It’s an historic day for Auckland Council as the vote looms on Wayne Brown’s ‘reset budget’
In a matter of hours Auckland’s councillors will vote on a budget that could markedly change the future of the city – and it all hinges on the airport.
As the governing body gathers to say yea or nay to Mayor Wayne Brown’s budget proposal, all eyes are on the decision of whether to sell Auckland Council’s 18 percent stake in the airport.
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At the same time that Brown has softened service cuts and difficult economic times have made rates increases taste particularly bitter to local body politicians, a prospective airport sale has loomed larger and larger in significance on his list of money-saving initiatives.
Now the share sale stands to be the crux of today’s discussions, with what Newsroom understands to be a majority of councillors opposed to a full selldown.
Roughly a third of the governing body appear to be in support of Brown’s bid for a full sale, while the rest fall into a range of opinions including firmly against any sale, keen on a partial sale, or having not yet decided how they will vote.
With the full sale of shares part of the budget proposal, it’s unlikely to pass when put to a room full of councillors who are either worried about privatisation of public assets or that council will sponge up any revenue from the sale before Aucklanders can get a proper look-in.
Brown has tried to mollify those of the latter mind, saying there will be new rules to make sure the money is put to good use.
“I know some councillors are concerned council will just borrow that money to spend again,” he said. “So as part of my proposal, I am signalling new Auckland Council group financial responsibility and transparency rules, including permanently lowering debt-to-revenue policy limits following the sale of AIAL shares.”
But even with such promises, it appears the appetite for a full sale may not be high enough for it to pass at first glance.
That would leave councillors to make an amendment to the proposal, potentially calling for a partial sale or none at all.
Almost a quarter of the governing body have indicated they are undecided or want to explore more options than the current all-or-nothing settings. That could be enough for a partial sale to get the all clear.
The voting has become clouded by questions over councillors' potential conflicts of interest. As of Thursday morning, three councillors had discovered they had direct or indirect interests in parcels of airport shares, Julie Fairey, Chris Darby and, at the 11th hour, Wayne Walker, who disclosed he was a beneficiary of around $3m in the company's shares through a family trust. Walker says he has been cleared to vote, after assessment by council officials and the office of the Auditor-General.
Climate groups and union representatives have come out against the sale, saying it would remove the council’s potential for influence on climate and employment-related action within the airport – a significant employer for the region.
Public ownership could conceivably continue if there were hands up in Wellington to buy the shares – but Finance Minister Grant Robertson said there was no plan for the Government to acquire them.
Others in Parliament were split on the sale across political lines. Greens co-leader Marama Davidson said her party had always opposed the selling off of public assets, while Act Party leader David Seymour didn’t see the sense in the council owning airport shares.
Seymour said the shares were “not actually a good deal" for Auckland ratepayers.
"The best thing the Government can do to get its books in order is reduce its debt and the same goes for the council,” he said. "You just have to ask yourself: if anyone working for the Government had any hot share tips do you really think that they would be working for the Government or investing their own money and making a fortune?”
But back up in Auckland, it’s not a view shared by everyone with their eye on the balance sheet.
Both councillors and external financial experts have shared concerns over the financial wisdom of turfing shares that could be more lucrative down the road – particularly if that revenue is spent wastefully, as has been a common complaint levelled by the current crop of councillors at the organisation.
But in the likely case of some of the shares going up for sale, who is posed to become the new biggest shareholder of Auckland International Airport?
Devon Funds head of retail Greg Smith said there would be plenty of appetite for the council’s airport stake-out in the market from the likes of foreign super funds.
“It's a fairly unique asset. Obviously a lot of other airports have attracted strong buying interest, although perhaps in different stages in the economic cycle.”
Smith referenced the A$23.6 billion takeover of Sydney Airport at the beginning of last year by a consortium of infrastructure investors and super funds as evidence of that appetite, “This isn't a takeover, but it is an opportunity to secure a significant stake in a high-quality asset.”
He said any institutional investor could look at Auckland Airport as more of a long-term property play considering its extensive and well-positioned property portfolio, valued at almost $3b in its 2022 full year results.
He said any potential valuation would ride the reopening and return of Asian tourism as more flights came back on stream post pandemic.
