Edmund Burke once described society as a “contract between three interested parties, the living, the dead and the unborn.” I was reminded of this during the recent debate on the sale of Auckland Council’s airport shares. Auckland International Airport was built at Mangere in the early 1960s by Auckland local authorities and the government. It was opened in January 1966 by prime minister Keith Holyoake amidst much fanfare and Auckland civic pride. Managed by the Auckland Regional Authority it quickly became the busiest airport in the country and soon Oceania.
As part of the rogernomics reforms of the 1980s, the airport was corporatized, the shares split between the government and Auckland local bodies. Soon after, Papakura District in a controversial move sold its tiny parcel of shares to the government thereby giving the government majority ownership. In 1998 the Shipley government used this to privatise to list the company and privatise the government’s shares. North Shore City sold its shares the following year. In 2002, Auckland City’s newly elected mayor John Banks in his first budget proposed to sell all Auckland City’s shares but in the face of widespread opposition, eventually sold half. In response Manukau City under Sir Barry Curtis increased its holding to block a takeover by a foreign interest, which I understand to have been Dubai World (which is also long been interested in buying the Ports of Auckland). The remaining shares, some 22% along with the Ports of Auckland were gifted to the new ‘Super City’ in 2010. This portfolio shrunk relatively to 18.9% over the past 13 years as the Council declined to take up reissued share offerings.
This was the situation when soon after his election Mayor Wayne Brown announced his intention to sell all the shares. In a case of ‘history repeats’, last month, just as in 2002, the council voted to sell just under half its remaining portfolio.
Councillors Lotu Fuli, Alf Filipaiana, Angela Dalton, Josephine Bartley, Kerrin Leoni, Wayne Walker, John Watson and myself argued long and hard to retain all the shares. This for three reasons:
- No public mandate to sell.
The mayor and pro-sale councillors gave no indication to voters of their intention to privatise assets during the recent local body elections. For my part, opposition to selling airport shares, along with the port and the downtown carpark was an explicit commitment in my election manifesto.
As well, a clear majority of local boards opposed the sale.
Finally, the largest proportion of public responses to the council’s consultation questionnaire was for ‘no sale’. (And on the subject of election commitments, my seven colleagues and myself moved unsuccessfully for a residential rates’ increase of 6.7%, 1% lower than that proposed by the mayor, but with $140m of additional debt as opposed to the mayor’s $80m (which has now crept up to $105m).
On the subject of election promises Labour/Green voters will be disappointed at some of their councillors (all who might be described as of the Woke Left) who betrayed election commitments to oppose the sale public assets.
- Legally questionable process.
Airport shares are deemed a strategic asset in the Local Government Act and therefore the council was required under the Act to adopt a ‘special consultative procedure’ before selling them. Along with other process failings, the council overlooked resolving to do this. Accordingly, the process had nothing special about it. The council even refused to hold hearings for the general public – just a hearing session for a few selected groups. It was the standard ‘Have your say’ process as in ‘Have your say – and the council will have its way’. Under the Local Government Act the council was also required to provide a ‘fair representation’ of key issues in its consultation ‘summary of information’. The loaded questions in council’s consultation material were anything but ‘fair’. Retaining the shares was always conflated with higher rates (marked in bold) and higher debt, but the financial benefits of not selling, including this year’s and future dividends were never mentioned. Given the bias and the push-polling tactics of the council, it’s all-the-more remarkable that the largest portion of Aucklanders voted to keep all the shares.
- A short-sighted financial decision.
Not mentioned in council publicity was that since 2010, despite the covid years, the value of airport shares has increased by some 360%, benefiting Auckland Council by some $1.7b, comprising $344m in dividends and some $1.4b in capital gains. I reject the argument constantly pushed by council finance bureaucrats that holding airport shares ‘costs’ the council interest, any more than keeping the Town Hall or our parks. It is revealing that at the start of the ‘Super City’, council debt was $3b, now it’s closer to $12b and that has absolutely nothing to do with airport shares but much to do with profligacy and inept financial management.
Had the legacy councils retained all their original shares, Auckland ratepayers this year could have expected $117 million in dividends instead of $42b. Now because of the part-sale decision, the dividend will be reduced to $16m. That being said, managing to hold onto to most of the council’s shares (11% of the total) in the face of months of intense pressure was something of victory for Auckland public opinion and the tenacity of those councillors who refused to sell out. In the end the mayor Wayne Brown was astute enough to compromise on the share sale and to withdraw his unpopular cuts, but total sale remains on his agenda as well as selling the Port company. In other words to asset strip Auckland.
To return to Edmund Burke and his social contract, the shares in Auckland International Airport, like the Ports of Auckland, and prized civic facilities were handed down to us by the visionary generation who built Auckland. They should be managed wisely and handed on to coming generations of Aucklanders. That’s the difference between inter-generational equity and inter-generational theft.
Mike Lee is an Auckland City Councillor