By RNZ
The mayor of Auckland says selling the council’s shares in Auckland Airport could be the only option to save more services from budget cuts.
The council is facing a deficit to the tune of $375 million.
Wayne Brown said something has to give, and the airport is the easiest option.
His comment comes a day after he said without cuts or asset sales, residents would face a massive rates hike of 22.5 per cent - almost five times more than he originally proposed in December.
But some councillors have labelled that scaremongering, saying it was not being seriously considered for the upcoming council budget, which is due to be formalised in early June.
“The council’s got a huge pile of debt and interest rates are rising steadily, and quite a lot of that debt had been on fixed lower rates, and each time chunks of it come off, it’s rebooked at a higher rate and that’s mostly what’s driving it,” Brown told RNZ’s Nine to Noon today.
“People with mortgages would understand that and be experiencing the same thing, which is one of the reasons I don’t really want to put up rates that much. In the last few years when everyone got richer with their houses being worth more, they didn’t put up rates and now when the houses are being worth less, all that borrowing is causing us to face things which we shouldn’t have had to face otherwise.”
The council has about $2 billion invested in Auckland Airport, about 18 per cent of the company, inherited from the former Manukau and Auckland City councils. Selling the shares and paying down some of the council’s $11.7b in debt would immediately save $100 million a year in interest payments, Brown said - more than the airport currently pays in dividends.
Asked why the council is looking at selling shares in the airport and not its golf courses, which in total are worth more than its share in the airport and generate losses, not dividends, Brown said: “We didn’t consult on that, you know?”, before blaming councillors for the oversight.
“These people have been in here, most of the ones who have made this loss, have been here for years. Why didn’t they do that before? Why didn’t they raise that as something that we consult on?
“It’s a bit late to come up with fresh ideas now. We’ve had dozens of meetings and I’ve asked for fresh ideas.”
Brown also ruled out raising the debt ceiling, saying borrowing more to avoid a rates hike now would just mean even bigger increases in future years.
Howick Ward councillor Maurice Williamson, who heads the key Auckland committee charged with handling the city’s budget deficit, told Morning Report the 22.5 per cent figure was “if you didn’t do anything with cost reductions, and you didn’t do anything with lifting your debt level and you didn’t do anything about the airport shares”.
The former National Party MP said cuts to services were inevitable.
“You’d be amazed at the number of people who say, ‘I accept there’s got to be cuts, but I don’t want you cutting this and I don’t want you cutting that.’ There’s sort of a case of everybody wants to go to heaven, but nobody wants to die.”
He said while most would agree to using debt to cover the one-off cost of recent storm-related damage, it was not feasible to keep growing the city’s $11.7b debt to cover the day-to-day running of the council’s existing services - backing Brown’s suggestion to sell the airport shares.
“If your family had some shares in a company, they weren’t returning you anywhere near a dividend by way of what your mortgage was costing you at the bank, why would you not sell the shares and pay off your mortgage?”
He dismissed suggestions that some public ownership in the airport - the country’s biggest - was strategically important, because the council’s stake was too small to have a director on the company’s board, and there was no “appetite” for buying more shares.
Despite Brown saying no one raised selling the golf courses, Williamson - a first-term councillor - last year told media selling the golf clubs was “one of the alternatives that will be looked at in the long-term plan”.
Auckland Chamber of Commerce head Simon Bridges - also a former National Party MP - is also keen on selling the council’s airport shares, as were more than half of those who made a submission on the council’s budget.
On Wednesday, Manukau Ward councillor Alf Filipaina called the 22.5 per cent suggestion “scaremongering”, and Papakura Ward councillor Angela Dalton agreed.
“I don’t even know why a 22.5 per cent rate increase was touted, because we have already agreed and consulted on using four levers, and rates is one of those levers,” she told Morning Report. “The rest are the debt asset sales and spending cuts, so I see no reason for that to be touted.”
She said Aucklanders had made it clear they want to maintain services like the Citizens Advice Bureau and arts/cultural events, and the shortfall was just a fraction of the city’s overall budget.
Ward said it was possible to cover it without selling airport shares.
“Increasing parking fees is one way of increasing revenue, but the airport shares are a revenue stream, and they’re gonna be returning $40 million this year. We’re gonna have to fill that gap if we sell the shares.”
Brown said even with the airport sale and cuts, the proposed rates hike would likely be around 1 per cent higher than inflation, which is currently running at just under 7 per cent.
“That’s the mixture that I’d like to negotiate on, but I can’t do any deals if I don’t have any cards, and if we only partially sell the airport or don’t, then all the cuts have to be harder, and the rate rises have to be stiffer. And I don’t, I just don’t think Aucklanders, particularly ones with mortgages, are in a position to face much of an increase in costs.”
Williamson said whatever Brown ended up proposing, he would need to get at least 11 councillors to agree on it.
“We’re 20 councillors, each with one vote. And so what I’m telling you this morning, what I believe, may not come even close to it - because 19 other councillors won’t agree with it and that’ll be the same with another councillor and 19 not agreeing with them.
“So the difficulty the mayor has got - and I really feel for him, he’s come into the mayoralty, been given one huge budget hole passed to him from the previous council - that’s nothing to do with this council’s operation. He’s then had these dreadful floods and storms that have added extra cost and he’s got to find a way of getting 20, or at least 11 to get a majority, of councillors who agree.”
Brown said while he had a “core” of councillors onside, many of them did not like making “hard decisions”.
The final budget proposal will be released at the end of this month, Brown said.
“I don’t particularly like cutting services that people like getting at all. But if we don’t do the easy ones, like selling the airport, we will have to cut things more...
“We borrowed our way into this mess, we’re not gonna borrow our way out.”
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