Part 1: Introduction
Between 2009 and 2010, after several years of discussion dating back to 2002, Waitakere City Council entered into a series of agreements with companies in the New Zealand Retail Property Group Limited group of companies (NZRPG) to develop a new town centre at Massey North, in north-west Auckland.
NZRPG is a private commercial property developer that had built and owned the existing Westgate shopping centre next to the proposed location of the new town. NZRPG also owned or leased much of the land that the new town centre was to be built on.
For the development of the new town centre to proceed, the Council decided to acquire land from NZRPG and other private landowners in the area for the town's road network, for the provision of infrastructure, and for the public parts of the town, such as the town square and community park.
The agreements the Council entered into with NZRPG set up a collaborative project between the parties to construct the town centre. An Infrastructure Funding Agreement comprised the main agreement between the parties, setting out the purchase of assets, the development of infrastructure for both NZRPG's and the Council's parts of the development, and the sharing of costs. Further detail about how the works would be carried out and how costs would be shared was then set out in a series of Works Development Agreements and Cost Sharing Agreements.
During the time that these contracts were under negotiation, it was announced that Waitakere City Council was to in effect merge with six other Auckland councils and Auckland Regional Council, to form Auckland Council. Waitakere City Council and the other six councils were dissolved on 31 October 2010. As a result, Auckland Council became responsible for the project on 1 November 2010.
Some parts of the town – both public and privately owned – have now been completed. This includes the roads and other infrastructure, a community park, a town centre, a new shopping centre (the NorthWest Shopping Centre), and an area of "large format" retail units. Other parts of the town, including the library and community centre, are still to be completed.
Over the years, concerns have been raised about the project both with Auckland Council and with us. The project required Waitakere City Council to form relationships and enter into contracts with several private landowners and developers in the area. However, the focus of the concerns raised with us was the respective Councils' relationship with NZRPG.
In February 2015, we decided to carry out an inquiry into the project under section 18 of the Public Audit Act 2001. The purpose of our inquiry was to provide information to the public about the nature of the relationship between Auckland Council and NZRPG, to provide assurance that the Council is managing that relationship appropriately, and to report on any other matters of relevance to the Massey North project.
In the course of doing this work, it became apparent that the project is factually and commercially complex and spans more than 15 years. We have not attempted to describe or comment on every decision made or action taken by the respective Councils, nor have we been able to make a judgement about the value of the project overall.
Although we reviewed an extensive amount of documentation about the Council's relationship with NZRPG and the wider project, this report focuses on those aspects of the project that appeared to have caused particular concern. Those are:
- the background to the development and how the relationship between Waitakere City Council and NZRPG began;
- the agreements entered into between Waitakere City Council and NZRPG;
- three specific arrangements between the respective Councils and NZRPG: the decision to buy Westgate Street (now Maki Street), relocating overhead power lines, and the arrangements about deferral of the payment of development contributions by NZRPG;
- some of the steps Auckland Council took after November 2010 when it came into being; and
- aspects of Auckland Council's governance of the project.
As background and context to our report on Auckland Council's governance and management of the project, we describe in broad terms the contract negotiations between Waitakere City Council and NZRPG, and the main factors that shaped the agreements they entered into.
How we carried out our inquiry
We reviewed records of Auckland Council and the former Waitakere City Council dating back to 2004.
We talked to some of the complainants, NZRPG, elected members of Auckland Council with an interest in the project, Auckland Council employees, ex-employees from Waitakere City Council, Auckland Council's legal advisors, and Waitakere City Council's legal advisors.
We engaged project management and engineering experts, and reviewed Auckland Council's project management processes for the development at Massey North.
We also reviewed a report commissioned from Meredith Connell by Auckland Council in 2011. Auckland Council provided this to us on the basis that it is legally privileged.
How this report is structured
In Part 2, we explain in broad terms what the Massey North project is, how the relationship between Waitakere City Council and NZRPG came about, and the background to the negotiation of the commercial agreements between the Council and NZRPG.
In Part 3, we explain the negotiation process and the nature of the agreements that were entered into.
In Part 4, we describe Waitakere City Council's decision to buy a street in the existing Westgate Shopping Centre from NZRPG (Westgate Street, now Maki Street).
In Part 5, we outline the agreements for infrastructure funding and works development agreed between Waitakere City Council and NZRPG.
In Part 6, we describe the agreements between Waitakere City Council, Transpower New Zealand Limited and NZRPG about relocating a high-powered transmission line (the power lines) underground.
In Part 7, we outline an arrangement approved by Waitakere City Council under which the Council agreed to postpone or remit NZRPG's obligation to pay certain development contributions (development contributions are contributions developers are required to make to cover the costs of providing new infrastructure).
In Part 8, we discuss some specific steps Auckland Council took when it inherited the project from Waitakere City Council, including subsequent decisions made about the payment by NZRPG of development contributions and costs relating to the relocation of power lines.
In Part 9, we discuss aspects of Auckland Council's governance of the project.
2: The terms of reference for our inquiry are on our website (oag.govt.nz).