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The Trusts West Auckland bars pokies gaming gambling alcohol business
The Trusts West Auckland bars pokies gaming gambling alcohol business

BusinessApril 13, 2018

Meet the councillors moonlighting as West Auckland’s booze and gambling tsars

BusinessDesk
The Trusts West Auckland bars pokies gaming gambling alcohol business
The Trusts West Auckland bars pokies gaming gambling alcohol business

Gambling and booze, booze and gambling. Those legal – but potentially devastating – vices. Rebecca Stevenson investigates how a handful of people, including sitting councillors, hold a tight grip on West Auckland nightlife.

A piece published last week on the Spinoff, arguing that licensing trusts are holding back West Auckland, triggered a national conversation about the arcane governance that continues to control alcohol sales in parts of New Zealand. Do we really need licensing trusts any more, many asked, especially if they appear to be as focused on empire building as giving back? And if one of a licensing trust’s bars is considered among the worst by police for arrests, doesn’t that suggest the model is a failure?

A closer look at the set-up in West Auckland reveals that many of those holding the levers of power on booze are also in charge of the pokies. The same names pop up on the licensing trusts and the gaming trusts. These are people entrusted with overseeing million-dollar industries; how and where gaming and drinking are done, and where the grants go.

There is meant to be a separation between the bars (that host gaming machines) and the gaming trusts, but in West Auckland – thanks to the presence of the monopoly-holding licensing trusts – the lines are blurred, and the shots are called by an influential few.

The head honcho

Let me introduce to you Ross Clow, the president of the Portage Licensing Trust, one half of the The Trusts group which runs alcohol sales from Avondale to Westgate. Clow is also chairman of The Trusts Community Foundation (TTCF), which runs the pokie machines in various licensing trust outlets around the country including some in West Auckland.

I should also probably mention Clow is also a Labour councillor representing the Whau ward on Auckland Council, where he is chairman of the influential Finance and Performance Committee – annual salary: $127,481.

The affable and sharp Clow is a working example of how New Zealand’s convoluted “the local community runs booze and gaming” system has actually concentrated power in the hands of a few.

The pokies

As chairman of TTCF, Clow is at the head of an organisation overseeing gaming machines in 54 venues, 27 of which are licensing trust premises including Portage and Waitākere licensing trust venues.

The trust is mandated, by gaming law, to give back 40% of the proceeds of gaming. For TTCF’s financial year ended 31st March 2017, it returned 43% or close to $13 million in grants, on revenue of about $29m. TTCF is a not-for-profit; it was previously run as a charity but was “obliged to restructure as its charitable status made it difficult to support sporting and/or racing related activities”.

Over that period the trust earned about $6.2m from Portage machines; $2.7m was paid back into the community by way of grants. For the Waitākere licensing trust, they earned $5.3m from pokies in their bars and taverns, with $2.1m paid back as grants into the licensing trust’s community.

Despite a sinking lid policy on the number of gaming machines, the flow of cash through pokies in West Auckland has been increasing, up 30% in the Waitākere Ranges Local Board area, and 23% in Henderson-Massey.

Chairman Clow and directors (including Henderson-Massey local board member Warren Flaunty) were paid $140,000 in fees, depending on how many meetings they attended. Also on TTCF are Horace McAuley and Gary Williams. (To check out the absolutely dizzying number of grants TTCF looks at and accepts or rejects in a grant period head here.)

In 2016 TTCF paid out grants to organisations with which Clow had an association to the tune of more than $830,000 (he recused himself from voting on these applications) and in 2017 it was $276,927.

It paid venue payments to the licensing trusts – including, of course, Portage, of which Clow is president – valued $4.2m for the latest financial year. It admits it has a few conflicts of interest (with directors on both gaming and licensing trusts) and related party transactions, but in terms of handing out grants it says having its licensing trust members pitch in on funding decisions is valuable and benefits the local communities.

The booze

But they would say that, wouldn’t they? Clow’s Portage Licensing Trust, along with the Waitākere trust, monopolise retail alcohol sales (no, you can’t buy booze at the supermarket out west) and bars and taverns in West Auckland, and of course controls the gaming machines operating in them.

There was once a nightclub (that may be coming back) – but on the whole The Trusts, as the two are collectively known, own the night from Avondale through New Lynn, Te Atatu, Henderson, out to Titirangi and through to the border of Kumeu.

Portage reported revenue of $43 million for the 2016/17 financial year and profit of about $11m, with president Clow paid a $30,000 a year honorarium. The licensing trusts booked increased gaming site rental (from TTCF) of about $770,000 for the 16/2017 financial year, up more than $100,000.

Collectively The Trusts gave away at least a million dollars last year with its Million Dollar Mission, attracting reported marketing costs of $200,000. But it has at least $14m in the bank, and many, many millions more in retained earnings.

Some West Auckland agitators would like to see a vote on The Trusts monopoly, noting it has been about 15 years since they were last asked whether the system should stay.

The barons

But Clow is not the only elected local government politician that is also involved with the trusts (both gaming and booze). National-aligned fellow Auckland councillor Linda Cooper (salary more than $100,000) is also the president of the Waitākere Licensing Trust (honorarium $30,000 per year), and Henderson-Massey local board member Warren Flaunty is both a director of TTCF and Waitākere Licensing Trust (and the Waitemata DHB even), for example.

In response to questions about his remuneration (and following my appearance on The Project which discussed conflicts of interest on licensing trusts), Clow says that what matters is not conflicts of interest, but that they are declared. “I know that if my reputation is slandered and or/libelled and hence damaged by false accusations I will not hesitate to protect myself. My integrity and reputation are critically important to me as an elected person.”

And, look, I’m absolutely not saying it’s dodgy, certainly not that it’s corrupt. At the very least, however, for the chairman of a gaming trust to be the president of a licensing trust that does business with the gaming trust has caused confusion, whether it not it was ill-intentioned. And it’s no wonder it’s confusing for the trustees – could it be they are wearing too many hats to keep them stably balanced on their heads?

More Reading

More importantly still, it’s fair to ask whether it is really in the interests of democracy to have community decision-making (and the doling out of all that pokie cash or control over the alcohol trade) concentrated among a small group of people. And with voting for trusts so low (a few thousand was enough to get a seat on some licensing trusts) can we be confident they are truly representative, particularly when such enormous amounts of money are up for grabs?

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Image: Getty
Image: Getty

BusinessApril 12, 2018

Count me out on the tax-love bandwagon

Contributing writer
Image: Getty
Image: Getty

Even if you admire the ends, the who and what of tax is pretty loathsome, argues Danyl Mclachlan.

Last week was tax week at the Spinoff. It celebrated companies that pay tax, interviewed Sir Michael Cullen, argued that tax is love and that we should stop talking about it as a burden, and gave a platform to ACT’s David Seymour who argued that tax is violence and probably made other points in the paragraphs beyond the first that I didn’t bother reading.

But I want to endorse Seymour’s opening paragraph, partially, sort-of, and argue that while the general concept of tax is very worthy our current system is anything but lovable. That it is arguably, a form of violence, and that if you’re concerned about inequality, climate change, pollution and housing affordability you should consider hating our current tax system.

Wait! Isn’t tax the price we pay for living in a civilised society? Isn’t tax how we express our love for each other? Sure: if you have to put it like that: fine. But those homilies leave out the crucial question of who pays tax and who doesn’t, and what is taxed and what is not. Let’s look at that.

Tax is when the government takes a portion of your wealth. Most of us generate wealth by working. If you’ve got a job you pay PAYE on your salary. If you own a business you pay company tax on your profits. That’s where the bulk of the government’s tax revenue comes from, and GST makes up most of the rest.

But the most profitable way to generate wealth isn’t by working: it’s by owning stuff. A bunch of houses, a factory, a farm, shares in a company, the intellectual property for a software application. This isn’t always the case: an accountant working for a consulting firm might be wealthier than a farmer up to their eyeballs in debt, or a guy who owns a Prius and drives for Uber; but generally speaking, the poor mostly work, the very rich mostly own stuff (economists refer to working as labour, owning profitable stuff as capital).

And in our tax system labour is taxed but capital is not: instead owners are taxed on the revenue they make with their capital, not an increase in its value. So someone earning the minimum wage is taxed at 10.5% and they pay about four thousand dollars a year in PAYE (some of which is probably transferred back to them in benefits or Working for Families, after the government keeps a bit to fund the elaborate bureaucracy required to take people’s money then give it back to them).

Contrast that with Apple, which made $4.2 billion dollars in sales in New Zealand last year but paid no tax because they are able to structure their finances in a way that ensured they returned zero profit; or Sam Morgan who sold TradeMe for $700 million dollars and paid no tax (which he personally considered absurd), or Sir John Key who sold his Parnell mansion last year for $20 million: making an estimated profit of about $15 million over the 12 years he owned it, but also paid no tax.

Can you feel the hate yet?

Wealth created by an increase in the value of capital is what economists mean when they talk about capital gains. New Zealand famously and unusually does not, essentially, tax capital gains (although at the height of the residential housing market’s hyperinflation National introduced a “bright line test” so that you pay tax on a property sale if you bought and sold within five years). Over the last 20 years the total value of New Zealand’s residential property increased in value by about $800 billion dollars – it’s worth way more than our share market – almost all of which was untaxed and little of which involved building new houses, creating new jobs or creating any actual value. Instead it constitutes, as many have pointed out, a vast transfer of wealth from the poor to the rich and the young to the old, has locked most young New Zealanders out of the housing market, led to thousands of families living in cars and garages and is still heavily incentivised by our tax system.

Now let the hate flow through you.

Here’s something else to consider. We tax the creation of wealth in a way that’s horribly unfair – but most of us consider wealth creation to be a good thing. Why don’t we tax harmful things? We do, a little bit. Cigarettes are taxed. Alcohol is taxed. There’s an ongoing back-and-forth about a sugar tax. But greenhouses gases aren’t taxed, which is weird when you consider the incalculable harm they’re going to cause in terms of flooding, droughts, hurricanes and other extreme weather events, and that the government will have to meet most of those costs. Pollution is totally untaxed. The good old dairy industry can intensify land use, wipe out native species, flood rivers with excrement while simultaneously emitting vast amounts of greenhouse gases, burn coal – a deadly carcinogen and greenhouse gas – and all of this is completely untaxed.

Most forms of social harm are neutral in the eyes of the tax system. Consider Facebook, a global company which designs its interface to be as addictive as possible, harvests its users private information and fails to keep it secure, is destroying the media ecosystem, functions as a platform for authoritarian regimes to disrupt elections in democratic states, monetises the spread of fake news and makes many of its users feel lonely, alienated and depressed: yet pays close to no tax in New Zealand. Which might change when they start booking their advertising sales revenue here, rather than Ireland as they’ve been doing for many years: but that will merely bring them closer to parity with the media companies they’re destroying and not, say, the tobacco companies which are closer to the Facebook model in terms of profiting from the damage they inflict on our society.

The current tax system is the product of many years of accumulated decisions about how to pay for the costs of the state. Some of them doubtless made good sense at the time; most were influenced by lobbying and political calculation. You can love the ends: the schools, the health system and so on; but the means are pretty awful. So I struggle with the argument that we shouldn’t refer to tax as a burden when for many low income earners, small businesses and working families it is, literally a burden, a burden which is not shared by many of the wealthiest in our society, or those who cause the most harm to us and our environment.

You can’t radically change the tax system overnight. It’s too complex and vital; you’ll cause too many unintended consequences; taxing income is easy, taxing capital and externalities like pollution is harder. But I hope I’ve convinced you we can all hate it, deeply, and call for progressive governments to work towards a system that is fairer and better, a system which is even, if you really insist: more lovable.

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