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Auckland port report “seriously flawed”

Wednesday, 27 November 2019 | 00:00

Two new economic reports show that “the idea of moving Auckland’s port to Northland is seriously flawed,” Ports of Auckland (POAL) has said.

POAL’s statement refers to reports which examine the Economic Analysis of Upper North Island Supply Chain Scenarios carried out by consulting firm EY and produced as part of the second Upper North Island Supply Chain Strategy (UNISCS) Working Group report, which last month recommended the closure of POAL to improve the country’s supply chain.

EY’s report was labelled inadequate by the reports, by economic consultancies the New Zealand Institute of Economic Research (NZIER) and international firm Castalia.

“Our initial review suggests that the financial (and consequentially fiscal) costs of the proposed relocation are materially under-estimated,” said Castalia said.

It said that net benefit of full relocation of the port to Northland is “likely to be negative”.

NZ$4-5bn net cost

The net costs of full relocation of the port to Northland was put at NZ$1.7bn, but Castalia said due to underestimation of the gross costs and inappropriate netting, the net cost of the Northland project is likely to be in the region of NZ$4-5bn.

POAL has commercial enterprise value of about NZ$1.2bn, said the company. Assuming the net cost of the project will be NZ$5bn and its commercial enterprise value will be NZ$1bn means POAL’s relocation will require NZ$4bn in fiscal subsidy which would not need to be spent without the relocation.

“The key question then is whether releasing some land for more apartment/commercial development closer to Auckland CBD is worth spending this much taxpayers’ money compared to all other social objectives that can be achieved with the same amount of subsidy.”

NZIER analysis

NZIER said: “On balance, the recommendations around feasibility of moving to Northport should be treated with a high degree of caution.”

In its report, it said the EY study appears to over-estimate the cost of maintaining and upgrading POAL and under-estimates the cost of moving POAL.

It is “extremely unclear” whether it is feasible to move POAL operations to Northport.

“Far too many components of the supply chain do not appear to have been costed or are under-costed, and these costs will be material.”

NZIER said it is not clear whether moving POAL’s operations is cheaper than developing it onsite.

“While as the study reveals, there are higher value uses that the land could be put to, however these uses don’t seem to recognise that there are a range of benefits that the Auckland region gains from short and efficient transport linkages to its port.”
Source: Port Strategy

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