Wayne Brown should sell the golf courses instead

Wayne Brown wants to sell Auckland Airport shares to save $88 million a year in interest costs, but has no plans to sell golf courses costing $162 million a year to run and worth over $2.9 billion. Bernard Hickey asks – why not?

This article was first published in Bernard Hickey’s newsletter The Kākā.

Auckland mayor Wayne Brown wants to sell the council’s $2 billion stake in Auckland International Airport to cut interest costs by $88 million per year and try to fill the council’s $295 million budget “black hole”.

But he is ignoring the annual losses of over $160 million a year to run the council’s 13 golf courses, which have a combined value of well over $2.9 billion. He also has made no case for emergency asset sales to deal with some sort of fiscal “crisis”, given Auckland Council’s blue-chip-level AA credit rating is stable and its interest costs are forecast by Standard and Poor’s to be around 10% of revenues for the next three years.

Brown’s case for selling the shares in Auckland Airport cannot be justified by:

• The current financial outlook, given the council itself sees its main debt-to-revenue forecast falling well below its self-imposed limit over the next five years, its borrowing requirements are scheduled to fall over the next five years and it has ample resources to roll over its existing debt.
• The alternative investment case for asset sales, given selling the council’s golf courses would reduce the ongoing losses from running the courses of over $160 million per year and raise north of $4 billion in an asset sales process, which would lift the combination of avoided losses and interest savings to over $320 million a year.

Meanwhile, here are two good reasons not to sell:

• The alternative long-term investment case for keeping the council’s 18% share in the airport is compelling, given airport traffic is rising fast back towards pre-Covid levels and the shares generated returns of 22.6% per year in the five years to 2019, which dwarfs the cost of debt at around 4-5%.
• The alternative investment case for using the sale proceeds to invest in public transport would generate much higher returns to Auckland’s ratepayer than 4-5% per annum through reduced congestion and lower carbon credit costs in future.

So why is the mayor talking as if there is a fiscal crisis that “demands” asset sales? And if there is such a crisis, why isn’t he proposing selling the golf courses to residential property developers to build tens of thousands of new homes and open up the courses’ green spaces to the public? Or proposing to invest any share sale proceeds in public transport rather than debt reduction?

The logical conclusion is that Brown’s arguments obscure an ideological view: that the public shouldn’t own shares in publicly listed companies or commercial operations and…