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What does a Future Fund mean for Aucklanders?

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RNZ

09 June 2024, 7:16 PM

What does a Future Fund mean for Aucklanders?Auckland Council has started work on establishing an Auckland Future Fund. Photo: RNZ / Cole Eastham-Farrelly

Work is underway to create Auckland's own investment fund, called the Auckland Future Fund.


The move is part of Auckland's 10-year budget and will "swap" its shares in Auckland Airport for less risky investments.


What is the Auckland Future Fund?


Last month, Auckland Council voted to go ahead with Mayor Wayne Brown's long-term plan (LTP) budget to create the fund, if policies were in place to keep income with Auckland communities.





The Auckland Future Fund (AFF) lets Auckland Council "swap" [ Auckland Airport shares] for smaller investments in different areas, according to the draft local policy for the fund.


The draft policy states it will bring in more income without any rates rises for residents.


"The AFF enabled council to 'swap' a single asset for a diversified asset portfolio that provides a higher and steadier expected rate of return, and which is expected to be more resilient to shocks that impact council's other assets."


It states the fund contains Auckland Council's shareholding in Auckland International Airport Limited, any additional funds from council and any investment returns.


Auckland Council group treasurer John Bishop told Local Democracy Reporting the fund will diversify Auckland's major investments across different sectors and geographic areas "to better protect value for future generations".


What is going into the fund?


The initial investment in the fund will be Auckland Council's remaining 11 percent stake in Auckland Airport, a decision that was criticised by South Auckland representatives who wanted to keep some ownership of their locality's biggest asset.


On whether all of Auckland International Airport Ltd (AIAL) shares will be sold, Bishop said the decision will be up to the fund manager once the fund was set up, but that "it is almost certain most remaining AIAL shares will be sold".


"Proceeds from AIAL shares will provide initial capital for the Auckland Future Fund," he said.


At last month's LTP debate, Manukau councillor Alf Filipaina asked if Auckland Council could decide on other investments to put in the fund before it was created.


Mayor Brown replied that airport shares were the only obvious investment.


"We asked over the last 120 hours what we could put in, and the only thing that's obvious to put in is the airport shares," Brown said to Filipaina.


Brown said there was no guarantee of airport shares making a profit.


Auckland Mayor Wayne Brown makes an announcement on the future of the Ports of Auckland on 7 May, 2024.


The Auckland Future Fund is part of Mayor Wayne Brown's long-term plan (LTP) budget. Photo: RNZ / Marika Khabazi


How much money will it make?


Bishop said the fund was expected to add about $40 million to Auckland Council's revenue between 2025 and 2026, over and above the $26m return that was estimated from Auckland International Airport dividends.


Aucklanders should start to see extra revenue from 1 January next year, according to Auckland's 10-year budget.


Do we know who will manage the fund?


"Not as yet," Bishop said. "There will be a competitive market process to secure a professional fund manager."





What will it cost to start the fund?


Last year, Auckland Council sold 7 percent of its stake in Auckland Airport, which cost about $3m according to Bishop.


He said any costs would depend on when the fund manager sells the airport shares and the fees they negotiate for the sale.


The long-term plan, including the decision to start the future fund, will be formally adopted by the Governing Body on 27 June.


LDR is local body journalism co-funded by RNZ and NZ On Air.