14 councillors voted through the new yearly budget in the culmination of a lengthy process that green-lights a compromise on the Mayor’s original vision
Seven percent of Auckland Airport is up for grabs, as Auckland’s councillors voted Mayor Wayne Brown’s budget proposal through today with an amendment for only a partial sale of the airport.
While Brown was gunning for a full selldown of the council’s 18 percent stake, the governing body agreed today to put 7 percent up for sale and keep the rest.
The vote passed with 14 for and six against, with an abstention from Albert-Eden-Puketāpapa ward councillor Julie Fairey.
It was the culmination of a lengthy process that sees a compromise on Brown’s original vision given the green light. The budget calls for:
* The sale of a 7 percent stake in Auckland International Airport Limited to pay down $865m of debt
* 11 percent average rates increase, which calculates to a 7.7 percent increase for the average household
* $83m of operating spending reductions
* $105m of debt
It’s a middle ground on the original call to sell all of the airport shares, but to those firmly against the asset sales, it still represented 7 percent too many.
Two amendments failed to pass that took the asset sale out of the equation, before a final version of the mayoral proposal was put forward that was able to gain enough votes to go through.
Much of the day’s debate focused on debt, with many councillors raising concerns around the amount of headroom the council would have if they borrowed much more.
Brown’s original proposal saw around $2b of debt paid off, which would give breathing space for councillors needing to react to ‘financial shocks’ coming down the pipe.
Future shocks could come in the form of inflating City Rail Link costs and potential buyout schemes for houses affected by the January floods and Cyclone Gabrielle.
“We need the debt headroom for these kind of things: they're coming towards us and we know it,” said Waitakere ward councillor Shane Henderson.
Other councillors said the asset sale question should be considered later in the year when it's time to figure out the long-term plan that will carry council’s over-riding budgets through into the next decade.
The governing body will start looking at the long-term plan from their next meeting before it is decided in September.
Brown said the budget was the “best, most prudent, balanced budget for Aucklanders that I’ve been able to achieve”, although he did indicate that the level of debt included was a bitter pill for him to swallow.
It was also bitter for the voting blocks who proposed and backed two amendments that took the asset sale off the equation, with councillors like Alf Filipaina, Lotu Fuli and Mike Lee all decrying the decision.
Lee said asset recycling, as council staff have framed such sales, is really a codeword for privatisation and called on the ghost of Edmund Burke to back up his argument.
Lee quoted the economist saying "society is a contract between three interested parties, the living, the dead, and the unborn; and if any issue pertains to Burke's social contract, this airport does ... it should be used to benefit the people who are now living and it should be handed on to future generations.”
There was a flurry of quotes from famous figures, such as Daniel Newman reaching for a Ronald Reagan quote to justify his distaste for councils living beyond their means.
Brown even produced his own take on a quote by Mao Zedong, saying “the thousand mile march to reduce debt starts with the first step, and it's time that we took the first step”.
He’s right in that it's just the first step in a long march. Next year’s budget looks to be a similarly difficult needle to thread with rates rises forecast and tough economic times not yet over.
It was the prospect of an austere budget next year that provoked councillors like Richard Hills and Shane Henderson to reluctantly go for a partial sale of assets.
“I will lose a vote on hundreds of millions of dollars on cuts next year... so if I don’t make a choice to fill that gap now we are going to lose new jobs,” he said, referring to the 500 jobs that have been axed at Auckland Council in recent months.
So with a 7 percent stake in the airport up for market, who would be likely to step in and become the new largest shareholder?
Finance Minister Grant Robertson indicated on Wednesday that central government was not planning to buy them. Meanwhile, Devon Funds head of retail Greg Smith said it was a “fairly unique asset” that could attract strong buying interest from the likes of foreign super funds.
He said institutional investors would look at Auckland Airport as a long-term property play because of its wide-ranging and well-located property portfolio, valued at almost $3b in its 2022 full-year results.
While it's still not a controlling interest in the company, the council itself has said that large shareholders can sometimes influence general company votes and agitate for common shareholder interests.
The decision comes as airlines Air New Zealand and Qantas put out a joint statement saying they are united against the cost and scale of a significant redevelopment planned for the airport, which they say will cause tourism and trade to suffer.
The airport’s two biggest customers called it an enormous spend that adds relatively low capacity
“We all agree that some investment in Auckland Airport is necessary,” says Air New Zealand chief executive Greg Foran. “However, this is an enormous spend over a short period of time that adds almost no additional capacity. All it is expected to result in is more costs for everyone who uses, relies on, or passes through the airport, including the aviation industry, the tourism industry, the whole economy, and Air New Zealand’s passengers.”
Waikato-based iwi Waikato-Tainui has signalled that they are interested in the shares as a part of settling Tiriti o Waitangi claims in the area.
The votes were as follows. John Watson and Wayne Walker voted for the proposal in whole but wanted their rejection of the asset sale recorded.
FOR
Andrew Baker Mayor Wayne Brown Chris Darby Christine Fletcher Shane Henderson Richard Hills Daniel Newman Greg Sayers Desley Simpson Sharon Stewart Ken Turner Wayne Walker John Watson Maurice Williamson
AGAINST
Josephine Bartley Angela Dalton Alf Filipaina Lotu Fuli Mike Lee Kerrin Leoni
ABSTAINED
Julie Fairey
