Council. I think the purpose is to make sure the fund is not being mismanaged or being wasted in different areas that are not going to benefit Aucklanders.

Thank you, Mr Chair. I’ll just take a call and put focus on Part 1 clause 4 and the whole long-term view of the Auckland Future Fund and its benefits to the wider region, a region, which stretches all the way up to the edges of Mangawhai. There are investments that can be made up there for the benefit of the wider region, whether it be into some of the great regional parks they’ve got up there but also into the area of huge investment around the golf courses. They need more infrastructure investment, potentially, up there that would benefit the wider population and provide opportunity for events and help to develop that part of the region.

I’m intrigued to see how the benefits could flow to the wider population of Auckland. That’s the focus around the events opportunity with investment into a potential area like Eden Park, which is obviously a large stadium in the middle of Auckland with a lot of history and a lot of contention, but it really needs the opportunity for investment to grow the use of that investment. I’d be interested to hear what the member’s thoughts are in terms of utilising that asset for wider use around the region to get a better return and better opportunities and more and more events to be held there and how that would benefit the population of Auckland going forward so that it will, once again, work on that livable city and provide lots of opportunities for the people, whether it be to invest in more opportunities to provide concerts and those sorts of things. If you can make the ground bigger so you can provide more cricket games for test cricket and so forth, which it struggles to do at the moment, that would be of benefit. But the investment of the fund could be used for something like that, I would have thought, to potentially help the sport of test cricket in the Auckland region.

And then that would then allow them, maybe, to have day-night games so that we can benefit the Indian population in particular, which we then can project to, because that works better for the time zones in terms of utilising the lights, the only lights that are probably good enough in Auckland to have a facility and provide entertainment at that time of night, and then the income that would come back from advertising into the region, and it would make for great entertainment.

Then other sports could benefit. You could change the shape of the ground if you could invest in it and, maybe, then put a roof on it so that you don’t have to worry about whether it rains or not or whether the wind blows too hard. You can still have all your various sports, and you wouldn’t have—like we saw recently—a T20 game being cancelled down in Canterbury because of the fact it rained for the second part of the match.

The advantages of having a future fund that can invest in that type of infrastructure, I think, would really benefit the wider population of not only Auckland but, actually, the country. It would bring people from around the country into Auckland to help drive that event sector. Then you would be hosting big rugby games with the benefit of not having to worry about what the weather’s going to do and all that sort of thing. You can provide big, huge concerts and attract the really big acts. Wouldn’t it be great to have Taylor Swift over here? After she’s been out here and got married, she can go and perform a concert. Wouldn’t that be a great thing? Wouldn’t that be a great thing?

Hon Dr Megan Woods: Why don’t you get the Prime Minister to ask her again in a—

GRANT McCALLUM: Exactly, wouldn’t that be a great thing? I completely agree. Isn’t that a great idea? Isn’t that a great idea? Wouldn’t that promote—yes, Megan thinks it’s a great idea. Well, it would certainly be a bigger venue than what we provide and what you’re going to have in Canterbury, which is a great new stadium. The potential of covered stadia is that when you try to attract events, they don’t have to worry about weather and the impact of that sort of thing. Investing in a roof would, I’m sure, be of great interest to the people of Auckland. That’s another one of the big things you could use it for. There are plenty of other events that that would be able to drive and help the people of Auckland. I’ll be fascinated in your thoughts there.

I move, That debate on this question now close.

Thank you, thank you, thank you, Chair. Thank you, member, for raising the question. Although I keep saying that the Auckland Future Fund is going to benefit Aucklanders—the current and future generations as well—I always say that Auckland is the heartbeat of the country. We’ve got 1.3 million people living in Auckland, and I believe that the impact for this fund, for this legislation, goes way beyond Auckland. I think it’s going to be for the benefit of New Zealand as a whole.

For example, I think the member just now raises a very good example. What’s happening if they’re going to put more infrastructure in Eden Park? We’re going to benefit people. People will travel to Auckland to watch the concert. Or, for example, I think if Auckland Council put more funding on the transport level, I think that’s going to benefit the whole country. We know that for the member, the MP for Warkworth, there’s a lot of transport logistics going on between Northland and the Port of Auckland as well. Imagine if all this funding, the return on this investment, can go back to improve our transport network in Auckland. That also benefits the people in Northland as well. I agree with you. I believe that this bill’s impact goes beyond Auckland and actually benefits everyone in New Zealand.

I’m interested to delve into an area that hasn’t been traversed yet over the course of this debate, and I have been listening diligently throughout the early stages of this debate so far. It does delve a bit deeper into clause 4. I appreciate the higher-level perspective from the member Grant McCallum, who talked of his aspiration for roofs, but I thought, in particular, I wanted to touch here on clause 4(1)(b)(i)—that’s on line 18—talking about the Auckland Future Fund (AFF) being the establishment of the fund in the Long-Term Plan. It includes “any funds or assets (or both) that the Council adds to the AFF;”.

Now, I’m interested in the first part of that, in particular “any funds or assets”. I’m interested to understand from the member in the chair whether he can give us some greater insight around when a fund is not an asset—because, obviously, we’re well aware of normal processes to draft legislation that is simple, concise, and as clear as possible, so I am interested in why they have chosen to specify “funds or assets (or both)” as opposed to simply saying “assets”. The suggestion there, to me, anyway—and I’m happy to be corrected by the member in the chair—is that it’s possible for Auckland Council to perceive a scenario where a fund is not an asset but they may still wish to include it in the Auckland Future Fund. That, I suggest, would be an unusual situation, but, again, it’s unusual that we’ve broken out fund and asset in this situation, where most people would consider, I think, funds to be assets.

If there is indeed a scenario where the member could shed some light on any potential funds that the Auckland Council currently has that are, from their perspective, not considered to be assets, or maybe perhaps be in negative equity? There could technically be a scenario where that could happen if they had a standalone fund and that fund had borrowed money against the assets of the fund, which have then devalued over time for some particular reason such that it was in a negative equity position—that is a potential scenario that could occur. I suggest it would be unlikely, but, again, I come back to the point of why you would specify those two separate pieces being a fund or an asset if, indeed, that was not the expectation that there could be at some point a fund that was not an asset such that it needs to be clarified through that mechanism.

Then, I guess the question that flows from that is: if, indeed, a fund could potentially not be an asset in that scenario, is it the intent of Auckland Council that they may look to leverage some of these funds such that they may be in a position of vulnerability and may fall into a negative equity situation? I think that would definitely give a different lens on the conversation we’ve had so far around looking to, primarily—well, the conversation certainly has primarily focused on assets, but that could be a scenario where we have a leveraged fund in negative equity. Of course, that still could, potentially, be cashflow positive, but I would suggest, again, that that would be an unusual scenario.

I’m really just interested in understanding why we’ve seen that classification of “any funds or assets (or both)”—why the distinction of fund versus asset, unless there is that scenario. As I said, I would be surprised if there was a scenario where we were talking of funds potentially being in negative equity, but it could technically be possible. As I say, that suggests—well, asks the question, actually—is that where they’re wanting to go, putting something as a potential liability or a negative equity into the Auckland Future Fund? What are the potential implications of that, if that was a scenario that came to be in some sort of speculative investment environment that then could potentially have a detrimental effect on the Auckland Future Fund itself, which, of course, then would go against, presumably, the premise of the fund looking to grow wealth over time and return investment to the city to fund a wide myriad of things like roofs, as Mr McCallum has suggested?

I’m really interested if we can get some clarity around that aspect in particular from the member in the chair, and I do want to acknowledge his work on this, working on behalf of his constituency and the wider Auckland region to bring this bill forward. It is a useful suggestion, but I just really do think it would be helpful for the committee if we could gain some clarity on that aspect in particular to ensure that we have the right lens around this as we proceed. Thank you.

Well, the Auckland Future Fund for me is not only a fund to grow the fund for future Auckland development as well, but I also think it represents a new journey of local government with a different funding model. I mean, at this stage, yes, maybe we have only got the fund which was raised from the sale of the Auckland Airport shares, but I think this is only the first stage. I think in the future we’re going to put different assets into the fund as well.

We remember one of the reasons or one of the initiatives of this fund is to try to diversify all the investments. At the moment, I think most of the Auckland investments are either on properties or on shares, and I think they have a high risk to the funding model. I think we would love diverse investment. Also, I think we’ve got to put more funding or more assets into the fund. This is why clause 4 is purposely drafted like this, to leave the door open for the future, to allow Auckland to put more assets into the fund in order to match the development of Auckland in the long term.

Mr Chair, through you, if I could ask the member in charge: is there a chance, through this bill, for the Auckland Council to see the error of its ways and perhaps buy back into Auckland Airport, a gold-standard piece of monopoly infrastructure that’s expanding, pays a good dividend, and would be able to be leveraged to pay for Grant McCallum’s Taylor Swift concert? If so, so be it. Are they going to be able to see the error of their ways, Mr Cheung?

Thank you, Minister, for your questions. As I say, I mean, there’s nothing wrong with investing in specific shares or specific assets, but, at the moment, we need to also know that we want to reduce the risk; we want to manage the risk. For example, during COVID, when we didn’t actually have tourists coming from overseas, and we got a lot of flights being cancelled because of the pandemic and, obviously, airport shares not doing well, that actually reduced the return of the fund. That affects the future planning for Auckland Council as well, so I think it’s very important to diversify all investment to make sure we’ve got return from different areas, as well. That will provide an extra layer of protection to our funding model, to enable Auckland Council and the councillors to plan in the long term, as well.

I move, That debate on this question now close.

Motion agreed to.

Part 1 agreed to.

Part 2 Auckland Future Fund