Sell the lot and watch the debts wing away
By BRIAN RUDMAN
Hands up everyone who is sick and tired of Auckland City councillors' endless dithering over the sale of the council's minority shareholding in Auckland Airport.
Well, I agree. Why don't they just cash up our 25.8 per cent holding, collect the $300 million, pay off the council's $100 million debt and get on with life?
It's all very well to point to the possible earnings the city can make by keeping the shares and collecting the dividends, but as any personal financial adviser will tell you, the best investment move you can make is to get rid of the mortgage.
This was certainly the advice council treasury manager Glennis Christie gave councillors on Thursday night.
But they chose to reject it. Not, to be fair to the number crunchers, because they didn't buy the arithmetic. It was that the councillors didn't trust one another to spend the sudden windfall wisely.
That, and the belief of deputy mayor Bruce Hucker and a minority of leftist allies that the airport should be retained as a strategic asset.
Dealing with that last point first. Auckland Airport is a strategic asset for Auckland City - and for the region and the country. It's the major gateway for people and a significant entry point for freight.
But as a report to the councillors points out, Auckland City's minority shareholding means it can do little to influence the airport company into adopting policies which favour the city's strategic objectives.
The report further adds that it could be argued that the council is in fact "supporting and promoting [through the provision of funds] the development of some aspects of Auckland International Airport Ltd's businesses as competitors to Auckland businesses."
Back to Glennis Christie's plan. The key ingredient is for the city to become - and then stay - mortgage-free. The first step would be to repay debt. Then a community asset fund would be established to pay for community asset needs, which could include the council's contribution to public transport and an indoor stadium.
Along with this the council would adopt a zero debt policy. First call on the fund would be the debt component of proposed capital expenditure. In other words, where the council would now borrow to pay for a project, it would instead get the cash from the fund.
Doing this would shrink the $300 million windfall to $49 million by 2004. This drain is the result of high projected capital expenditure over the next four years, in part relating to the Son of Britomart development.
From 2004, the fund would start to grow, reaching $180 million by 2010 even as it continues providing debt financing.
At any time, the council could dip into the fund to pay for one-off projects such as a $50 million indoor arena.
Now the sight of a balance sheet, or even a graph entitled Financial Projections Chart 19, is enough to make my eyes glaze over. But my advisers suggest such a community asset fund makes sense, as does the zero debt policy.
Of course it's not as sexy as the big spendup. Even with the dollar heading down towards the world of the peso and the rouble, $300 million still buys a lot.
A popular option would be a rates holiday for all of us. It just so happens that $300 million almost exactly coincides with the annual rates income.
For the more squirrel-like among us, salting it away underground is probably a more acceptable course of action. One option would be to pour it into stormwater improvements ($300 million). Another would be to speed up the separation of the ancient wastewater-sewage system ($360 million). And dare I suggest an arts and cultural foundation of suitably grand proportions?
Or we could think "fritter" and scatter it around on projects such as Mayor Christine Fletcher's favourite, lighting up the Harbour Bridge - a snip at $1.8 million - and on expanding councillor Victoria Carter's small band of blue jacket ambassadors.
Whatever we do, leaving the money ticking over in the airport seems the wrong option.
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