Sell airport shares to reduce debt, says councillor
Friday, 20 October 2023
As the city grapples with an unprecedented forecast debt, one councillor says the only real option in the proverbial “cupboard” is selling airport shares.
Council staff have been asked to look at asset sales - with the airport shares not the only thing on the cards - but the chief executive says “there’s not a huge war chest”.
Senior councillor Ewan Wilson is taking a leaf out of the Auckland Council’s fiscal playbook, and says the part sale of Hamilton City Council’s share’s in the city’s airport - at last valuation worth about $110m - is worth considering.
“The only thing we’ve got left worthy of discussion, in my opinion, are historical shares in the airport… I know one of the options we should consider and go out to the community with is selling some of our shares in the airport.”
While Wilson isn’t advocating a complete exit from Hamilton city’s 50% stake in the five-council owned business, he does suggest the price may soon be right to consider the council’s options.
The reason he’s floating the idea is two-fold, he says: fiscal prudence given the city’s $78m deficit in its day-to-day spending alone, and that there are very few other options left.
“The cupboard is fairly empty. During the Julie Hardaker regime we sold $30-35m in assets to pay down debt… There’s no low hanging easy fruit because what was there has been sold.”
If the council were to rely on rates alone to nullify deficit it would maim the finance of many city households.
“A twenty dollar a week rate rise, just do the maths. I don’t like to use the percentages because one gets an emotive reaction, but it’s in the thirties,” Wilson explained.
Wilson suggests that the prospect of a sale could be an attractive one to investors, despite the airport’s poor dividend return in light of sizeable profits.
“We have a requirement to offer our shares to the other shareholder councils, if they didn’t take up the option, we’d have to go out to the market… Absolutely, and the reason other investors would look at it, other airports in the country, might look at the fact Auckland Airport has flexed their muscle by buying shares in Queenstown airport.”
Other airports may go ‘hmm, maybe we have a strategic desire to be involved in owning an airport an hour south of our largest city’.”
Given the airport has allowed its designation to extend its 2195m runway to lapse and can expand little beyond service to the Australian east coast, Wilson says the strategic necessity for the council to maintain its stake has also lapsed with it.
The long-time councillor and former aeronautical businessman, says that the location of the airport - between two seaports - and its potential catchment of nearly half a million passengers, is a fortuitous one.
Wilson pointed to Infratil - a shareholder in Wellington airport, and Singaporean airport giant Changi as the type of investor who might be interested in a potential stake.
A potential arrangement could also see shares sold to a business the council could then in turn invest in itself, Wilson suggested.
Councillor Sarah Thomson disputes that a sale would help entirely.
“In my view it’s a matter of timing. Down the track there could be an argument for selling them… Even in the next ten years. I think it’s a case of wait and see. Wait and see how the development work has progressed.”
Thomson also says while the money could be useful to reduce debt, it could not be used to pay for operational expenditure like wages or power bills because of council rules.
Should the council also pursue a part sale, Thomson says there is a risk that the cost of exploratory work to arrange a sale could itself be expensive.
Meanwhile, the city’s chief executive Lance Vervoort confirmed staff had been asked to look at all council assets in a bid to top up coffers.
'We've got some odd bits of land here and there, and those sorts of things,“ he said.
Vervoort agreed with Wilson that there is little left in the city to sell.
'There's not a huge war chest of things to look at.'