Generally I agree with clearer thinking around what assets are reasonable for councils to hold, and I'm particularly frustrated with the nonsensical 'family silver' and 'rainy day fund' arguments.
However, I intuitively feel you're underselling the 'strategic' case, even if the term 'strategic' isn't quite right. Major city airports are reliant on the rents from unique permissions and zoning to be able to operate. Their value is completely intertwined with what regulation allows them to do. They tend to be monopolistic and able to generate reliable profits from demand for land adjacent to the airport (retail, transport services, parking), but also severely constrain the use and enjoyment of land around them due to noise (a negative externality).
The 'strategic' value isn't clear in the short term (The airport’s existence does not rely on the council’s shareholding). But let's say for example an airport wants to expand (eg in Wellington), I feel like councils would be reflexively anti-development due to the negative externalities. With financial skin in the game for councils, they might be more inclined to consider the benefits as well as the costs, and the public more willing to accept the changes.
To be clear, that's not the way things 'should' work (as you note: "Desirable environmental and planning outcomes can presumably be achieved through the council’s regulatory powers ... Desirable economic, commercial and aviation outcomes are the responsibility of central government" ). But in practice I wonder if local sharing of the benefits of airports helps overcome the barriers to providing them with the significant concessions they need to operate.
Thanks Robert for your thoughtful and insightful comment. As you say, a long-run financial interest in a local airport company would improve the alignment of interests between the council and airport, and there are good reasons why alignment is desirable.
I'd be interested in your thoughts on whether this has been a positive factor in Auckland Council's ownership of the local port. From the outside, the relationship looks pretty fractious.
My understanding is the disputes are mainly about use of the waterfront land that the port holds. The port would say they are performing as efficiently as they can in a highly constrained space, and are releasing land for alternative development as much as they feasibly can. They feel the need to defend themselves with PR like this: https://www.poal.co.nz/our-story/contribution.
The council/mayor argue the port is poorly operated, not paying sufficient rates/dividends to justify the land they are using, and using land inefficiently for big ugly industrial buildings and car parking.
I don't know enough about the situation to imagine the counterfactual where the council don't have an ownership stake at all. I think the core tension would remain - who knows, maybe the relationship would be more acrimonious without the carrot of higher dividend payouts when the port operates well.
Probably is a good example of why assets like this shouldn't be 100% owned by council. If they were publicly traded (like Port of Tauranga), the dividends/performance issue would likely be less heated - you can effectively delegate the 'commercial discipline' role to the private sector and any subsequent dissappointing results are diluted. But then the council are dead set against relinquishing any ownership of the underlying land.
Generally I agree with clearer thinking around what assets are reasonable for councils to hold, and I'm particularly frustrated with the nonsensical 'family silver' and 'rainy day fund' arguments.
However, I intuitively feel you're underselling the 'strategic' case, even if the term 'strategic' isn't quite right. Major city airports are reliant on the rents from unique permissions and zoning to be able to operate. Their value is completely intertwined with what regulation allows them to do. They tend to be monopolistic and able to generate reliable profits from demand for land adjacent to the airport (retail, transport services, parking), but also severely constrain the use and enjoyment of land around them due to noise (a negative externality).
The 'strategic' value isn't clear in the short term (The airport’s existence does not rely on the council’s shareholding). But let's say for example an airport wants to expand (eg in Wellington), I feel like councils would be reflexively anti-development due to the negative externalities. With financial skin in the game for councils, they might be more inclined to consider the benefits as well as the costs, and the public more willing to accept the changes.
To be clear, that's not the way things 'should' work (as you note: "Desirable environmental and planning outcomes can presumably be achieved through the council’s regulatory powers ... Desirable economic, commercial and aviation outcomes are the responsibility of central government" ). But in practice I wonder if local sharing of the benefits of airports helps overcome the barriers to providing them with the significant concessions they need to operate.
Thanks Robert for your thoughtful and insightful comment. As you say, a long-run financial interest in a local airport company would improve the alignment of interests between the council and airport, and there are good reasons why alignment is desirable.
I'd be interested in your thoughts on whether this has been a positive factor in Auckland Council's ownership of the local port. From the outside, the relationship looks pretty fractious.
Good point. It does seem pretty fraught.
My understanding is the disputes are mainly about use of the waterfront land that the port holds. The port would say they are performing as efficiently as they can in a highly constrained space, and are releasing land for alternative development as much as they feasibly can. They feel the need to defend themselves with PR like this: https://www.poal.co.nz/our-story/contribution.
The council/mayor argue the port is poorly operated, not paying sufficient rates/dividends to justify the land they are using, and using land inefficiently for big ugly industrial buildings and car parking.
I don't know enough about the situation to imagine the counterfactual where the council don't have an ownership stake at all. I think the core tension would remain - who knows, maybe the relationship would be more acrimonious without the carrot of higher dividend payouts when the port operates well.
Probably is a good example of why assets like this shouldn't be 100% owned by council. If they were publicly traded (like Port of Tauranga), the dividends/performance issue would likely be less heated - you can effectively delegate the 'commercial discipline' role to the private sector and any subsequent dissappointing results are diluted. But then the council are dead set against relinquishing any ownership of the underlying land.
Seems like the ideas in here (https://www.stuff.co.nz/business/128395660/auckland-mayor-considering-asking-ports-to-pay-rent-to-secure-a-better-return) are at least a step forward.