Sale of Route K frees up Council cash

Sale of Route K frees up Council cash

Article courtesy of Bay of Plenty Times


The Route K sale has freed up the council's options and allowed it to focus on developing civic amenities and public spaces.

The sale of strategic toll road Route K to the Government, effective at the end of this month, will have a huge impact on Tauranga's future infrastructure and amenities development, say Tauranga City Council and business leaders.

The $62 million sale is expected to cut city debt from $372 million to $310 million, reducing the debt to revenue ratio to less than 200 per cent, well below the formal local government and Treasury limit of 250 per cent. The 10-year Long Term Plan commits the council to keeping the debt ratio from exceeding 225 per cent.

"Selling Route K has enabled us to behave in a more grown-up way as a city and to look at our future infrastructure development from an investment perspective," city council chief executive Garry Poole told the Bay of Plenty Times.

"That is a significant move forward for the city. From a financial point of view, it has created headroom in our balance sheet."

In particular, the Route K sale had freed up the council's options and allowed it to include the strong focus on developing civic amenities, public spaces and more events, which was a feature of the Long Term Plan, said Mr Poole.

"Before we did this transaction, our balance sheet was so constrained that, if a proposal was going to add debt, we didn't want to do it."

And some debt was necessary to develop the infrastructure to facilitate the city's growth, he said.

Murray Denyer, chairman of economic agency Priority One and a partner with Cooney Lees Morgan, noted there had been a consistent level of concern among ratepayers about debt levels.

"This transaction has removed a huge amount of debt and has effectively resulted in a sea change in the balance sheet," he said.

"There's an opportunity that didn't exist previously to invest in infrastructure and other things around the city.

"When the business community was submitting on the 10-year plan, there was a pretty consistent theme coming through that all of us, as employers of skilled workers, definitely saw the value of having the council invest in amenities in the CBD that people will weigh up when they consider whether or not they will take a job here."

Vince Hawksworth, chief executive of Trustpower, which will move into a new building in the CBD next year, said he was supportive of the LTP's goal of creating a city of heart and soul, and welcomed the opportunities the Route K sale had opened up.

"When you get someone like us moving into the CBD with 400-plus people, that can either be viewed as a burden or as an opportunity," he said.

"I think it's an opportunity. As a business like ours grows, it brings economic wealth. People will spend some of that wealth in the CBD and, for that to work it's got to feel like a place where people want to be."

TECT chairman Bill Holland, partner in Holland Beckett Lawyers, said the impact of the Route K sale had provided a "huge boost" for Tauranga.

"It doesn't mean they should go out and spend $62 million and I'm sure they won't. But it's wonderful for Tauranga that the council is now in a position to consider its strategic options."

Route K revenues flow to Crown

Route K will become part of the state highway network as of July 1, providing a strategic connection between State Highway 29 and the Port of Tauranga and Mount Maunganui.

The motivation for the sale was the sizeable portion Route K's debt made up of the Tauranga City Council's overall debt burden. Toll revenues have consistently fallen short of the amount needed to service the road's debt.

Discussions with the New Zealand Transport Agency on taking over responsibility for Route K took place over two to three years and became more intense as they neared a conclusion, said council chief executive Garry Poole.

"We gave ownership of Route K and the revenues that flowed from it to the crown, effective 1 July," he said. "NZTA will assume operation responsibility for the road and will have to maintain it." The council's responsibility had been to provide a fit-for-purpose assessment of the road prior to handing it over, he said.

The transport agency has already set up a new electronic toll gantry, which uses cameras to allocate tolls. The first is already in place on the Tauranga Eastern Link.

Drivers will be able to use one account to cover all three toll roads, Route K, the Eastern Link and the Northern Gateway Toll Rd.

What is Route K

Route K is a 5km two-lane, tolled expressway that links Tauranga city centre, the Port of
Tauranga and Mount Maunganui with State Highways 29 and 36 to the southwest. It is an
extension of Takitimu Drive (State Highway 2).

By David Porter