Stake holdings in Auckland Airport suppress value and opportunity, says Alasdair Thompson, chief executive of the Employers & Manufacturers Association (Northern).
Auckland Airport is issuing more shares to fund its purchase of airport company shares in Cairns and Mackay, Australia, and the mayors of Manukau and Auckland say their councils will use ratepayers' money ($28.66 million) to buy their extra allocation of them.
The Auckland Transition Authority has agreed to the
investment since it had been notified in both councils' annual plans, but most ratepayers didn't know this would happen and might not now agree with this use of their funds.
While it's hardly a good use of ratepayers' money when there is so much investment needed in infrastructure, the councils should leave it to regulatory authorities to restrict or block mergers or acquisitions considered "strategic". Besides, councils trying to do this are unfair to other shareholders in Auckland Airport, many of whom are ratepayers.
Councils' shareholdings should not be maintained to block what they don't like. That suppresses the real market value of the airport shares, of which 77.28 per cent are held privately.
With Auckland City owning 12.71 per cent of the airport and Manukau 10.01 per cent, either council can, according to Mayor Len Brown, stop a merger or any other significant transactions involving the other 77.28 per cent of shares held by the public.
The ARC last year also invested a further $40 million of ratepayers' funds in the Ports of Auckland to meet its capital needs. That was on top of $20 million paid to "buy" a half share of Queens Wharf from the port company and the $170 million paid by ratepayers in 2005 for the 20 per cent of the port it did not already own. Meanwhile the port's independent valuation last year was $506 million, a huge loss to ratepayers based on the price they paid for total control.
Councils are allowed to invest ratepayers' money in commercial business. They do not have to restrict themselves to their core functions, and they can take risks with ratepayers' money.
But the question is why would they do that when the return from investing in core infrastructure for their citizens and ratepayers is much greater than the dividends from such as airport shares?
And investment in local community infrastructure assets like transport is risk-free and the list of urgent projects is long.
I asked Mr Brown about this recently, and his answer was he wants Manukau city to control the airports shareholding because it's a "strategic" asset. He quoted a former Manukau mayor, who apparently used to say "it's a licence to print money". He made no attempt to compare the return on his ratepayers' investment in the airport with the returns or benefits from investing in risk free core public infrastructure.
John Banks agrees with Mr Brown. He too wants his council to buy more shares in the airport to keep its level of control over the airport's ownership. Mr Brown's subtext was that most of the people who will vote for him like public ownership of businesses such as airports and ports and don't like private ownership of them.
But this is like saying most people don't like private ownership of businesses, even though it is business that provides the jobs, products and services, and dividends and taxes that pay for the jobs and services of the public sector. We say that where the private sector is happy to take on risk let it do so and let government regulate monopolies and control of "strategic" assets.
One council even owns shares in a hotel. Others have dreamed of setting up insurance companies and banks. We have to ask: What is the private sector for, and what are councils for?
At present 77.28 per cent of shareholders in Auckland Airport have to accept that, as long as Mr Brown and Mr Banks have their way, their shares will probably not ever attain their full market value, and no mergers or bids for your shares that they don't approve of is going to happen. Their combined 22.72 per cent shareholding means they may prevent their own ratepayers and others who own 77.28 per cent of the shares, from realising the full market value for them because they control enough shares to veto any sale or merger.
