Saturday, September 22, 2007

The onset of elections...

It must be the onset of elections that does it. We have city and district elections over the next month so the place is full of “vote for ME!!” signs for prospective mayoral and other candidates. Leading the personal interest is the Manukau mayoralty campaign. Long time (Manukau seems to pick good and keep them) incumbent Mayor Barry Curtis is standing down after about 20 years in Council. The second highest polling candidate from the last election was Len Brown, whom I have never met but seems a good and decent sort of bloke who is most likely to follow the path set down by Mayors Elsmore and Curtis. (Note I have lived in Manukau for some 36 years and these are the only two serving Mayors during that time.) I need to get out and see who (in terms of “teams”) is promising what in the various Council and Community elections.

TO that end one of the leading issues in the election involves not sewerage or salaries but City ownership of shares (“stocks” to you Americans).

Manukau city owns in shares some 10% of Auckland International Airport. At current market values, that represents about $130 million on the current market I believe… a not inconsiderable sum anyhoos. Auckland City also owns a slightly larger share. The issue is, of course, whether the City should retain share investments in anything but most importantly the Airport. “Imagine”, they say, “what could be done with all of that money!”.

Underlying the resistance to the idea of selling the shares though are two quite important principles. I touched on those earlier…

First is the value of the investment. For a city corporation that value has to come from the revenue stream (in the form of dividends) that the shares generate. Auckland City has been talking of some $100 million in dividends over the past ten years. The value of a shareholding then must reflect the future income stream from another investment. I suggest that the Airport investment would be very difficult to match.

The second involves the likely buyer. Dubai DAS was looking for a major holding in AIA. They promised increased investment and development. The quid pro would probably be increased landing rights for their Emirates airline (but that is a minor detail you understand). An offshore sale, and it matters not whether it is DAS or a Canadian pension fund, is in my world not an entirely good idea.


We know what happened when the Government sold our rail systems to an American corporation. Some three times the purchase price was “repatriated” by the company to the US; the rail system was “streamlined” (read “closed down”) to save costs; the government then had to spend some $100 million to recover what is in fact a fairly important strategic asset which was then sold off again to Toll who are Australian and was again “repurchased”. Is that the only example? No, Bank of New Zealand and Air New Zealand have both been through the same process.

Now I could care less that the get rich quick buyer might end up with the lemon that they deserve. Similarly if the buy-back is considerably less than the sale price.

I do get considerably steamed though about the flow of money out of NZ into the pockets of others in the name of “open global markets”. Yes by all means pay a dividend. But for every dollar of that dividend that walks over the border, NZ needs to earn at least two on the overseas market to recoup the “loss”. No, I am not talking about “income redistribution”. If I want part of the Airport pie I can and will go buy some shares on the market. I am talking about the reinvestment power of those dollars leaving NZ shores for the benefit of Dubai, or Canada, and other foreign shores. Equally, I also get steamed about the control of assets such as AIA being held overseas rather than by NZers. DAS wanted something like 45% and Board control. The Canadians are seeking about 30% but are happier to leave control to Board majority.

So at this stage Len Brown looks like he might get my vote for the mayoralty. If I look at the candidates for Council – and they are probably far more important in the general scheme of things than the Mayor – and cross out all of the “reduce the rates”, “sack the staff”, and “core services” candidates I don’t think that there would be much left other than parochial interests. I have to add that the present mob seem to know what they are about at least in general terms. The Council seems to tick over fairly quietly - like the proverbial watch, even if it does occasionally morph into a Mickey Mouse dial.

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