Super Fund proposal to build and operate Auckland light rail

The Government has revealed an ‘unsolicited proposal’ from the New Zealand Super Fund to design, build and operate two light rail projects in Auckland.

Grant Robertson and Phil Twyford: Auckland light rail a step closer

A modern, rapid transit light rail network to transform Auckland is a step closer with Cabinet agreeing to launch a procurement process, Transport Minister Phil Twyford and Finance Minister Grant Robertson announced today.

“The Government is committed to progressing light rail to transform Auckland. It will be a magnet for private investment in urban renewal and will be able to carry 11,000 commuters per hour – the equivalent of four lanes of motorway,” Phil Twyford says.

“We are investigating innovative solutions to tackle congestion and build a vibrant and modern city.”

“The New Zealand Transport Agency will now set up a robust process to explore a range of possible procurement, financing and project delivery options. This process will invite and assess all potential proposals and report back to the Ministers of Finance and Transport. The Transport Agency will work with the Treasury and the Ministry of Transport in this process,” Grant Robertson says.

The procurement process covers both the city to Mangere and the city to North West lines. The recently announced 10-year transport plan for Auckland earmarked $1.8 billion in seed funding with the option of securing private investment in the network.

“Last month, the Government received an unsolicited proposal from the New Zealand Superannuation Fund, which proposed they would form an international consortium to design, build and operate Auckland’s light rail network,” Phil Twyford says.

“The Government will not be commenting further on the proposal other than to say that we welcome the strong interest in light rail and acknowledge that any investors will require a reasonable commercial return. The procurement process agreed by Cabinet will review all other proposals in the same way as the Super Fund’s proposal is assessed.

“It’s good to see that investors recognise this project will be a game-changer for Auckland commuters and the first step in tackling Auckland’s ever-increasing congestion,” Phil Twyford says.

This would be a variation on a public-private partnership, with in involvement in the Super Fund  working alongside international investors in a consortium.

The Super Fund is a Government owned fund – that means a taxpayer owned fund. The new Government has just resumed putting more money into the fund after the National Government suspended payments when the Global Financial Crisis struck – it didn’t make sense to borrow heavily and put money aside as an investment at the same time.

The Super Fund explains it’s purpose and mandate:

In response to the challenge of New Zealand’s ageing population, the NZ Superannuation and Retirement Income Act 2001 established:

  • the New Zealand Superannuation Fund, a pool of assets on the Crown’s balance sheet; and
  • the Guardians of New Zealand Superannuation, a Crown entity charged with managing the Fund.

The Government uses the Fund to save now in order to help pay for the future cost of providing universal superannuation. In this way the Fund helps smooth the cost of superannuation between today’s taxpayers and future generations.

The Guardians of New Zealand Superannuation is the Crown entity charged with managing and administering the Fund. It operates by investing initial Government contributions – and returns generated from these investments – in New Zealand and internationally, in order to grow the size of the Fund over the long term.

Government contributions to the Super Fund were suspended between 2009 and 2017. In December 2017 contributions resumed, with an initial payment of $500 million planned for the financial year to 2018. From around 2035/36, the Government will begin to withdraw money from the Fund to help pay for New Zealand Superannuation. The Fund will continue to grow until it peaks in size in 2070s.

The Fund is therefore a long-term, growth-oriented, global investment fund.

So for the Super Fund to invest in Auckland’s light rail projects they would have to see them as growth orientated. This would be a financial risk, unless the Government guaranteed a reasonable rate of return.

If light rail gets superceded by other more flexible and more economic forms of transport like electric buses and cars, or if less centralised work arrangements (like working from home) become more prevalanet, it could become an expensive white elephant. The Government could end up propping up light rail to protect the Super Fund investment.

How unsolicited was the Super Fund proposal? Investing in New Zealand infrastructure projects has been proposed before – by Winston Peters.

On re-establishing contributions on 18 July 2017:  Only One Party Can Be Trusted on NZ Super

“Labour, like National, has a record of flip flopping on NZ Super,” says New Zealand First Leader and Northland MP Rt Hon Winston Peters.

“No party can be trusted on NZ Super, except NZ Super’s long standing friend – New Zealand First.

“We’ll restore contributions in full to the NZ Superannuation Fund, so there will be a nest egg to cushion demand, which was the original purpose for its establishment.”

On investing in infrastructure on 28 September 2017: Cullen Fund Performs, But National Taxes It

“New Zealand First would encourage the fund’s managers to invest in infrastructure in New Zealand so it works for New Zealand’s long term interests,” says Mr Peters.

Maybe that’s where the NZ Super Fund got the idea from.

Investing in Auckland light rail will only be in New Zealand’s long term interests if it is financially viable.

Will the NZ Super Fund only consider big city projects, or will they also consider investing in regional projects?

They will need to be careful they don’t come to rely too much on local government projects. Andy investment fund should spread it’s risks.

28 Comments

    • Griff

       /  May 10, 2018

      some points about the jarring sketch
      Lots of peploe no car parking.
      We know from past experience away access for cars and the area dies
      Onhunga want the route in the seventy’s after a few years being a desolate wasteland they reopened the road and its now booming again.
      Scooters and tram tracks are death.
      The road is presently gridlocked most of the time now.
      What is going to happen to traffic when they add a great big tram with half a dozen peploe in it ?
      Every time there is an accident the entire transport system will stop. trams cant just take a short detour around an obstruction.
      The tram idea is gibberingly stupid wet dream from a bunch of weirdos with their heads firmly planted in lah lah land.
      Running one down Aucklands major roads is going to make the traffic problems far worse.
      Construction will be a nightmare for tens of thousands for years even before the thing is running and obstructing traffic .

      • Kitty Catkin

         /  May 10, 2018

        Oh heavens, the accident thing hadn’t occurred to me- I mean that it would stop traffic.It will be fun trying to get ambulances and fire engines down the street, by the time they have manipulated the vehicles around the trams, the patients will be dead and the building burnt down.

        Tramlines and bikes are a lethal combination, and the chances of someone catching a foot in one are probably high.

        Someone said that they have them in Melbourne, but there’s a huge difference between them being there for decades and them starting now,

        The blindingly obvious point that if they stop in the middle of the road, people will be trying to negotiate traffic seems to have passed the planners by. How about a photo that doesn’t have all the cars photoshopped out and a solitary motorcyclist left/put in, so that we can have a realistic idea of the way it would be ?

  1. David

     /  May 10, 2018

    Be the quickest way to undermine confidence in what has been a pretty well supported scheme. Labour have played politics with the cessation of contributions during the GFC and now it will be seen as their slush fund, perhaps Labours “Shane Jones” fund.

    • Blazer

       /  May 10, 2018

      ‘now it will be seen as their slush fund, ‘….what nonsense you come out with.Another capital idea from the left which is prudent and popular.The fund invests to make a return not to satisfy politicians.

      • Alan Wilkinson

         /  May 10, 2018

        The Left see every asset as fuel for their grand designs. Nothing is ever safe from their good intentions which is why they mange to kill so many people.

        • Kitty Catkin

           /  May 10, 2018

          It’s imprudent and unpopular.

  2. Blazer

     /  May 10, 2018

    The Right see every asset as fuel for their grand profits. Nothing is ever safe from their venal intentions which is why they mange to exploit so many people.

    • Alan Wilkinson

       /  May 10, 2018

      No: …which is why they manage to satisfy so many customers.

  3. Callum

     /  May 10, 2018

    The point of the Super Fund is to build reserves to support future pension payments and reduce reliance on government funds. It is stupid to then invest in government projects that rely on government funding to support returns. It is simply a money-go-round NOT an investment.
    They should be investing offshore as a hedge to economic issues at home, you are trying to diversify risk not magnify it.

    • Blazer

       /  May 10, 2018

      the bulk is invested… offshore.

      • Callum

         /  May 10, 2018

        I am well aware of that and that is where it should stay. Not thrown at a pet government project where the returns to the fund will be funded by the government while the super fund is owned by the government. One big political circle jerk.

      • David

         /  May 10, 2018

        “the bulk is invested… offshore.”

        Yes, that is the whole bloody point.

        • Blazer

           /  May 10, 2018

          ‘They should be investing offshore as a hedge to economic issues at home, you are trying to diversify risk not magnify it.’…
          that is therefore spreading risk FFS.

  4. alloytoo

     /  May 10, 2018

    Whomever suggested this should be fired. Trams are not a good investment.

    • Gezza

       /  May 10, 2018

      I’m dubious too. This should left for private investors to investigate & fund. If it proves to be profitable the government could then nationalise it & pay them off. If it doesn’t there’s no loss to the taxpayers.

      • Blazer

         /  May 10, 2018

        taking the piss…’If it proves to be profitable the government could then nationalise it & pay them off. ‘

        • Gezza

           /  May 10, 2018

          what could go wrong?

          • Blazer

             /  May 10, 2018

            Nationalise=communism ,as far as the right are concerned.

            • Gezza

               /  May 10, 2018

              Shh … I’m chucking raw meat in the stream … to see what goes after it …

            • Kitty Catkin

               /  May 10, 2018

              (manages not to say it)

            • Gezza

               /  May 10, 2018

              Bugger. All I’ve caught is a Blazerfish.

      • alloytoo

         /  May 10, 2018

        If you can find private investors stupid enough……

  5. Kitty Catkin

     /  May 10, 2018

    I hope that by the time I am old enough for super this stupid scheme will be ancient history. I bet that when people realise that super money’s being gambled on it, they will protest.

  6. alloytoo

     /  May 10, 2018

    Also note how this is being sold as “light Rail” and not Trams which is what they really are.

  7. chrism56

     /  May 10, 2018

    The maths on the transportation numbers is also suspect. If we assume 50 passengers a car and four cars a unit, that is 55 trams an hour. How many units are they buying if we assume just 10% will be out of service at any time for maintenance.
    How long do the stop for at each stop? From my experiences in Melbourne, stops of a minute weren’t uncommon. It takes some time for passengers to move up and down the aisles, with many not wanting to get up out of their seat until the unit stops. And to get to the airport at an average speed of 50km/hr, they have to accelerate very quickly away from stops, so that will skittle anyone not seated.

  1. Super Fund proposal to build and operate Auckland light rail — Your NZ – NZ Conservative Coalition