Wellington mayor-elect flip-flops on sale of Wellington Airport

Written By: - Date published: 8:15 am, October 30th, 2019 - 26 comments
Categories: local government, Politics - Tags: , , , , ,

One of the first acts of Wellington mayor-elect, Andy Foster has been to reverse his stance on the council’s 34% holding in Wellington International Airport Ltd (WIAL).

Foster, who has flirted with National, Labour and NZ First in his desire to enter parliament, won the mayoralty in a shock result on his third attempt, with a tiny majority of 62 votes, after getting film magnate Peter Jackson to bankroll a heavily-funded campaign.

It was third time lucky for the former National Party researcher who came a dismal fourth to Mark Blumsky in 2001 and limped into fifth spot in 2016 against Justin Lester, the man he beat this time. Lester has called for a recount.

Foster, who is adamant he isn’t Jackson’s puppet, immediately floated the idea of “recycling” assets, of which WIAL would be the jewel. He has also advocated building a second Mt Victoria tunnel, sending the Let’s Get Wellington Moving project, already stalled for three years, back to the start line.

As well showing more flexibility than Winston Churchill over which party is lucky enough to have him, Foster has a history of equivocating over the council’s holding in WIAL.

He was instrumental in voting against the 1998 sale of the council’s airport stake, an issue that not only ripped the council apart, but split the Jenny Shipley-led National-NZ First coalition.

Then mayor Mark Blumsky and former CEO Garry Poole were certain they had lined Foster up on the sale side despite his many pronouncements against the sale.

But they received almost as nasty a shock as Lester received from this month’s election, when Foster jumped the other way.

Rob Laking conducted a fascinating post-mortem of the council’s proposed sale, titled The family silver: the sale of Wellington Airport. 

In it, Blumsky states: “Andy tends to sit on the fence and … you were never sure at the end of the phone call with Andy: he wouldn’t say he wasn’t going to support you, he would say ‘well he still needed a bit more information but it was probably going to be okay’ and then out of the blue he doesn’t.”

Laking notes there was extensive public consultation which was dominated by opposition to the proposed sale. Councillor Foster, first elected in 1992, remembered it as being “surprisingly vocal”.

“The mayor and myself mainly [attended the public meetings]. The mayor fronted most of it. I can remember the one in the Kilbirnie Community Centre. There were people hanging off the rafters. They were very anti. I don’t think we had a supporter in the room and it was chocker… anything we said, we were talking absolute nonsense as far as they were concerned.”

A council-commissioned poll of Wellington residents conducted by AC Nielsen found 42% had concerns over the sale. Most written submissions opposed selling with many expressing a view that the airport was an investment that generated good income.

Sale proponents argued WCC was only receiving a 2% return on investment but Foster argued that the alternative was worse – selling gold for silver.

In fact, WIAL has been a reasonable earner for WCC and the value of the asset has soared. In the year to March 31, 2019 WCC received a dividend of $12.6 million.

Infratil offered $150 million for the whole company in 1998 so WCC would have received $50 million ($76 million in today’s dollars, adjusting for inflation). Today, the asset would be valued at over $240.5 million, given that Infratil has it 66% stake in its books at $481.5 million.

In a letter to Evening Post on August 22, 1988, Foster said: “I believe most Kiwis don’t want strategic or monopoly assets sold, and the airport sale consultation results, while mixed, reinforced that belief.”

He had a similar track record of flip-flopping on the sale of Wellington lines company Capital Power, now the Chinese-owned Wellington Electricity.

Along with then fellow councillors Jack Reuben and Hazel Armstrong, he was a vociferous critic of that sale. But he managed to absent himself when the vote on the sale was taken and then changed his view. In the letter quoted above, he said selling the second half of Capital Power, “though unpopular, and personally difficult, made financial and customer sense, and subsequent events have proved the sale right”.

An interesting aspect of the WIAL ownership structure is that Infratil gets proportionally more dividends from its 66% stake because of a contentious tax mechanism called “subvention payments”. Infratil is allowed to group tax losses from interest costs in the parent company to offset WIAL’s tax liabilities so it receives disproportionately large returns – $40.5 million this year versus $12.6 million for the council. It’s all pretty legal, but not unlike what the likes of Facebook and Google do on an international scale.

The Infratil directors receive high fees – Chair Tim Brown receives $165,000 which goes back to Infratil. Foster is actually one of WCC’s two directors on the WIAL board but his $87,000 fee goes back to the council. However, WCC’s other board member, Wayne Eagleson, former chief of staff for John Key and now working for controversial lobbying company Thompson Lewis, keeps his $102,000 fee. How the council managed make such a tainted appointment is an interesting question that new the council’s three Labour and three Green members might wish to review.

Brown told me that the directors’ fees are in line with similar companies and based on Institute of Directors’ recommendations. They are set after a rigorous assessment process, he said.

Given the strong opposition to the sale of the WCC stake in 1998, including his own, it seems odd Foster didn’t raise the issue more prominently during the election campaign. In an email response to my query on this, he said he raised it at several meetings, and the main issue is price and risk.

Coincidently, WIAL , last week announced big new spending plans over the next 20 years. It also announced it is buying half of the Miramar Golf Course for $31 million, something it expressly states in its current 30-year plan it would never have to do even if the planned runway extension proceeded. The club has agreed to sell voluntarily under threat of forced acquisition via the Public Works Act.

Many people have questioned how WIAL’s expansion plans that involve a huge increase in flights, dovetail with the council declaring a climate and ecological emergency is anyone’s guess.

WIAL’s grandiose plans for the runway extension are bogged down and unlikely to proceed under the current government. Only subsidies by local, regional and central government would make the $350 million project viable. The subsidies assume benefits to the region beyond the airport and Brown says the extension “couldn’t be justified it on a purely commercial basis”.

The project has been stymied by a pilots’ union legal challenge to safety margins on the runway and all is on hold until the Civil Aviation Authority completes a review.

Neither Brown nor CEO Steve Sanderson are confident the runway plan will proceed while Foster has publicly expressed doubts.

Whether he can get his plan to sell the airport stake past a once hostile public or a leftist-dominated council also seems about as likely as his desire to bulldoze through another tunnel through Mt Vic.

Even before he has been officially confirmed as mayor, ructions in the council emerged in the stoush over the appointment of his deputy. One former councillor told me the two stand-out attributes she remembered of her time on the council with Foster, were that he would often vote on issues opposite to what he promised, and he was never a team player.

We will watch this space.

(Simon Louisson reported for The Wall Street Journal, AP Dow Jones Newswires, New Zealand Press Association and Reuters and later was an adviser to the Green Party. Disclosure: he is a member of Miramar Golf Club and voted against the sale of the course.)

26 comments on “Wellington mayor-elect flip-flops on sale of Wellington Airport ”

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  1. lprent 1
    30 October 2019 at 8:34 am

    Speaking from afar and remembering ancient history, wasn't Winston Peters also pretty damn adamant about about the sale of Wellington Airport.. ummm yep.

    Later, however, tensions began to develop between Peters and the National Party, which only worsened after Jenny Shipley staged a party room coup and became prime minister. After a dispute over the privatisation of Wellington International Airport, Peters was sacked from Cabinet again on 14 August 1998.

    I know that I really shouldn't ignore Wellington (I tend to focus on Auckland a lot these days). But this does appear to be a pretty contentious issue down there. I must read up some more on it.

    This is a good a post to start from.

    Makes it likely that any such proposal will face opposition at the government level as well.

    As a side issue. I also understand that Lester is launching a electoral challenge. With 62 votes in it on a STV election and a lot of disallowed votes, he has a good chance. Both with the appeal, and with the vote.

    The precedent on which Lester’s case hinges is based on Winston Peters’ election to the Hunua ward in 1978.

    On that occasion, Peters won on a recount after it was ruled voting papers not filled out correctly should be excluded, even if those voters’ intentions were clear.

    That ruling was subsequently challenged through the Court of Appeal, and a precedent set that any voting paper which clearly signalled a voter’s intention should be considered.

    Winston – pops up everywhere 🙂

    • Dukeofurl 1.1
      30 October 2019 at 9:07 am

      "He was instrumental in voting against the 1998 sale of the council’s airport stake, an issue that not only ripped the council apart, but split the Jenny Shipley-led National-NZ First coalition."

      The issue back then(1998) wasnt the Councils stake , it was the Governments 66% share That why the government doesnt have any shares now in the Airport but the Council does.

      Was there another time when The Council was ripped part over selling its share ?

    • greywarshark 1.2
      30 October 2019 at 9:49 am

      Winston is the gift that goes on giving, the doughty warrior that plans his campaigns well, and knows which way the wind is blowing. And can't be ignored; he is the pop-up politician for all conditions.

      • Dukeofurl 1.2.1
        30 October 2019 at 10:51 am

        The last electorate seat Court recount in NZ was for Waitakere in 2011.

        Paula Bennett overturned the final result and re-gained the seat.

        Ms Bennett was in the lead by 349 votes on election night but the result was overturned after special votes put Labour MP Carmel Sepuloni ahead by 11 votes. After Ms Bennett filed an application for a recount the Electoral Commission announced that she had won by nine votes.

        Of course it would have gains and losses on both sides ( and other candidates too) but would be interesting to see the quantum of votes changed by the court. Perhaps Mickey would know ?

  2. Hooch 2
    30 October 2019 at 8:57 am

    I wouldn’t want to presume what Andy Fosters stance is on the sale of the airport but I refer to an article on stuff when it was mentioned.

    Foster said the idea of the council sellings its stake in the airport was nothing more than an "early conversation" after council management asked him to address the issue of "asset recycling".

    So the council management asked him to sound it out rather than his own personal idea. From memory (and I could be wrong) Andy mentioned during the election campaign, on the wellington scoop page, that he preferred to keep the dividend income stream from owning the airport shares.

    LGWM actually called for an additional tunnel through Mt Victoria so it’s hardly sending it backward. It’s a bit hard to run a mass transit route when it has nowhere to go so it would be logical to build the tunnel first with dedicated mass transit lanes?

  3. Jimmy 3
    30 October 2019 at 9:14 am

    Surely with only a 62 vote majority and a re-count in progress, are the council able to make any major decisions until re-count done and dusted?

    • Dukeofurl 3.1
      30 October 2019 at 10:42 am

      Yes they are. The Mayor is only one vote around the council table. The process is the mayor (or any councillor) continues in their position until a court decision is announced either way.

      It wasnt NZ, but in Western Australia where they have STV type elections for Australian Senate, a candidate who missed out by a tiny amount requested a court recount, but for some reason not all the ballot papers were available anymore . in that instance the senate election had to be re run.

      Recounts bring up all sorts of gremlins in the vote counting process, its not totally accurate and done by clockwork as people might think

      • lprent 3.1.1
        30 October 2019 at 10:58 am

        In this case, my understanding is that the council are also using software / machine for the count.

        Speaking as someone who has spent the last 30 odd years as computer programmer, I simply don't trust software or hardware that much. The system engineering tends to have built in presumptions that are always worth reviewing. I seem to spend an excessive amount of time finding those (and my own biases) and fixing them.

        I'd regard this as an excellent opportunity for the court to review the actual process in an actual election, and to do it in depth.

        • Dukeofurl 3.1.1.1
          30 October 2019 at 12:22 pm

          The Council uses a contractor , like most other councils, for the whole election process.

          My understanding is the ballot papers are scanned to digital images when they arrive in the post and that first run is to detect those vote images that are unreadable by the software, for later manual counting. Likely other issues are paper jams during the scanning and that the numbers tally up for the barcodes read on the unopened envelope windows with the digital images barcoding to see that every vote receieved by post is accounted for.

          Plus the big issue, what the computer decides between competing digital image of numbers.

          With STV there are issues with not enough candidates numbered ( not really an issue with Mayor) or numbers repeated which make for an invalid vote. This could be fertile territory for 'what did the voter intend' , which I dont think has been tested by court for STV votes.

          • lprent 3.1.1.1.1
            31 October 2019 at 7:46 am

            Lots of scope for systematic errors in there.

            And I don't think that any of this has been tested by the courts here.

            In aussie, they’re still having STV count issues run through the courts.

        • Agora 3.1.1.2
          30 October 2019 at 8:52 pm

          I agree with the need for a thorough independent review of the election.

  4. Dukeofurl 4
    30 October 2019 at 9:20 am

    Its the Traffic that has no where to go. An extra tunnel for cars just means the streets in the CBD become grid locked.

    At the moment the tunnel is a choke point which allows some free movement in the CBD, removing the choke point doesnt mean you get to the destination quicker, just you spend less of the time in a tunnel.

  5. mpledger 5
    30 October 2019 at 11:08 am

    Wellington Airport is a private company (I believe) so I don't know that they can take the golf land via the Public Works Act – just like McDonalds can't force a sale of someone else's land to build a new restaurant via the Public Works Act. (OK – just checked on wikipedia – it's 2/3 private owned by infratil, the rest owned by WCC – so what does that mean for the Public Works Act?)

    The other thing is that the sewage works has lakes on the golf course which they use to clean the water before it goes into the sea. I don't know if they'll have the room to do that on a 9 hole golf course.

    They should move all the stuff on Freight Drive on to the Western side of the airport – they have a ton of unused land along Titirangi Road – and then they won't need to take golf land for a plane parking lot.

    • Alice Tectonite 5.1
      30 October 2019 at 11:29 am

      Public Works Act: Wellington Airport is classified as a network utility operator, same as electricity lines, telecoms, etc.

      Network utility operators are defined in section 166 of the RMA and distribute gas, petroleum, geothermal energy, telecommunications, electricity, water and wastewater, or construct or operate roads, railway lines and airports.

      [source]

      The golf course is zoned as 'Airport' in the District Plan. I have seen plans (not online) going back decades showing the golf course as future airport expansion. It been an option for along time.

      edit: corrected ‘designated’ to ‘zoned’

      • Dukeofurl 5.1.1
        30 October 2019 at 12:10 pm

        Yes. The sale of large block of Auckland airport shares to an overseas pension fund was blocked in 2008 by labour government.

        I think it was because the shares would provide 'control' to an overseas entity that was the problem rather than just the shares themselves

        • mpledger 5.1.1.1
          30 October 2019 at 12:17 pm

          (In a round-about way of getting there) It would mean that Wellington Airport couldn't be sold for the same reason.

    • Dukeofurl 5.2
      30 October 2019 at 3:35 pm

      Airport has offered $31 mill for half the Miramar course and I think the Club has accepted.

      Over the years the airport has encroached on the course

      " In the 1950s the government took 5.25 hectares of land from the club, and another 8.2 hectares in the 1970s. Further change was threatened in the 1990s, which led to a redesign of the layout by Graham Marsh design. The 18-hole layout that the 450 club members currently enjoy is a quasi-links with pot bunkers and rumpled fairways."

      Golf is a declining sport and Wellington City has other courses at Mornington and Berhampore and a few others a bit further out from the central city.

  6. Sigurd Magnusson 6
    30 October 2019 at 12:18 pm

    Am curious what the trend is relating to the future runway requirements of planes. Are plane-makers creating passenger aircraft with much shorter stopping and take-off requirements? I was thoroughly impressed in some of large US airforce transporters with incredibly short distances at Ohakea. (Boeing C-17 Globemaster needs only a 1km runway; our airport is 2km long) Furthermore, domestic planes will likely go electric (otherwise there will be a revolt against plane travel given climate change) and I am curious about their impact on take-off distances also. That's all to say: the future would seem quite uncertain on whether a longer runway is needed given imminent changes to technology.

    • Dukeofurl 6.1
      30 October 2019 at 5:52 pm

      Airliners need long runways for lift off to carry lots of fuel for long range.

      The long thin wings are best for that , military airlifters have bigger wing area so they can use shorter runways.

      Domestic planes arent going electric any time soon, unless they stay under 12 seats. Batteries that can currently be used in planes and at cold high altitudes are 1/100 of the energy density of kerosene.

      The big killer for batteries is that drag increases substantially with weight if the plane is otherwise the same. Added to that fuel is burnt during flight reducing weight, while batteries stay the same weight throughout.

      Cant compare with road vehicles as they work because weight doesnt matter so much, can recharge often and electric motors in vehicles are so much more efficient than petrol/diesel engines. Much less jump in efficency compared to modern gas turbines in flight profiles

    • Sacha 6.2
      30 October 2019 at 8:48 pm

      The future amount of flying people can do seems uncertain. Tourism industry has a big reckoning coming.

  7. Simon Louisson 7
    30 October 2019 at 1:01 pm

    Just to clarify – WIAL is what as known as a requiring authority and local authority under the designation and compulsory acquisition processes of the Public Works Act. The golf club was counselled that "assuming that WIAL is able to produce compelling evidence as to the need to acquire and use the land, it is unlikely that WIAL will be unsuccessful in compulsorily acquiring the Club’s land if it wishes to do so".
    ie the club decided it had to negotiate a sale which now has all but being signed off. The alternative was to fight it via the courts but the club argued it had no financial resources for such a fight and it would get the same result but be worse off. I unsuccessfully argued that WIAL would not wish for such a public battle where all the reasons against the extension would be publicly aired- climate change issues; noise issues for Strathmore residents; WIAL already having sufficient land for plane parking; that actually this is just a land grab in the same way that it was on the eastern side where WIAL now leases land to the big box retailers that are helping kill the CBD; destroying a Wellington green space, destroying Wellington's only proper 18 hole golf course and generally going against WCC's stated aim of making the city the most livable in the southern hemisphere.

  8. greywarshark 8
    30 October 2019 at 3:07 pm

    Who owns NZ and its infrastructure? This list of owners of country areas is interesting. https://www.rnz.co.nz/news/in-depth/401186/nz-s-top-50-private-landowners-revealed

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