Part 5: Infrastructure funding and works development

Inquiry into aspects of Auckland Council’s Westgate/Massey North town centre project.

Waitakere City Council's agreements with NZRPG included an Infrastructure Funding Agreement, under which the Council agreed to acquire certain land in the proposed town centre from NZRPG to construct roads and other infrastructure, and to contribute to the costs of constructing those roads.

In this Part, we discuss:

Revised asset list

In May 2009, officials provided a further update to the Council on the progress of the negotiation of the Infrastructure Funding Agreement.

By this stage, NZRPG had submitted its Comprehensive Development Plan for the site and a disagreement had arisen about the construction of a road referred to as Cross Street East (see Figure 3). The Council wanted Cross Street to extend east to west on both sides of the main street running through the centre of the town. It considered that this was needed to minimise the effects of an internal retail area (that is, a mall) being built in such a way that the wider town centre was undermined and would not integrate with public transport.

NZRPG did not want Cross Street East to be built because it considered that it would interfere with its plan for the development of the site, as indicated in the Comprehensive Development Plan.

A compromise had been reached under which the enclosed retail area over Cross Street would be partly opened by a "piazza" area. Officials considered that this would help integrate a private mall environment and a public street environment. Certain other design features were also under discussion, including a ratio of retail floor area on the main street relative to the amount of retail areas in the mall to try to ensure that the mall was subsidiary to the main street.

Another complication was that part of the land needed for roads and the public park was owned by another landowner, and NZRPG had not been able to acquire the land to date. Officials still hoped that negotiations could be concluded within the $29 million allocated for the project, but there could be no assurance on that outcome.

Officials had done more analysis to assess the extent of the Council's ability to recover its costs through development contributions. Officials advised that the list of assets to be bought had been altered to ensure greater cost recovery. Under the revised asset list, Council agreed to contribute to roading construction costs, provided that any contribution was still within the $29 million. The amount of the Council's contribution to road construction would be defined in the Infrastructure Funding Agreement, and priority would be given to Council-owned land for the piazza and Main Street areas.

Councillors authorised the Chief Executive to negotiate and conclude an agreement to buy the revised asset set from NZRPG under the Public Works Act 1981. This was subject to the Chief Executive carrying out any due diligence considered necessary and on terms that, after negotiation, best achieved the following outcomes:

  • the negotiated purchase price would not exceed $29 million plus GST, including the price agreed to buy Westgate Street and any contribution to road construction; and
  • an urban form acceptable to the Chief Executive, having particular regard to the need for:
    • a library site, preferably on the western edge of the town square;
    • a town square/piazza;
    • the development of Precinct A of District Plan Change 15, including retail development fronting public streets;
    • light penetration to the ground level of Cross Street East if it was not a public street;
    • a bus interchange at the heart of the town centre; and
    • Main Street and the town square/piazza area being prioritised for development at an early stage.

The Council agreed to consider including a gross cost of $29 million in the long-term council community plan for 2009-19. This would buy non-road assets, road assets, and road construction within Plan Change 15 and be funded from a combination of loans, future development contributions, and financial contributions.

The Chief Executive was required to report back to the Long-Term Council Community Plan and Annual Plan Committee, proposing an alteration to the final long-term council community plan to be adopted by the Council in June 2009. This alteration would set out the rationale for the Council buying the assets and making a contribution to road construction. It would also seek adequate budget to enable it to do this and to amend the development contributions schedule to support this.

The Council also recommended to the Long-Term Council Community Plan and Annual Plan Committee that the approach taken to establishing development contributions in the Chief Executive's report be included in the Council's Development Contributions and Financial Contributions Policy and applied citywide as appropriate.

September 2009 – Approval of the Infrastructure Funding Agreement

In September 2009, officials reported to the Council that the Infrastructure Funding Agreement, which included the proposed asset purchase from NZRPG, had been finalised.

Officials reported that:

  • The methodology for recovering contributions to fund construction had been resolved, and the necessary changes had been made to the development contributions policy.
  • Westgate Street had been bought.
  • The Council had not been able to get NZRPG to agree to vesting "Cross Street East" as a road. However, its other urban design objectives had been achieved, including:
    • buying sites for the library, town square, and bus interchange; and
    • securing certain design features, such as the form of the town square and light penetration requirements, by NZRPG entering into a memorandum of encumbrance.
  • Extensive valuation advice had been taken to assess different scenarios – for example, what roads might be purchased.
  • NZRPG had changed its preferred negotiating position from a transaction under which the Council would buy the land in question, including the road land, at full consideration and contribute any money left over within the budget limit of $29 million towards the cost of road formation, to a position where it preferred to transfer the road land without consideration, with the money that might otherwise have been applied to land purchase costs being notionally applied as a contribution towards construction costs.

The overall issue for determination was whether the Council was satisfied that its strategic objectives had been achieved, or sufficiently achieved, to approve the Infrastructure Funding Agreement in the form proposed.

Officials were satisfied that the list of assets ultimately agreed (referred to as "Asset Set B") would meet the Council's strategic goals and also enable the Council to recover a higher proportion of its costs than other options on the table.

The Infrastructure Funding Agreement was authorised to sign on 7 September 2009. It was confirmed by the Auckland Transition Agency on 17 November 2009 and signed by the parties on 22 February 2010.

The Infrastructure Funding Agreement

The main agreement the parties entered into is the Infrastructure Funding Agreement.3 Waitakere City Council agreed to carry out or procure certain works and projects at its own expense, including:

  • construction and/or widening of the roads;
  • construction of stormwater ponds;
  • provision of adequate freshwater supply capacity and wastewater services to the boundary of NZRPG's land;
  • design (in consultation with NZRPG) and construction of the town square and library; and
  • acquisition of certain land for open space purposes.

NZRPG acknowledged that:

  • The Council's ability to complete these works depended on the Council concluding agreements with the landowners concerned to acquire the necessary land under the Public Works Act 1981.
  • The Council would seek to recover all or part of the costs by way of development contributions, either on a city-wide or local catchment basis, in accordance with the Council's development contributions policy.

The Council agreed to acquire certain land from NZRPG under the Public Works Act 1981 to construct roads. It was agreed that the Council would not be required to pay NZRPG any compensation for this land. In return, the Council agreed not to make any claim for betterment.4

NZRPG owned some of the land in question, but most of it was leased. Therefore, the Agreement was conditional on the parties obtaining the owner's consent as lessor and on the Council buying the lessor's interest in the land under the Public Works Act 1981.

In addition to land for roads, the Council agreed to acquire land from NZRPG under the Public Works Act 1981:

  • for the purposes of a town square (purchase price was $275,000 plus GST);
  • for the purposes of a library (purchase price $891,000 plus GST);
  • for a community park ($1.00 inclusive of GST); and
  • certain riparian and non-riparian land for stormwater management purposes ($377,059 plus GST for the non-riparian land, $1.00 inclusive of GST for the riparian land).

As with the road land, some of this land was owned by NZRPG, and some was leased. Therefore, the agreement to acquire the leased land was conditional on the Council obtaining the consent of the owner to the acquisition of the land under the Public Works Act 1981.

NZRPG accepted full responsibility for the design and construction of roads on, and services within, certain road land, including bus stops and bus lanes, amenity planting, and landscaping. The roads were to be constructed in accordance with plans and to the minimum standards agreed between the parties or approved by the Council.

When constructing the roads, NZRPG was required to include all the usual services (water, electrical power, gas, telephone, and media ducting) and adequate street lighting.

Where these services were provided in land that was required to serve other land, services were required to be installed in a manner that facilitated connection by the adjoining land owner.

The Council agreed to pay the following amount as a contribution towards the cost of constructing the certain roads and associated services:

A – (B + C), where:

A = the sum of $23 million (exclusive of GST).

B = the amount the Council was required to pay for the town square, library site, and community park ($1,166,001 plus GST).

C = the amount the Council was required to pay to buy NZRPG's interest in the non-riparian open space ($377,059 plus GST).

Where services were provided that provided additional capacity to serve other land in the Plan Change 15 area, Waitakere City Council agreed to reimburse the reasonable additional costs incurred by NZRPG to provide that additional capacity. If the Council was going to be required to reimburse costs, the parties had to first discuss and agree on a proposed estimate of costs (based on advice from a quantity surveyor employed by NZRPG at its expense), a work timetable, and the cash flow for payment of the Council's contribution.

Summary of payments

The Council agreed to make the following payments under the Agreement:

Land for town square (owned by NZRPG) $275,000 plus GST
Land for library (owned by NZRPG) $891,000 plus GST
Land for community park (leased by NZRPG) $1 inclusive of GST
Non-riparian open space land (leased by NZRPG) $377,059 plus GST
Riparian margin (leased by NZRPG) $1 inclusive of GST
Contribution towards construction of roads and associated services A – (B + C)


A = the sum of $23,000,000 (exclusive of GST).

B = the amount the Council was required to pay for the town square, library site, and community park ($1,166,001 plus GST).

C = the amount the Council was required to pay to buy NZRPG's interest in the non-riparian open space ($377,059 plus GST).
Reimbursement of reasonable additional costs incurred as a result of providing additional capacity to serve other land within the Plan Change 15 area As agreed between the parties, based on advice from a quantity surveyor employed by NZRPG at its expense.

The parties agreed the following other matters under the Agreement:

  • to co-operate in relation to certain matters relating to designations imposed by the New Zealand Transport Agency on NZRPG land;
  • to co-operate with each other in their efforts to persuade Transpower to agree to all matters necessary to facilitate the replacement of the existing overhead transmission lines over NZRPG land with an underground installation;
  • to make certain changes to the covenants previously agreed in the Agreement for the Sale and Purchase of Westgate Street (the covenants related to urban design issues, including the location of a bus interchange, an undertaking to ensure certain land was available for public use at all times, and the design and construction of a pedestrian access way);
  • to consult in relation to the design of buildings and other improvements to be constructed on the open space land, community park, and library site, including consideration of NZRPG's concerns in relation to car parking at the library site; and
  • to negotiate in good faith the terms on which a park and ride facility would be developed on NZRPG's land as required by Plan Change 15.

The Auckland Transition Agency confirmed the terms of the Infrastructure Funding Agreement in November 2009, and the Agreement was formally signed by the Council in February 2010.

Works Development Agreements and Cost Sharing Agreements

After the Infrastructure Funding Agreement, the parties entered into agreements which detailed how the construction and civil works would be carried out and how costs would be shared are set out in a series of Works Development Agreements and Cost Sharing Agreements.

Under Works Development Agreements 1, 4, and 5, NZRPG was required to build roads and infrastructure for the Council, at the Council's cost. The Works Development Agreements were made on the following basis:

  • The Council would pay NZRPG its actual costs of providing the infrastructure plus fee of 8.5% of the approved costs.
  • The costs of providing the infrastructure are recorded in the Agreements as estimates but with provision for the estimated amounts to be revised at certain points.
  • NZRPG was required to operate on an "open book" basis – that is, it was required to give the Council full access to any documents relating to the costs of the works.
  • Any claim NZRPG made for payment from the Council was required to include a breakdown of costs with supporting information.

The Agreements also included a "cost saving" provision under which any cost savings NZRPG made in carrying out the works would be split, with the Council receiving 65% of the costs savings and NZRPG the other 35%. The estimated amount payable by the Council under Works Development Agreements was as follows:

  • Works Development Agreement 1
  • Works Development Agreement 4
  • Works Development Agreement 5

In each instance, the agreement provides for these estimated amounts to be revised at the detailed design and letting of tender stages. The actual costs payable by the Council is on a progress payments basis when approved by Waitakere City Council's quantity surveyor.

Two further agreements, referred to as Cost Sharing Agreements, allocate responsibility between Waitakere City Council and NZRPG for acquiring land, obtaining consents, design, landscaping, consultancy, and construction costs. Consultancy costs were split 65%/35% between NZRPG and Waitakere City Council. Landscaping design was allocated 20%/80% between NZRPG and Waitakere City Council.

The Council approved Works Development Agreements 1, 4, and 5 and the two Cost Sharing Agreements, but the Auckland Transition Agency did not. We discuss the consequences of this in Part 8.

The agreements outlined in this Part comprise most of the suite of agreements transferred to Auckland Council in November 2010. In Parts 6 and 7, we describe two further arrangements relating to the relocation of overhead power lines and development contributions.

3: The Infrastructure Funding Agreement is a form of "Development Agreement". A Development Agreement is an agreement between a local authority and a private developer under which the private developer agrees to provide infrastructure as an alternative to paying all or part of a development contribution.

4: Under the Public Works Act, if Council works, such as a new road, increase the value of adjoining land, the Council can claim "betterment" from the landowner – that is, payment in recognition of the value the Council's works has added.