By Bernard Hickey
Just imagine if someone told you that the ratepayers of Auckland and the taxpayers of New Zealand in general were providing billions of dollars of subsidies to the wealthiest property owners in the land.
How do you think the public would react? The assumption would be not very well. Yet that is exactly what they've been told and I haven't heard the chorus of talkback abuse or any outraged front pages or indignant questions in Parliament or reports of stormy council meetings.
Yet.
So here goes. Did you know that 1,400 members of the Remuera Golf Club currently receive the exclusive benefit of using a piece of Auckland Council-owned land that has just been valued at up to NZ$517.1 million?
For the privilege, the Remuera Golf Club pays rates of NZ$130,000 a year. If up to 70% of that land was broken up and sold off for housing with the remaining 30% left in parks, it would produce rates revenues to help ease the burden of ratepayers in general of NZ$16.5 million a year. That's an annual subsidy of NZ$16.37 million, or NZ$11,700 per member per year. That includes Prime Minister John Key, who is an honorary member of the club. Even if each member played 50 rounds a year, that would be a subsidy of NZ$233 per round or NZ$13 per hole.
The estimates of the Remuera club's true value and the forgone rates comes from investment bankers and consultants Cameron Partners and EY in two reports delivered this month to the Auckland Council, which is looking at other ways to fund its looming infrastructure investment bill as Auckland grows.
"This represents a significant subsidisation to private interests and raises questions about whether at least parts of this asset, the land the golf course occupies, could be considered for higher value uses," EY wrote in its report.
"We pass no judgment about whether this is the right use of this land. However, we assert the Auckland public is likely to be unaware of the significance of this subsidy," said the consultancy from the top end of town.
"By making this subsidy and others like it transparent, Aucklanders can make their own minds up about whether this represents fair value and, ultimately, whether capital locked away in this investment could be put to uses that serve the wider vision for Auckland."
That's only part of the subsidy. Cameron Partners estimated the value of Auckland Council's 13 golf courses at NZ$2.1 billion, including the top four courses of Remuera, Chamberlain Park, Pupuke and Takapuna with a value of NZ$1.4 billion. This value assumed 70% of the courses were redeveloped for housing and the remaining 30% remaining as publicly available parks.
And the subsidy for Auckland's land owners doesn't stop with Council ratepayers.
The most startling statistic regularly touted this year has come from Finance Minister Bill English. He regularly points out that 60% of all landlords are subsidised by the Government, which spends around NZ$2 billion a year on accommodation supplements and income related rent subsidies to fewer than 30,000 landlords.
Auckland landlords will be the dominant recipient of this redistribution of income from several million taxpayers, thanks to Auckland rents being the highest in the land and, in particular, the highest relative to incomes.
Imagine the outrage if these billions of taxpayer subsidies were paid to farmers or manufacturers or a religious sect? Farmers are rightly proud of kicking the subsidy habit in the late 1980s, yet there are few howls of outrage about the subsidies for Auckland's property farmers.
The unfairness of these subsidies becomes doubly important in the context of Auckland's painful housing shortage, driven at least partly by the NIMBY property owners of the leafy suburbs around the CBD -- some of whom will be members of these golf clubs too.
The release this week of a report by the Salvation Army showing dozens of children having to sleep in cars, garages, on couches and in caravans emphasised the point. The Army called for urgent action to build thousands of new affordable homes.
The Remuera subsidy is doubly painful because not only is it costing taxpayers and ratepayers at large in the form of forgone rates and higher taxes, but it is costing tens of thousands of Auckland's most deprived children a chance of a stable home from which to learn, be healthy and eventually bring up their own happy, healthy and productive kids.
Ultimately, of course, we all pay when a small group of the population benefits in the short term at the expense of the many. Eventually, the extra housing, health and education costs (not to mention the lost productivity of sick and poorly educated workers) will be paid for by taxpayers at large. Its more than a pity these subsidies are not clearly identified and the tradeoffs measured. It's a tragedy and it means the Remuera subsidy costs three times over.
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A version of this article first appeared in the Herald on Sunday. It is here with permission.
45 Comments
Just think, if it wasn't subsidised, and the Remmers set paid their way instead of being parasites, membership of the club would be a much more impressive status symbol. The silly primates slave to dominance hierarchies would be much more impressed if it cost an extra $11,000 per year.
Agreed BigDaddy. But it is worse than that, this article is absolute incompetent rubbish of the highest order.
Firstly how much land is the golf club on that isn't protected wetland?? The whole title is 63ha but much of that is useable?? The site is hilly and some parts are steep. Had someone done some investigation and found the exact land area out and then worked out that undeveloped land is only worth a small fraction of developed land (sites of the order 4 to 10 ha might be worth $300-500/m2 and that would be a very generous estimate), something as big as the golf course might be worth of the order maybe $100-150m or thereabouts and most definitely nothing like half a billion dollars!!!!!!
The orangatang that came up with a $500m plus value is on a different planet....
Well it was Ernst Young who put the $16 million yearly rental on the golf course - based on a far lower figure - which was the basis of Hickey's estimates of subsidy. What would be the headlines if this subsidy was anything other than white male middle class sport. Are you saying that the subsidy is valid because it was only $9million per annum (your figures at 6% return?).
Ah yes, build and concrete over all the golf courses and see what that does to biodiversity...
I don't play golf but I sure like seeing golf courses in and around the city. Your opinion on whether they should stay as golf courses depends on whether you have a chip on your shoulder or not I suppose.
Nope, depends on whether you think they are more important than using the land for other purposes. Certainly as a rate payer my expectation is the council should be getting the best return, if it is not, it needs to be fixed. free market, user pays and all that.
If the space was converted to a free park, then yes OK.
Central Park at 315ha services the population of Manhattan (about 1,600,000). Remuera Golf Club (privately controlled with the right to exclude the general public) services 1,400 with its 280ha.
The reality is you could get a much better return to the public by breaking the course into one decent sized park and several neighbourhood parks that everyone can use. And you could get much greater biodiversity than rolling hectares of mown grass with occasional plantings of introduced tree species.
I'm not a golfer, nor a member of the Remuera Golf club - but it seems obtaining membership is not that hard $50 - you just have to be a member - and not necessarily a resident of Remuera - just need two nominees - a standard practice in many clubs and incorporated societies
In typical fashion BH opens with his usual emotively misleading deception that all the members are landed gentry of Remuera, but he doesn't do the research and find out how many of those 1400 members are in fact Remuera Residents
Or, in fact, a one-off fee of $3,375 and an annual fee of $2,594. Of course the membership will be diverse representing a true cross-section of Auckland. Yeah, right.
But who cares? The real issue is that hundreds of hectares of public land have been reserved for the exclusive use of 1,400 people at the same time that hundreds of kids sleep rough every night just a few km down the road. If the members had clubbed together and bought the land at market value then no-one would care but they haven't.
Dooh Nibor rides again stealing from the poor and giving to the rich.
I think the issue BH has is that the land is owned by Auckland Council.
Auckland Council, I would imagine, has as one of its objectives to get the best use of the land out of any of their holdings.
Keeping this piece of land as a golf course, which has a very small user group, is hard to defend these days.
It looks like AC can't get out of this one until 2070. Bad luck.
You are right that the Local Government Act 2002 s101 (1) requires all councils to manage their finances "prudently and in a manner that promotes the current and future interests of the community". It's hard to imagine how selling a golf course, and so. allowing more residential building, creating public greenspaces and getting capital to build more infrastructure to allow the city to function properly would not meet that definition.
How to get out of the lease? Ironically it could take an Act of Parliament that would have to be introduced by the local MP, ACT's David Seymour, and supported by John Key and his merry bunch of quipsters.
Oh yeah. That's why Auckland Council isn't in any hurry on this one.
Membership fees would be $25,000 p.a. instead of $3,000.
It's back of the envelope. But, it's no wonder there is a waiting list for membership at Remuera Golf Club. Each member is getting a $22K p.a. gift from the ratepayers of Otara and Henderson. What's not to like?
"The most startling statistic regularly touted this year has come from Finance Minister Bill English. He regularly points out that 60% of all landlords are subsidised by the Government, which spends around NZ$2 billion a year on accommodation supplements and income related rent subsidies to fewer than 30,000 landlords."
Risible nonsense. It's the tenant being subsidized. If you really believe it's the landlord who benefits, then you will also be campaigning against benefit money that buys food as being a subsidy to supermarkets.
You solve this issue in one hit by removing your so called subsidy, who do you think will suffer the most from that?
Australia are having the conversation on this, "NZ$2 billion a year on accommodation supplements"
does it distort the market in favour of investors over FHB
can that money be better spent to house ones citizens
what does the forward spend (increase) look like and who to pay for it.
in my opinion this is going to become another WFF or interest free student loans as house prices increase therefore the spend will increase.
they would be far better spending that money on a building program for FHB
If people have to move out because they can't afford to pay the rent, how will you cover your mortgage on your rental property?
Or will you accept a reduced rent to keep your unit occupied?
.
But you're right in a way: it's not just landlords who are being subsidised: it's employers, too. Imagine how many of these would go under if they had to pay their employees an actual living wage....
Rubbish, who do you think gets the benefit in the end. Put a cap on rents and see how many people stay in the landlording business. People need to be accommodated and it is the landlords predating on vulnerability, and profiting from the fact that the Government won't like publicity from hordes sleeping on the streets or overcrowded accommodation. Doctors to the same through their pay.
Lost in what way? Off shore income that doesn't get taxed in NZ, or NZ income that goes the other way? Companies, or individuals? $6bn is a huge number, I very much doubt that is possible on that scale. The UK HMRC estimates tax avoidance in the UK as only 20bn in all forms, not just tax havens.
its called tax reducing until the IRD takes you to court them it becomes tax avoidance. ie the banks and there NZ subsidiaries
http://www.stuff.co.nz/business/industries/67503078/anz-under-fire-for-…
there are a lot of deals out there to move money out and reduce you profit, corporate overheads, license payments, interest payments, management fees, advertisement expenses.
the more companies that are owned by overseas the more money flows out.
we need more worldwide companies based in NZ to mitigate the flow.
Three Blind Mice - see how they run
You all realise that this conversation is only being had because of uncontrolled immigration - you are all prepared to sacrifice a few tracts of well managed recreational open space in order to relieve a pressure that was unforseen but inevitable - probability is very few of these immigrants will ever play golf - but you will give up your golf courses to accommodate their needs
Sports facilities are fair game. Go and stand and look at what was once Carlaw Park and Blandford Park - doesn't look good - then the parts of Ellerslie Racecourse and Akarana Golf Course that have already been sold off, and now the same fate is already set in place for Alexandra Racecourse and Avondale Racecourse - Manukau Golf Club has gone - sold to Fletcher Building - no houses on it yet
Bernard doesn't mention any of that - wonder why not? - remains silent - why? - So Bernard, in hindsight what was achieved by selling off those tracts of land - did it achieve anything desirable
Shortsighted fools
Ellerslie Racecourse was once the largest garden racecourse in the Southern Hemisphere - no longer
"Unforeseen" when it should have been. The Government, both local and national employs planners on significant pay to do exactly that, predict the likely outcomes. The international trend is to gravitate towards major centres, of which Auckland is NZs biggest. Where else would immigrants be likely to go from their (definitely not our) perspective? The Government when they insisted on maintaining this immigration policy should have reasonably foreseen this, as they have steadfastly refused to put incentives in place for immigrants and businesses to move to the regions to relieve the pressure on Jaffaville. Now Phil Goff is throwing his hat in the ring and has already stated that he expects central Government to cough up and help AK solve it's problems, thus the tumour that is Jaffaville continues to suck the life out of the country.
what was obviously achieved was land for development - in a small way adding to supply and reducing the pressure on housing. The reality is that as cities grow land use changes - except where 'shortsighted fools' want to keep land for the same purpose forever because it is in the public arena. Your point about ellerslie racecourse proves the point - times change. The Basin Reserve in Wellington used to be a slip yard for ships are you arguing that it should be still?
Lets be clear - that compared to other sporting activities Golf is in a very privileged position. With a rugby field, perhaps with the exception of when a game is on, the land is available for Aucklanders to walk across. . However, Golf clubs take public land put a barbed wire fence around and say to Aucklanders you aren't allowed in. The underlying element is that Council has a pattern of subsidising white middle class male sports. The subsidy on cricket compared to netball is enormous. My real surprise is that the left have a fixation about owning the assets rather than considering what the social impact of council ownership and the result is a tax on the poor to subsidise the interests of the wealthy.
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