Auckland International Airport, owned in part by Auckland Council. Should the shares be sold? Photo / Alex Burton
Auckland International Airport, owned in part by Auckland Council. Should the shares be sold? Photo / Alex Burton
Part 2 of a 6-part series
The Auckland Council owns 18 per cent of Auckland International Airport. Selling that shareholding is the central proposal in a tough new council budget proposed by Mayor Wayne Brown for the year 2023-24.
The council has to plug a $300 million operating deficit. Todo it, the budget also proposes cuts to services, raising fees and cancelling public events, and raising residential rates by a net average of 5.66 per cent. But it will also boost disaster-response spending.
They’re now asking for public input. In this six-part series, we explain the key issues. Today: the airport shares.
The shares are a “strategic” asset, which is a legal term that means they cannot be sold without public consultation.
Nobody questions whether the airport is a strategic asset for Auckland. The city could not survive without the trade, tourism and other economic and recreational functions it makes possible.
Auckland Mayor Wayne Brown with his deputy Desley Simpson. Photo / Dean Purcell
The question is, what does Auckland get from owning part of it? After all, it doesn’t seem likely any future owner would pack up and move the operation somewhere else.
But what if new owners acted against Auckland’s best interests? They might have no long-term commitment to the city, seeking merely to make short-term profits from jacking up airline fees while investing nothing in the airport’s future.
The problem with this argument is that it could happen anyway. Although the council holds more shares than any other owner, it doesn’t have a controlling interest. It’s not even represented on the board.
Last December, the council’s chief financial officer, Peter Gudsell, spelled this out. Despite the “strategic” definition of the shares, he advised councillors, there is no sense in which council exercises “strategic” ownership. To all intents and purposes, he said, it is “simply a financial investment”.
Moreover, although the airport company does have strategic growth plans, Mayor Brown has stated he will not support the council paying in any way for that growth.
Perhaps the shareholding help keep the airport predominantly in New Zealand hands? Deputy Mayor Desley Simpson says if that’s the issue, local ownership should be guaranteed by the Government, not the council.
Another reason to hold onto the shares is that they provide a revenue stream. That hasn’t happened in Covid-disrupted years, but the council is expecting a $39 million dividend for the current financial year.
Supporters of the sale say there are better things to do with the money. The shares are worth about $2 billion, but Brown doesn’t propose to put the money directly into operating expenses or capital spending projects.
Instead, he wants to pay down debt, saving the city about $87 million a year in interest payments. That would take the pressure off spending this year and well into the future. This has become more critical because those interest rates are rising.
Would selling the shares cost ratepayers over time, or save money? There’s no sure way to answer that. Interest payments rise and fall and so do dividends. But there’s no evidence the shares are a goldmine.
Simpson says: “If we can’t sell the shares I don’t know what we will do.” One option would be an additional 4.5 per cent rates rise, on top of the net 5.66 per cent already proposed. Another would be far deeper cuts to operating expenses than are already proposed.
In the rest of this series, we explain more about all that.
Auckland Council budget: Have your say
All this week, the Herald is backgrounding the key issues.
Public consultation on the draft Auckland Council budget runs from February 28 to March 28. You can have your say online, or by phoning or writing in. The council is also holding dozens of “drop-in” events, community barbecues and public meetings. The details are here.
