- Date published:
8:15 am, October 30th, 2019 - 26 comments
Categories: local government, Politics - Tags: andy foster, Mark Blumsky, peter jackson, wellington, wellington airport, wellington city council
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.)