Westhaven Pier Renewal Fee Options?

by Seagull Media on 10 Jun 2009
All Westhaven Marina Licensees will have received the annual opex account last week. Please note that this does not affect any berthholders who rent at Westhaven's daily rate.

A new item added to the account is: 'Pier Renewals'. At first glance this appears to be another name for a refurbishment fee, in addition to the the Refurbishment fee in the line above, which is charged at the maximum permitted under clause 5.2 of the Berth Licence, 10% of the opex.

In fact, this charge covers interest only on borrowings to be used to fund pier replacement - A and T piers which are in danger of sinking, having reached the end of their lives.

Creative thinking done by the Marina Manager, ACC and WMUA has reduced the projected opex increase of 15% to 4.6% in part, by placing this interest charge separately, outside opex so that it is not further increased by adding another 10% to it for refurbishment.

To Pay?

The Marina could repair the marinas, and charge the full repair costs to Licensee's opex each year. For about the same cost, and with less disruption, they can replace the marinas, which will give longer life and ultimately lower total cost of ownership. They propose to fund this renewal by borrowing, and charging interest costs to the berthholders. Interest adds much less to the annual opex accounts than the full costs.

They are planning to renew A and T piers this year. The Pier renewals fee covers the estimated interest of funding replacement of these two piers for around half a year. On that basis, this fee can be expected to double in all subsequent years.

Within the next 5 to 7 years 11 more piers will require renewal - this will result in the the Pier Renewal fee being at least 10 times the amount on your account this year.

When post depression interest rates are driven up by the recovering economy, this item will increase even more.
The $55 fee this year for a 10m berth can be expected to increase to more than $550 per year within 7 years.
Should you feel that paying on this basis represents better value than receiving ongoing repair costs which Westhaven Marina is entitled to charge to the opex account, then please pay your account in full.
Doing so will legitimise this charge, and make you liable for an increasing amount each year, even when it increases by 10 times or more within 7 years.

Please consider making your payment on a 'without prejudice' basis.


Or not to Pay

The above scheme overlooks two important factors:

Berth Licence Clause 4.6 (j) does not provide for Licensees to be charged interest on renewing or refurbishing any piers; and

Clause 5. Major Refurbishment Expenses makes plain that refurbishment and renewal charges are limited to no more than 10% of the opex defined in clause 4.6.

Ports of Auckland Ltd (PoAL), the owner at the time, sold licences to berthholders for between $35,000 and $350,000, to secure their boats in strong berths and provide access to their boat via piers in good condition.
The Berth Licence contract recognises this fact by limiting the maximum amount that can be charged to Licensees by Clause 5.2, making clear that the owner is responsible for the costs of major refurbishment and renewal beyond the limited amount that can be charged to the Licensees.

The previous owners, PoAL have already established precedent by renewing the first piers installed at Westhaven, B to F in 1997 - 1998 without adding extra interest or other costs to licensee's annual opex accounts. Last year ACC fully funded the replacement of X pier.

The limitations of the other clauses makes plain that clause 4.6 (m) that interest for pier renewal cannot regarded as an 'extraordinary cost'.

Auckland City Council bought the marina in 2003 after performing thorough due diligence. They worked out that the income from the opex and rentals would fund their interest costs on the whole $48 million paid, so it would not have any cost to the ratepayers. They identified that they will have the opportunity to sell the licences again in 2026 / 2029 for much higher prices. Without doubt, they noted that PoAL had profited by many tens of millions of dollars from the sale of licences during the 50 years since the first piers were built, selling many of the berths 3 times during that period. They would have found the need for ongoing pier renewal and analysed their benefits and costs using advanced financial techniques including discounted cashflows before buying Westhaven.

The Pier Renewal fee appears to be ultra vires - outside the scope of the contract in each Berth Licence agreement that each Licensee, Westhaven management and Auckland City Council are all bound by.

Please read your Berth Licence, and if you then feel that this charge is not legitimate, deduct it from your payment, and demand a credit for the amount.

To assist you there is a template covering letter you can download from:
http://www.cananz.org.nz/WHpier.doc


Summary
A few years ago you paid an amount between $35,000 for the licence for an 8m berth and $350,000 for a 32m berth. What do you think you paid for if it wasn't a secure spot for your boat and a good pier to get to it?
It is clearly the marina owner's responsibility to provide this, and to meet the full cost of replacement piers when they reach the end of their lives.


WMUA AGM - Monday 15 June 18:00hrs at Ponsonby Cruising Club

Thanks to the efforts of the WMUA committee, the true nature of the Piers Renewal Fee has been clearly identified and documented, and it is now not possible for Auckland City Council to disguise it. The committee will update members, and seek direction for further negotiation. Please attend.