Politicians Running Ports

Auckland Mayor Len Brown found himself in a spot of bother when he was caught between the competing interests of the Auckland port company, that needs to expand to meet growing demand, and parts of his political constituency, that would rather have the port closed. The Mayor did what some politicians tend to do in these cases: he set up a committee.

The committee was duly formed and given the rather hopeful name of “Consensus Working Group”, the hope being that some form of consensus would emerge to save politicians the trouble of actually exercising leadership. The committee was duly equipped with a chair who is a professional management consultant with degrees in psychology and sociology and a PhD in environmental management. The committee was supported by council planners as well as a consortium of external consultants led by EY.

The writer was invited to attend the first meeting of the committee, but was unable to, as he was in Europe at the time. Our apology met with this reply from a Council Planner: “unfortunately for your case, stakeholders must be present at the initial plenary meeting in order to be involved in this process”. We decided at that point that we would be happy not to be involved in that process.

It now looks like we have missed out on some first-rate comical entertainment. Six months of deliberations have given rise to an interim report that lists 12 possible alternative locations for a major port, including Muriwai. Had we bothered to spend a few hours sitting in these stakeholders’ confabs, we would have supported the Muriwai proposal wholeheartedly. The transit time for ships carrying import containers would be reduced, as their approach to the port would be assisted by powerful surf waves.

Councillor Mike Lee told Radio New Zealand some of the sites should never have made the list of areas to be considered and some of the suggestions were batty. We totally agree. Some of the suggestions are as batty as his earlier decisions. Back in 2005, Ports of Auckland was majority-owned by the Auckland Regional Council. The elected chairman of that body at the time, Mike Lee, justified a decision to buy out the private shareholders by saying, “The Ports of Auckland will be a prized legacy for future generations and the wealth generated will be vital for funding Auckland’s infrastructure for years to come.”

This is what actually happened: the cost of buying out the 20% then owned by other shareholders was $170 million; that transaction effectively valued the whole company at $850 million; but the book value of the company shown in the Auckland Council transition documents in 2010 was just $394 million. Even after allowing for inflation and differences in valuation methods, $456 million is an awful lot of money to disappear in just five years.

The worst part of Mr Lee’s legacy, however, was to remove share market accountability and hand over total control of the port to local body politicians and planners. The expensive consultants employed by Council are doing very well out of this process, but their gain is the city’s and the country’s loss. The port company, somehow, has managed to continue to run an efficient operation, no thanks to their political ‘owners’.

The obvious solution is to incentivise the port to optimise and rationalise its operation in cooperation with other ports, unencumbered by petty parochialisms. The alternatives amount to grandiose schemes to relocate the port, totally ignoring the reality that in New Zealand, these days, we just don’t do massive infrastructure. It is simply not possible to undertake major public works without upsetting the habitat of some snails, kauri saplings or taniwhas. Besides, all the money Auckland has (and doesn’t have) has already been committed to the rail loop.

Vesting the total ownership of the ports on the Auckland Council was a particularly bad idea. The Council is deeply dysfunctional, run by a swollen bureaucracy whose primary aim seems to be to provide more highly paid jobs for more officials A veritable den of spivvery.

(This article by the Importers Institute was first published in The Exporter Magazine)

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