Learning the lessons of asset sales
Across the country councils are being pushed to sell off locally owned assets.
In Auckland, Mayor Wayne Brown has proposed selling the remaining 11% of Auckland airport shares in public ownership, leasing the port’s operations for 35 years, and establishing a rolling asset sales target of $300 million.
In Wellington, the Green-led council has voted to consult on a proposal to sell its 34% stake in Wellington airport.
Bay of Plenty Regional Council is considering selling its 54% stake in the country’s biggest port, the Port of Tauranga.
Christchurch council voted in December last year to take asset sales off the table, after it was suggested the council sell off its stake in the city’s airport and port. It’s a good time to revisit why council assets should stay in public hands.
Running a council isn’t the same as running a portfolio of financial assets. It’s not just about surveying returns, and divesting assets where they’re not making high enough returns.
Not all public assets should – or do – make returns. Councils own parks and libraries, for example, so spaces can be accessible and enjoyed by all. That requires investing in assets without a return. (Even if running a council was about making returns on assets, many assets on the chopping block – like Auckland airport – are returning strong revenue.)
Strategic infrastructure, like ports and airports, must be stable and reliable.
Selling these assets to for-profit companies leaves infrastructure operations vulnerable to the vagaries of the market.
That doesn’t provide the security for everyone relying on transport routes. New Zealanders and New Zealand businesses rely on these routes more than most.
Selling off assets also contributes to a values shift in society.
It’s 40 years this year since the start of Rogernomics in 1984, and the wave of privatisations and deregulation that continued under Ruth Richardson as finance minister in the early 1990s.
Those privatisations of the 1980s and 1990s helped make us into more of a market society. A greater proportion of activities in society is now run for profit, rather than public good.
If we want to halt the shift towards being an individualistic, competitive society – where profit is the overriding goal, markets govern, and money’s the main marker of success – we need to hold onto spaces and assets not driven by profit. It may be a sign of how far our political “centre” has moved right that NZ First leader Winston Peters resigned from the coalition government in opposition to the proposed sale of Wellington Airport in 1998 – and we now have a progressive majority in Wellington council entertaining the sale of the public stake in that airport.
The election of a right-wing government means supporters of asset sales in councils know they can accelerate asset sales without opposition from central government.
Lobby groups like the Auckland Ratepayers’ Alliance, affiliated with the Taxpayers’ Union, have ramped up pressure to sell assets, including through highly tilted polling questions.
Councils face some cost pressures, including higher insurance costs. But there are alternatives to address these costs, including collaboration with central government for self-insurance, increased borrowing, or pooling risk across councils.
Central government could provide much more robust funding to local government, to relieve some of these pressures. It is high time that a long-term funding settlement was negotiated by central government to support councils.
But disingenuous arguments are being marshalled to justify cuts and asset sales.
An Infrastructure Commission report suggests claims about councils facing debt crises are likely overstated.
The commission found “[a]ll councils have low debt servicing costs”, “the fundamentals of council debt are strong”, councils have “been significantly more indebted in the past”, and credit rating downgrades – which are not imminent – would incur only very modest increases in debt servicing costs.
In Wellington and Auckland there are proposals to put revenue from offloading public assets into future investment funds. “Future funds” sound good, but future investment funds were the main rationale for the sell-off of state assets in the 1980s, and are simply a way to make unpopular privatisations seem palatable.
Councillors, and the public, should see through these arguments and stand up to pressure.
If privatisations are accepted now, it’ll be far easier for community assets to be sold in the years ahead. Our libraries, pools, and parks could be next.