Tauranga Mayor Mahé Drysdale has called for legislation to ring-fence the Bay of Plenty Regional Council's $3 billion investment portfolio, arguing for a stronger separation between the fund's managers and elected councillors.
The call comes as Tauranga City Council lodged a formal submission opposing the regional council's proposed restructure of the massive fund. The portfolio, managed by council-controlled organisation (CCO) Quayside Holdings, represents a significant financial asset for the Bay of Plenty community.
Mr Drysdale has voiced concerns that without legislative protection, the fund remains vulnerable to short-term political pressures, potentially undermining its long-term value for future generations.
A fund born from port shares
The investment portfolio originated in 1991 with a majority shareholding in the Port of Tauranga, initially valued at $53 million. Over the past three decades, it has grown into a $3 billion giant, becoming a cornerstone of the regional council's financial strategy.
Quayside Holdings manages the fund independently, providing an annual dividend to the regional council. This dividend is used to offset rates across the region, providing significant relief to households. Last year, a $48 million dividend payment reduced the average household's rates bill by approximately $400.
As of 30 June last year, the council's controlling stake in the port was valued at $2.5 billion. The portfolio also includes $470 million in non-port and special-purpose assets, featuring major developments like the $161 million Rangiuru Business Park.
The proposed restructure
The debate centres on the regional council's proposal to amend its Long-Term Plan 2024-2034, which includes a significant shake-up of the investment fund's structure and purpose. The council's preferred option is a “hybrid” model that would split the port and non-port assets from special-purpose assets into two separate CCOs.
Alongside the structural change, the proposal seeks to alter how the fund's profits are used. It suggests capping the annual amount for rates reductions and other council functions at $50 million (plus inflation). Any income beyond this cap would be redirected towards funding regionally significant infrastructure projects.
This change is aimed at allowing the council to 'recycle capital'. For instance, the council is currently using $200 million of debt to finance the Rangiuru Business Park development, which will be repaid as the land is sold. Other options considered by the regional council included creating a CCO trust for all investments, partnering with an existing community trust, or maintaining the status quo.
'A regional taonga' at risk
In an interview with the Bay of Plenty Times, Mayor Drysdale described the fund as a “regional taonga” with “significant potential” to benefit the region for generations to come. He believes its protection is paramount.
Mr Drysdale expressed that there was “a little bit of a risk” associated with “too much direction” from elected members to the investment arm. He pointed to the regional council's policy requiring it to own at least 28% of shares in the Port of Tauranga as an example of political decisions potentially hindering optimal investment returns.
Obviously, if you’re set to deliver the maximum return, you’ll make the decisions that you think are best around that.” Mr Drysdale argues that the investment arm should be “more separated and insulated” to make purely investment-focused decisions, while the political arm concentrates on how the generated income is spent. He conceded the current structure “works fairly well” but insisted it “could be made better if you took more of the political out”. Similar challenges with political influence over public funds have been seen elsewhere, such as in Calgary's mayor challenging the premier over a provincial property tax hike.
This debate occurs amid ongoing discussions about the fund's governance, with some iwi groups previously raising concerns that the current model is akin to 'stealing from the future' by not adequately protecting the asset for subsequent generations.
Calls for legislative safeguards
Central to the city council's argument is the need for legislative safeguards, which it deems “critical” for ensuring a long-term regional benefit. Mr Drysdale said simply changing the fund's structure “does not give you any further protection than there is today”.
The submission suggests that specific legislation could impose clear obligations to maintain the real value of the fund's capital. It could also require a super-majority vote before any capital could be spent and mandate fully independent governance over investment decisions.
The submission highlights that councils without these legislative shields are often exposed to pressures to use capital for short-term needs like debt repayment or funding one-off projects, at the expense of long-term growth. It points to the New Plymouth Perpetual Investment Fund, which is protected by its own legislation, and the Auckland Future Fund, which is pursuing similar protections, as models to follow. For a fund of this scale, such protection under a framework like the Local Government Act 2002 is seen by proponents as a vital next step.
Regional council responds
In a statement, Bay of Plenty Regional Council chairwoman Matemoana McDonald said the council was unable to comment on individual submissions at this stage, as they are intended to inform the upcoming decision-making process.
Consultation on the proposal closed on 2 April. Ms McDonald confirmed that the feedback from Tauranga City Council and all other submitters will be carefully considered during hearings and deliberations.
Final decisions on the fund's structure and the Long-Term Plan are scheduled to be made and adopted in June. The outcome will determine the future governance of one of the region's most significant financial assets.
