Why Wellington Council U-turned on selling airport shares and what it means

Monday, 14 October 2024

Wellington City Council last week did a U-turn and cancelled - in a 9 to 7 vote - a previous decision to to sell the their 34% shareholding in the city’s airport.

Mayor Tory Whanau, who had supported the sale, told Newstalk ZB on Monday why the decision was reversed. She also said the council might have to look to cut hundreds of millions of dollars from its capital programme.

Why it matters

Income from the share sale was to be put into a new fund to address investment and insurance risk, and help Wellington rebuild after a major disaster.

The fund would have had an assumed initial investment of $492 million.

A report to last week’s meeting said the council was “facing serious financial issues”. The plan to sell the airport shares and use the proceeds to set up a new investment fund had been seen as the way to address those issues.

The council did not have enough insurance to cover future financial and natural hazard risks. The value of underinsurance was estimated at $2.6 billion and growing.

The council’s investment portfolio was also undiversified - with 93% being in the airport shares or ground leases.

Why the U-turn on selling shares?

Mayor Tory Whanau told Newstalk ZB on Monday she had been confident the sale of airport shares would go ahead “but then three councillors just changed their minds”.

“The problem we’re trying to solve is self-insurance. So that in the event of a disaster we could rebuild some of our city,” Whanau said.

“Because the airport was our biggest asset, it was easier to recycle the value of those shares into the self-insurance fund.”

Where will the money come from now?

Whanau told Newstalk ZB on Monday that assuming the council did want a form of self insurance, the council could need to find $400m to $600m from its capital programme over 10 years.

A decision on whether to still set up the fund depended on the level of risk the council was prepared to carry. If the council decided to go ahead with a fund, money would have to come from the capital programme.

The council could also look at selling its ground leases, or reducing its social housing.

That would have to go back out for consultation to find out the areas where people were comfortable having cuts.

“If we want to be able to insure our city, we have to seriously look at that,” Whanau said.

“I would prefer not to sell our homes for our most vulnerable, and the Government would have to be willing to buy it, as well.”

Last week’s council agenda said the capital programme equated to $4.2 billion over nine years, but more than half of that was for renewals and major projects substantively in-train. Removing those items left a programme of about $1.95b.

Whanau said she could not pre-determine what cuts would be made. “What I would say is everything is going to be an option.”

What are Whanau’s ‘non-negotiables’?

But Whanau did say she also had three “non-negotiables”.

She said one of her “non-negotiables” was the $1.8 billion set aside for spending on water over 10 years. That “absolutely cannot change”.

Second was transport, including the $140m Golden Mile project that is co-funded with the NZ Transport Agency and includes prime inner-city streets Lambton Quay and Courtenay Place.

The Golden Mile project was “on the table, but I’m not prepared to let it happen”, Whanau said.

She was also “currently not prepared to sell our social housing”.

“I will fight tooth and nail to keep our water, to keep the Golden Mile, and actually to keep social housing, but I understand I’m just one vote.”

Why is the Golden Mile project so important?

Whanau acknowledged the Golden Mile project was “on the table, but I’m not prepared to let it happen”.

Host Nick Mills asked her why she was so “hell-bent” on carrying on with the Golden Mile project, given the issues that had arisen this year as a result of roadworks on another key city road - Thorndon Quay.

“A lot of our people need our streets to be redesigned to be friendly towards pedestrians, bikes, public transport. That is happening. If we leave it longer, it gets much more expensive,” Whanua said

“I believe in these transformative projects. Yes’ they’re difficult, and yes I am sorry that businesses have suffered as a result, but this is what change is like.”