Has the airport share sale crisis been over-hyped?
Auckland councillors are about to make a decision on the centrepiece of this year’s council budget — the sale of publicly-owned shares in Auckland International Airport (AIAL).
The $2.3 billion plus privatisation would be the biggest single sell-off of council assets in Auckland’s history. If this wasn’t controversial enough, it’s been linked with quite savage cuts to funding for local board and community services.
Not surprisingly, the annual plan consultation process has drawn a record response from Aucklanders who are pushing back.
Even before the new mayor and councillors were sworn in, senior council managers were issuing dire warnings of a looming budget crisis. The supposed deficit has progressively grown from $270m to $295m to $325m.
Over the past six months, in briefing after briefing, the message from finance managers has been drummed home to councillors: we face a grave financial crisis; the only solution is to sell the airport shares.
That, plus deep cuts to local services. The mayor has been fronting this proposal but it’s not his idea. And there is no political mandate for it.
Privatising the airport was never mentioned in the 40 or so mayoral campaign debates during last year’s election, nor in any campaign advertising.
In fact, selling the airport shares was pitched by council managers to the previous mayor Phil Goff several times — and firmly rejected.
In the recent Annual Plan consultation, the people of Auckland were told, that apart from over-the-top double-digit rate increases, there was no other alternative to balancing the budget. But there are always alternatives.
Despite the one-sided council messaging, in the 30,368 public responses to the consultation multiple-choice questions regarding airport shares (“sell all shares”, “sell some”, “no sale”, “‘other”, “don’t know”), the largest single constituency, the mode, 34 per cent, opposed any sale.
Of the 4 per cent categorised as “other”, 590 commented against the sale.
In my ward, the three local boards, Waitematā , Waiheke and Aotea-Great Barrier are firmly opposed to the sale, as are our communities, with modes 47 per cent, 47 per cent, and 37 per cent respectively, (factoring out “don’t knows”).
Most local boards across the region are similarly opposed.
Auckland Council consultation material presented the public with four options, visualised as interlocking gears labelled, “Spending Cuts”, “Rates Increases”, “Debt” and “Asset Sales”. The fact that the “deficit” is largely due to a record budget with a capital spend of $2.8 billion was not made clear.
Interestingly there is no Capex “gear” in the council publicity material.
Management’s argument for selling out is that holding $2.3b worth of shares costs the council up to $100m a year in debt servicing. Yet this is an expedient argument given council’s debt is derived from other largely non-revenue earning projects.
The airport shares were never borrowed for, being allocated by central government in the late 1980s and handed on to the “Super City” in 2010 by the legacy Manukau and Auckland city councils.
It is my personal belief the present council finance “deficit” crisis has been hyped to force the sale of airport shares.
However one views the current crisis, it is fair to say there are systemic spending problems within Auckland Council and its CCOs which have been evident for years. How we got into this situation is deeply troubling.
If the council’s recent civil defence/ emergency management response required an independent inquiry, surely an independent inquiry into Auckland Council finances is well overdue.
Relying on the same advice that got us into this situation to get us out of it, is not a sensible option.
As for the airport, never mentioned by council staff is that since 2011, despite the unprecedented impact of two Covid years, the value of AIAL shares has increased by 352 per cent, benefiting Auckland Council by more than $1.634 billion. This comprises $344m in dividends and $1.3b in capital gains to council’s balance sheet (for argument’s sake we could deduct as “opportunity cost” $407m in interest).
Despite Mayor Brown dismissing the airport shares as a “lousy investment”, since last October the share price has increased by over 21 per cent. The AIAL dividend this year will be $42m, increasing to $60m in 2025. Revealingly, this dividend has not been factored into the council’s budget.
Deeply troubling are recent media reports that, ahead of any decision by the council’s Governing Body, council managers have been working on the sale with “Australian advisers”, the commission for which could be $150m.
Council management is even prepared to forgo 5 per cent of the value of the asset in a bulk sale.
To add to the pressure on councillors, media sources report first-term councillors are being contacted by the mayor’s office with dire warnings that failure to agree to a sale will mean the Government will sack the council and bring in a commissioner. This is nonsense, of course, but underscores the high stakes in play.
If this sale goes ahead, the young people of Auckland will be robbed of an intergenerational asset due to a selfish, shorted-sighted attitude on the part of an older generation who should know better.
Despite the painful lessons of the past, selling the family silver is back on the agenda. I find it depressing that 1980s Thatcherite-style neoliberalism evidently dominates the thinking within the mirror glass tower at 135 Albert St.
Auckland International Airport is a strategic asset built by visionary Auckland leaders, the shares secured and handed down to us by farsighted mayors, notably Sir Barry Curtis and the late Dame Cath Tizard.
They comprise a blue chip investment, providing alternative income to rates, predicted to earn ongoing dividends and capital gains. Future generations of Aucklanders should not be disinherited of this legacy.
There are systemic spending problems within Auckland Council and its CCOs which have been evident for years. How we got into this situation is deeply troubling.