Holding company process sunk
The establishment of a holding company for Nelson’s port and airport has been stalled, after it failed to gain majority support from Nelson City councillors.
The Tasman District Council (TDC) and Nelson City Council (NCC), currently 50/50 owners of both the Nelson Airport and Port Nelson, have been working towards establishing a holding company for the two strategic assets, which would grant access to loan funding from the Local Government Funding Agency at relatively cheap rates.
The latest step, the culmination of work since at least February last year, included a suite of recommendations and proposals on the precise set-up of the holding company to allow it to be registered. It passed at the TDC on June 30, but at a full meeting of the city council yesterday, the recommendation received just five supportive votes.
Councillors Brian McGurk, Kate Fulton, Gaile Noonan and the Mayor and Deputy Mayor were in favour.
Councillor Matt Lawrey was absent for the meeting.
McGurk said the council should rely on the advice it had received from staff and legal experts to continue with the process. ‘‘The advice is this is a good thing to do. There are benefits to our ratepayers, there are benefits to our companies, and it’s in our best interest.’’
He disagreed with concerns from other councillors, and some in the community, that ratepayers were being put in the position as guarantors because of the requirement of $233 million in uncalled capital was ‘‘misleading’’.
‘‘[It is] common practice for councils like Nelson to place their commercial activities into holding companies, and the model we’re being asked to enter today is neither unusual nor particularly novel,’’ he said.
‘‘They are really common and well-practised, so we’re a bit of an outlier in that we don’t have one.’’
He said that his concerns up to this point had been satisfactorily resolved.
Deputy mayor Judene Edgar agreed that while there had been issues in the process, she was satisfied that overall concerns had been addressed, and reminded councillors that the vote on whether or not to set up a holding company had already been made.
‘‘Voting against this today, for me, just means we might spend more hundreds of thousand [of dollars] changing constitutions ... the substantive work has now been done to shape this up into something that we can have confidence in today.’’
She said that elected members ‘‘should have been brought into the journey sooner’’ but steps had been taken to slow the process and allow councillors time to come to grips with the proposal, and the potential savings in interest payments would be significant for ratepayers.
‘‘The savings, if I just use round numbers, of $800,000 to $2m, our share of that savings is 0.5 to 1.2% in rates, and that is a big impact for our ratepayers, actually. If we could use that money to reduce the potential rate increase I think everyone would be saying, ‘thank you’.’’
However, councillor Rachel Sanson said ‘‘it doesn’t present a compelling case to me’’.
‘‘If I was simply representing the port and the airport, I would have little hesitation in supporting this. I can see the benefit to both entities, greater access to debt with fewer barriers and lower cost,’’ she said.
‘‘However, I am representing the community and council.’’
She reiterated her belief that adopting the proposal would ‘‘effectively and ultimately transfer debt risk from third-party financial institutions onto the community and ratepayers, and said the benefits for the companies did not outweigh the risk for the community.
‘‘Proceeding with this or not ultimately makes little difference to their strategic direction and outcomes, so for the sake of a possible and unconfirmed increase in dividends ... I cannot support the transfer of risk.’’
She was also concerned about climate change implications in lending.
‘‘The LGFA [Local Government Funding Agency] do not undertake climate related financial risk analysis . . . The implications of this are that council or Council Controlled Organisations could increase borrowings for a project or capital investment that presents significant climate related financial risk, no questions asked.
‘‘This has been a revelation for me ... [and] it has implications for our council’s own investment in areas and projects vulnerable to climate change impacts.’’
The Tasman District Council earlier this month supported the establishment of the holding company, but without support from Nelson City Council the process is now stalled until further notice.
‘‘[It is] common practice for councils like Nelson to place their commercial activities into holding companies . . . we’re a bit of an outlier in that we don’t have one.’’
Councillor Brian McGurk