Ports and Portability

Alas, Bernard didn't keep the headline I'd picked for this week's Newsroom column. 

It's about whether it makes sense to move Auckland's Port. I don't know whether it makes sense to move it or not, but I do think that the first step is figuring out just how much value could be unlocked by turning 55 hectares of waterfront real estate over to other uses, whether residential, commercial, or anything else other than a stadium.

So: Ports and Portability.

Bernard went with "Hard numbers needed before 'blue sky' Port talk".

Ah well. I still like Ports and Portability. He's the expert though.

A snippet:

Moving Auckland’s port might make sense – someday.

But I do wonder about some of the talk of moving Auckland’s port to put in a waterfront stadium, or museum, or other large, iconic, and expensive facility.

Stadium maths are almost invariably bad. Rather than revitalising cities, stadiums more typically become white elephants needing ongoing financial support. Putting one on some of the city’s most valuable property would not only ensure it could never cover its own real costs, but would also forgo far better uses for prime commercial and residential land.

If you owned a quarter-acre section in Epsom, with a sprawling ramshackle workshop and shed in the back yard, rising property prices might eventually convince you to make some changes. Clearing the workshop out could be a bit expensive – and especially if you needed to find some other facilities for your projects. But subdividing could let you clear the mortgage and pay off a few other bills.

Unless you had money to burn, deciding to take on all the expense of clearing out the shed and finding another place to work might be a bit silly if you decided instead to put in a swimming pool. It could be nice on a warm evening, but it certainly would not help with the problem of covering the mortgage. And the bank might have something to say about it.

As downtown property values rise, eventually the Council-owned Port’s fifty-five hectares of land and wharves will be valuable enough in other uses to cover the cost of clearing the land and building new facilities elsewhere. Those costs will not be small, with consultancy reports battling over just how close to $10 billion the bill might wind up being. But the value of the underlying property will not be small either.

I worry that where the government wants to decide on whether to move the port before deciding on what to do with the waterfront land, we could too easily wind up with a waterfront stadium.

In the Hitchhiker’s Guide to the Galaxy, Douglas Adams wrote of how numbers written on restaurant bills within the confines of restaurants do not follow normal the laws of normal mathematics but instead follow Bistromathics. He imagined spaceships powered by this new math. Numbers used in economic impact assessments of stadiums are even stranger than bistromaths. To put the academic economic consensus simply, public investments in stadiums do not deliver the promised benefits.

A waterfront stadium the size of Eden Park would sit on about $600 million dollars’ worth of property, if that waterfront land winds up being worth about $10,000 per square metre; construction and running costs of a stadium would be additional. If the stadium had zero running cost and zero construction cost, it would still need to generate revenues of almost $50 million per year to cover the capital cost of the land alone.

And Eden Park’s total operating income last year was just short of $16 million. A stadium might not be the best possible use of waterfront land. It is just too easy to imagine combined governments spending billions of dollars to move the port based on business cases involving selling the port’s land, only to then spend easily over a billion dollars on a new stadium for the site instead.