Why selling Auckland Port Operations is a particularly silly thing to do

It is a given that the right in power want to sell public assets off and the left want to retain those assets. And it appears that the right’s eyes are on Ports of Auckland.

Mayor Wayne Brown is clearly a fan of privatisation. He recently managed to get a majority of Auckland Councillors to agree to the sale of a significant number of the Council’s Auckland International Airport’s shares. I thought that the justification for the sale was wanting and that the decision would cost the City a significant amount in the long term.

The vote was close. Three progressive Councillors decided for various reasons to support the sale. If they had changed their vote the result would have been different.

Fresh from his success the Mayor has raised the possibility of the privatisation of Ports of Auckland’s operations.

From Finn Blackwell at Radio New Zealand:

Just two weeks after [Mayor Wayne] Brown won a contentious vote for the partial sale of the council’s shareholding in Auckland Airport, he has floated the idea of selling an operating lease for the port business and reclaiming some of the land for public use.

He said it would make the port more efficient but the union feared it could be a financial disaster.

Ports of Auckland operates as an independent business, working off port land owned by the council, to which it also pays dividends.

Brown has always been highly critical of the port’s performance saying it is inefficient and has wasted hundreds of millions of dollars on a botched automation project.

Now, he has been looking into what leasing its operations and freeing up land could mean for the city.

Maritime Union Secretary Craig Harrison thinks that any privatisation will be a lose-lose situation for ratepayers, workers, and businesses.

From Bernard Orsman at the Herald:

Responding to plans by Auckland Mayor Wayne Brown to clear the way for a possible sale of the port’s operating business, union general secretary Craig Harrison said relinquishing control of the strategic asset would be a “lose-lose situation” for ratepayers, workers, and businesses.

“The Australian experience is privatisation of port operations creates another layer of management costs and profit-taking for no real benefits,” said Harrison, whose union represents most of the workers at the port. …

“The risks of going down this path are massive, and the only beneficiaries in the long term would be the new owners.”

He said the “one-off sugar hit” of privatisation would soon wear off if the port was permitted to effectively become a private monopoly.

“Splitting off leased port operations from land ownership does not change the fact the ports would be privatised and the new owner would have huge leverage over Auckland,” Harrison said.

Mayoral adviser Matthew Hooton has for some time advocated for the closure of the ports. His analysis displays a simplistic right wing laissez faire approach to the issue. Essentially the ports land is worth $X, the City only received $Y in value and it should receive $Z. Therefore it is failing and should be handed over to private enterprise to sort out and increase profitability.

But his analysis ignores the fact that the Port is a transport hub and a transport asset. As a hub it assists all sorts of economic activities to happen. Exporters find that their ability to send their goods overseas is cheaper because there is a local conduit. Importers enjoy the extra ability to get large volumes of goods landed and into their warehouses quickly. If the Port only broke even then it would still be generating a significant public good. Currently we do not charge for using roads realising that they provide an important service. I do not understand why Ports should be treated differently.

The second problem is that his proposal ignores the implications for Auckland’s transport system of closing the port. If you adopt a blinkered money only analysis of Auckland’s port then its closure can be justified. But Auckland City needs to think about the big picture. Imagine up to 663,000 extra container movements by truck from Tauranga or Whangarei into the greater Auckland area each year. POAL is in the centre of the most intensely developed urban area in the country. Of course it has an important role and should continue.

Improvements are possible and in particular more freight should be able to be transported once the third rail line on the Southern line is complete.

If the Mayor’s goal is to facilitate the conversion of Port land to other uses then handing operations over to a private entity is the last thing that he should be doing.

And private Corporations do not act in the public good. They are there to maximise profit. Giving them control of an entity with monopoly control of the downtown wharves is giving them a licence to print money to the detriment of the city as a whole.

Councillor Mike Lee has been involved in issues concerning the port since the 1990s. He has provided this fascinating insight into what happened the last time that an attempt to privatise the Ports occurred. The then National Government pressured the Auckland Regional Council to sell its 80% shareholding in the Ports. After Bruce Jesson, Mike Lee and others managed to stop the sale process that had been started the Government then imposed structural reforms designed to ease the sale of public assets but were thwarted when the Alliance managed to capture control of the new entity.

As Mike said:

To the consternation of the political establishment a viable alternative to privatisation had been created – holding on to public assets – and managing them to create public wealth in the public interest. “Economic Jessonism” – perhaps we might call it. This completely flew in the face on neo liberal conventional wisdom. I have absolutely no doubt that the remarkable success of the ARST between 1992 and 1995 was to have an important influence on the Labour-led government some ten years later.

Since that time the profits from the Port and other regional assets have been a key funder of Auckland transport and storm water projects – and are now virtually taken for granted in Auckland. It is hard to imagine how we could have embarked on the recent transport and other infrastructure upgrades without it.

How this issue plays out will be a real challenge not only to the Mayor but to all Councillors.

And if it succeeds it will make the long term development of the harbour more difficult and I am certain that it will increase costs to local businesses and consumers and threaten the working conditions of Maritime Union members.

Reprinted from gregpresland.com