Auckland councillors could yet torpedo Mayor Wayne Brown’s bid to privatise the council’s 18 per cent shareholding in Auckland Airport.
The Herald understands Brown does not have the numbers to sell the shares in the strategic asset to help address a $325 million budget hole and keep household rates below inflation.
A source told the Herald Brown currently believes he has nine votes to sell the shares and 12 votes against, although there are a handful of wavering councillors on both sides.
“Any of these people could flip,” said the source.
Asked about the chances of the sale not going through, Brown said in a statement the process is ongoing and a lot of discussions are still to take place.
At a confidential workshop yesterday, Brown outlined some of his thinking ahead of his final mayoral proposal that will be released on May 31 before councillors meet on June 8 to make decisions.
It is understood Brown has told councillors if the sale does not proceed, rates could rise to more than 10 per cent and debt will increase from up to $75m to up to $140m. Until recently, it has looked like household rates would rise by 5.6 per cent.
Since releasing his draft budget last November, Brown has proposed selling the shares and using the proceeds to pay down debt to save the council more in interest costs than the dividends from the shares.
For example, the council is expecting a $42m airport dividend for the current financial year but would save about $90m in interest costs.
The mayor has said selling the shares at a time when a lot of debt is being refinanced at higher interest costs would not just hold interest costs down, but help address the $325m budget hole, take the sharp edges off the cost-cutting budget and hold down rates rises.
Consultation on the draft budget from about 40,000 Aucklanders found 53 per cent of submitters favoured a full or partial sale of shares and 34 per cent were opposed to a sale. The other 13 per cent had other ideas or did not know.
Deputy Mayor Desley Simpson is on Brown’s list as locked in to sell the shares and while she did not want to “comment definitively” before seeing the mayor’s final budget proposal, her comments lean towards selling.
Simpson said the council’s “small shareholding” cannot influence board decisions nor the direction of the airport and is purely a financial investment.
“When you look at the shares financially, the cost of holding them is more than the dividend stream expected and that is consistent over 10 years,” she said.
Two Labour councillors are also on Brown’s list in favour of the sale - Richard Hills and Shane Henderson.
Hills did not respond to a request for comment but Henderson said: “I am open to it, but I am not decided yet.
“The budget is a whole package and I am focusing on keeping as much council services from cuts as possible, and balancing a budget that delivers what people expect us to do,” he said.
Henderson’s comments reflect the difficult position for left-leaning councillors who, in principle, are opposed to the privatisation of strategic assets but are deeply concerned about cuts to community groups and services, and higher rates during a painful cost-of -iving crisis.
Historically, left-wing councillors have opposed selling strategic assets, including airport shares. Former mayor and Labour Party leader Phil Goff resisted any sale of the shares when it was put to him by council staff, and the left’s local government political arm City Vision urged members to make submissions not to sell the shares to pay down debt during the public consultation on the budget.
Three other councillors have indicated support for the sale. Greg Sayers said his vote is contingent on the proceeds being used to pay down debt, Andy Baker said the benefits of sale far outweigh the negatives, and Daniel Newman said his priority is retaining council services and avoiding spiralling rate increases.
Some councillors the mayor believes will oppose the sale, such as Alf Filipaina and Angela Dalton, said they are waiting for more information at workshops and debates before they make a final decision.
There are no more workshops before the mayor’s final budget proposal and no specific workshops on the airport before June 8.
Councillor Chris Darby said he had not decided whether he would support a full sell-down, a partial sell-down or no sale at all.
He said the dividend versus the cost-of-borrowing argument ignores the phenomenal growth in the council’s equity in the airport.
Since Brown’s first mayoral proposal in November, the value of the council’s shareholding has risen from $1.98 billion to $2.35b.
Darby said staff have provided limited financial analysis to date, the information gaps are considerable and there’s “more work to be done before I come in to land”.
Councillor Mike Lee has been the most vocal opponent to the sale, saying “selling the family silver” would be the biggest privatisation sell-off of council assets under the Super City.
He said the shares, a legacy of the former Auckland City and Manukau councils, comprise a blue chip investment providing alternative income to rates, having provided $344m in dividends and $1.3b in capital gains since 2011.
“It is my personal belief the present council finance ‘deficit’ crisis has been hyped to force the sale of airport shares.
“If the sale goes ahead, the young people of Auckland are set to be robbed of an intergenerational asset due to a selfish, short-sighted attitude on the part of an older generation who should know better,” Lee said.
Another opponent, councillor John Watson, said the airport shares are heading the same way as a $330m diversified investment portfolio of global shares, bonds and cash inherited from the former Auckland Regional Council, and sold under former Mayor Phil Goff to reduce debt.
“It was hocked off in the blink of an eye and the proceeds long since lost in the ever-expanding debt ether. I have no doubt that’s the fate which again awaits Aucklanders if the airport shares are sold,” Watson said.
His Albany ward colleague, Wayne Walker, said he remains undecided but his preference is to retain the shares if possible, and councillor Josephine Bartley said she is just going to wait until the vote.
Writing in the Herald today, councillor Christine Fletcher said the limited advice provided to councillors and lack of options or alternatives on the sale of shares left her wondering why there is such indecent haste for a decision of such magnitude.
“I am not in favour of selling now, partly as I don’t believe the systemic issues causing the council’s current financial crisis have been adequately addressed and this could just be a short-term ‘sugar hit’ fix.
“If forced I would prefer to see a part sale available only in small holdings to Auckllanders,” said Fletcher, a former National MP and Auckland City mayor.
Councillors Hills, Julie Fairey, Lotu Fuli, Kerrin Leoni, Sharon Stewart, Ken Turner and Maurice Williamson have not responded to the Herald on the issue.
How Wayne Brown sees the vote
Mayor Wayne Brown
Deputy Mayor Desley Simpson