If Wayne Brown’s full selldown of airport shares doesn’t get off the ground, will Auckland’s councillors find a compromise?
After months of consultation and policy pruning, Auckland’s councillors will gather tomorrow to vote on Mayor Wayne Brown’s budget proposal - and it looks like it will come down to each councillor’s appetite for asset sales.
The sale of the council’s 18 percent stake in Auckland International Airport has become the lynchpin of the budget, with Brown softening other aspects of his cuts but holding firm on his desire to offload the shares and use the proceeds to pay off $2 billion of council debt.
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As the majority of councillors seem unimpressed with the full sale option, with some saying the process has been rushed and geared towards the all-or-nothing, Brown may just turn up at the governing body meeting on Thursday to find a stalemate.
Without a majority of the 21 elected members (including Brown himself) voting a full sale through, another solution will need to be found - and quickly.
The yearly budget needs to be set in stone by Auckland Council’s new financial year on July 1.
Council staff have warned that a delay to a sale of the shares would in turn delay the financial benefits and “full projected interest savings for 2023/24 may not be achieved”.
Officers advised the council a delay of a month would cost them interest benefits of around $8 million.
So an impasse will require quick thinking to find another way through.
One option for those around the table would be to propose an amendment shifting from a total sale to a partial sale - or if the anti-asset sale camp are feeling strong enough, none at all.
While it currently looks like the keeping the shares crowd have it, yesterday's news of Transport Minister Michael Wood being stood down for a potential conflict of interest due to his own share ownership in the airport could have ripple effects that impact the outcome of the vote.
Council staff are looking into councillors or their spouses' ownership of shares to see if they pose any conflict of interest which could prevent them from voting on Thursday.
The council has kept the specific names of who is being looked into under wraps, but the fact that Albert-Eden-Puketāpapa ward councillor Julie Fairey is Wood's wife and her own council declaration was updated last night to reflect the situation, suggests they'll be looking at her.
Fairey is a safe vote in favour of keeping the shares, and if she is excluded that could be important in tipping the balance slightly towards some kind of sale.
The first-term councillor’s links to her husband’s airport shares are being looked at by council officers to see whether they pose a conflict of interest and whether she can participate in Thursday’s vote.
Waitakere ward councillor Shane Henderson said he was undecided on exactly how he would vote, but was primarily motivated by reducing cuts that would hit communities hard.
He said councillors had been working “crazy long hours” in meetings and workshops weighing up the pros and cons of each outcome.
It was the “biggest and most contentious budget for the city” but he was confident there would be an outcome that would reflect the desires of Aucklanders.
Albert-Eden-Puketāpapa ward councillor Christine Fletcher is on record opposing full sales, and believes there are crucial avenues that haven’t been explored.
“I’ve indicated that I would support some small sale to enable council to get through it,” she said. “There are solutions that are there if there’s a willingness of spirit.”
She had been asking for the past decade why a targeted rate couldn’t be applied to the airport precinct to help fund transport routes to and from the airport.
But she said it was a broader issue than just who owned the airport. The council had a “chequered reputation” with previous asset sales like the Civic Administration Building and Queen Elizabeth Square.
“We haven’t glorified ourselves in the way that we’ve gone about divesting things, and then there’s this distrust that the public feel that if they sell those it’s just going to go into the great dirty little debt problem that council has.”
She’s keen to see some kind of middle ground explored.
Joining her in the 'against' column are members like Mike Lee, who remains firmly against privatisation. But others may have more appetite for a compromise. It means while the full shares sale is looking unpopular among the 21, partial sales may just be able to muster the numbers.
A partial sale of say 8 percent could raise $1b to pay off debt and mean the council could maintain a blocking stake - enough shares to prevent the entire airport company being acquired in a takeover. Council documents suggest this blocking position would require 10 percent.
However, officials cautioned that another party could still acquire 100 percent of shares by taking effective control of the company via the court through a scheme of arrangement under the Companies Act 1993, allowing a court to determine the shape of a company.
The officers' advice on whether the council should continue to own its18 percent holding mostly seems to favour a sale.
They said the council brought no aeronautical expertise to the table, lacked the capital to contribute to airport growth projects and lacked influence over airport operations such as carbon emissions reductions.
The documents for councillors do provide some detail on what a partial sale might look like.
An immediate sale of eight percent of shares (keeping the 10 percent blocking stake) is projected to contribute $28 million to the operational expenditure shortfall.
Selling the whole shareholding would contribute $60m.
If a partial favour was favoured on Thursday that meant, for the 2023/24 financial year, councillors would therefore need to find a further $32m either from increasing rates or adding further debt.
Brown has played the democratic mandate card repeatedly during his tenure, saying his plans are backed by 180,000 Aucklanders who voted for him. In the case of asset sales, he’s pointed to consultation that said 53 percent of submitters were in favour of some kind of sale.
But when that’s broken down further, more than half of those supported a partial rather than full sale.
A later survey run by Kantar found 52 percent of those asked favoured a partial sale.
(The survey contained inaccurate information about the ‘blocking stake’, however, overplaying its ability to prevent other parties from gaining control.)
A partial selldown might very likely end up on the table on Thursday, but if enough of either side digs their heels in, other opportunities to fill in the budget gaps will have to be explored.
Rates are a likely battlefield. Brown’s current proposal has average residential rates set at 6.7 percent, in line with inflation.
Without the airport shares sale, the council would need to find an extra $60m. If all of this came from rates, it would represent an extra increase of about 3 percent, bringing general rates to almost 10 percent up on this current year's levels.
Using rates to fill in the difference between a full sale and a partial sale of 8 percent of the airport shares would require an additional 1.6 percent increase.
There are a range of levers in front of the governing body, however, and exactly what amendments emerge in the wake of any impasse will be up to the 20 councillors and one mayor.
