Councilor Andy Foster writes to the Fish, with some clarification over costs and leases on the waterfront. Published here in the full, with the aim of correcting misinformation, by the Eye of the Fish:

“I wanted to address the apparently emerging urban myth that Council and the Waterfront Company give away land – apparently to line the pockets of private developers. Some people event think the Council pays for these buildings ! Not a chance ! We go to the market looking for the best possible proposals in terms of dollar return and urban design outcomes. Sometimes we won’t go for top dollar if there is a combination of other outcomes that is considered in the best interests of the city and worth sacrificing some dollar revenue for. I would hope most people would see it as entirely appropriate for a Council to be interested in money and also in urban amenity, public access, heritage retention, relationship to surrounding public space etc.

An example was with Chews Lane, where Council had over time assembled a collection of somewhat rundown buildings on both sides of Chews Lane. We went to the market, received a range of proposals and went with a proposal which was somewhat, but not much below the highest priced one. Council received many millions of dollars for the site, but also the upgraded access through Chews Lane, retention of several heritage buildings, and a mixed use development including office, residential, retail and café activities. I think most people would consider this development adds immensely to this important part of the city. Some people have clearly misunderstood the type of commercial transaction. Council could have taken money over a period of time, but instead has taken what is effectively the equivalent market value for a sale – up front, and then a nominal $1 a year thereafter for the term of the lease. In the case of Chews Lane this is 250 years. 

In respect of the OPT the same competitive process applied. Again the Waterfront Company received a significant multi-million dollar sum up front, as well as avoiding the multi-million dollar cost of wharf strengthening. Wharf strengthening would have been required regardless of having a structure on top or not – and though the cost of strengthening would have been lower without any structure on top, it would still have cost many millions. The lease in this case is 125 years for a $1 a year. Wellington Scoop reported in May 2012 that :

“Willis Bond & Co would pay for a 125-year lease on the wharf and terminal building. Under the company’s proposal the building would accommodate apartments on the upper levels and a range of other uses at wharf-level ….
Willis Bond & Co would spend some $16 million on repiling and strengthening the 101-year-old wharf on which the OPT sits.
Wellington Waterfront Ltd would receive $16 million in cash and development benefits and improvements.”

Site 10 is the same. Another competitive process, negotiations, and a multi-million figure payment up front.

So in summary payments tend to be up front and for a long term lease, so anything thereafter for the life of the lease will be nominal. However the value of the up-front payment will be almost identical to the value of a sale because of the effect of discounting over a long period of time.

If you want to get a feel for the scale of the amounts received on an ongoing basis, I won’t put out any number that is not already in the public realm for reasons of commercial confidentiality. What you could do is look at the various Statements of Intent and Waterfront Business Plans over recent years. For example the 2012/15 Development Plan included “Proceeds from Operating receipts & Commercial developments 2013/14  $9,000,000   2014/15  $15,075,000” 

There are obviously ongoing operational costs for managing the waterfront, not least being wharf piling. However without these proceeds the Waterfront development most notably the public space we all enjoy so much, would have cost us ratepayers tens of millions more. I hope that this will address the myth that Council and/or the Waterfront Company give away land. As I said – no chance.”

Cr Andy Foster
Chair – Transport and Urban Development
Wellington City Council

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