Editorial: The risk is real
QLDC could so easily fix the risk in its draft Long Term Plan that it loses supermajority shareholder control of Queenstown Airport without any community consultation.
But instead of addressing this risk, Council’s “correction/clarification” (published 6 August - see below) of my Lakes Weekly Bulletin (LWB) article (published 30 July - see below) sought to obfuscate, misinform and divert attention from the serious issues raised. Issues about which Council’s LWB response was silent.
This risk exists because the LTP’s draft Significance and Engagement Policy (SEP) does not specify the Council’s supermajority ownership of Queenstown Airport Corporation in its strategic assets register.
It is QLDC’s 75.01% supermajority shareholding that gives Council effective sole ownership control over the airport company.
The draft SEP includes plenty of clauses saying Council won’t sell or transfer ownership of any shares it owns in QAC. But there’s nothing that would trigger community consultation if QAC chose to create and sell shares, diluting Council’s ownership below that critical 75%.
I was a Councillor in 2010 when QAC’s Board made the first step towards doing so.
They created new shares equivalent to 24.99% of the company and sold them to Auckland International Airport. Councillors – until then, QAC’s 100% owners – were informed after the sale was finalised. Council received no payment for this loss.
QAC’s Board recognised Council’s 75% supermajority shareholding was a threshold they couldn’t breach so brazenly. After secretly selling 24.99% as a first tranche, they sought Council’s endorsement to sell more, offering a $10million “special dividend” sweetener. Council pushback and legal challenges, including from Air New Zealand, rescinded this deal.
QAC’s lawyers had argued they didn’t need to inform Councillors because none of Council’s ‘equity shares’ were sold. Note that it’s only ‘equity shares’ that are protected in the draft SEP.
By listing “QLDC’s supermajority QAC shareholding” as a specific strategic asset to be protected, there’d be an imperative on Council to prevent such dilution without first formally consulting with our community.
This supermajority shareholding is a powerful strategic asset, worth Council protecting.
It enables Councillors to unilaterally make binding shareholder resolutions, at any time. This power gives Council significant legal leverage to achieve its community wellbeing objectives , both financial and non-financial, through QAC.
Instead of dealing with these core issues, Council’s anonymous response argued at the fringes. Like saying the SEP wasn’t part of the LTP consultation documentation. Despite the fact it’s on the front page of Council’s ‘Let’s Talk’ LTP consultation website and linked in the LTP and consultation documents.
They then claimed deliberations are public. Again, untrue. Agreed, their public submission hearings and LTP adoption meeting are, necessarily, public. But they deliberate and decide on those submissions behind a firmly closed door.
This problem’s so easy to fix. Why is QLDC’s executive team pushing back so hard?
- Cath Gilmour, We Love Whakatipu Inc chair and three term QLDC councillor
QLDC's response (published 6 August) to Cath Gilmour's original editorial (published 30 July - see below)
Correction / Clarification
Queenstown Lakes District Council (QLDC) would like to correct and clarify some points made in last week’s (LWB #962) front cover editorial, Airport control at risk.
The article states Queenstown Council has removed Queenstown Airport from the draft Long Term Plan’s “strategic asset” list, replacing it with “equity shares” in Queenstown Airport Corporation. Legally, the airport is not a Council asset. QLDC does not own the buildings, runway or related infrastructure. These assets are owned by Queenstown Airport Corporation (QAC) of which Council has a majority shareholding of 75.01%. The change in reference is to comply with national legislation, namely Section 5 of the Local Government Act 2002. This defines strategic assets of this type as equity shares in terms of how they need to be recorded by local authorities.
In short, from a legislative point of view, QLDC owns the shares; it does not own the airport.
The exception is Auckland Council. The article makes direct comparisons between Queenstown and Auckland councils and airports but they operate under different legislative frameworks. Auckland Council lists assets in a different way as required by the Local Government (Auckland Council) Act 2009. This legislation applies solely to Auckland Council.
The only place where QLDC lists strategic assets (such as buildings it owns outright) and equity shareholdings is its Significance & Engagement Policy (SEP). They are not, and never have been, listed in the Long Term Plan (LTP) documentation. Rather, Council takes the opportunity to consult on its SEP regularly in tandem with the three-year LTP cycle. The approach taken to list groups of assets (based on levels of service) in the SEP is one that’s adopted by many other councils – including Auckland. Queenstown Lakes District Councillors have had the draft SEP since February this year.
The article ends by saying Council recently opened workshops to the public, after calls for greater transparency. Deliberations on LTP submissions should be too.
They are! The draft LTP was adopted for community consultation by Councillors in a public meeting – livestreamed and recorded – on 27 June. The consultation period ran from 28 June to 28 July during which we received more than 900 submissions from residents and ratepayers. Hearings of submissions will take place in public in Queenstown and Wānaka on 26 and 27 August respectively. Councillors will decide whether to adopt the final LTP in a public meeting on 19 September. All this information is on the QLDC website and our engagement website letstalk.qldc.govt.nz. We’re grateful for the 900+ submissions we received which will be published along with the hearings agendas.
- Queenstown Lakes District Council
Cath Gilmour's original editorial (published 30 July)
Airport control at risk
Queenstown Council has removed Queenstown Airport from the draft Long Term Plan’s “strategic asset” list, replacing it with “equity shares” in Queenstown Airport Corporation.
The problem is, this could put council’s vital “supermajority” shareholding at serious risk.
QLDC’s 75.01% supermajority gives it the right to make binding shareholder resolutions, unilaterally, at any time, about any shareholder matter. Under QAC’s constitution, dilution of this by just 0.02% would cost council its effective ‘sole owner’ power.
And with that, the loss of protection for our community’s long-term wellbeing against QAC’s profit driven growth agenda and the downstream effects of over-tourism.
Council hasn’t used this power to date. But the potential to do so if needed must be protected.
Because the threat is real. If another pandemic struck and QAC’s $250 million expansion plan left them overextended, the cash-strapped company could demand equity input from council.
If council is too debt-laden to do so, QAC’s constitution then allows them to force council to agree to further shares being created … and sold to minority shareholder Auckland International Airport or a third party.
So council can lose its supermajority without actually selling or transferring any shares.
If we rely on the current wording in the draft LTP and its Significance & Engagement Policy, this could happen without public knowledge, consultation or informed consideration of other options.
As happened in 2010, when QAC created a new 24.99% of shares in itself and secretly sold them to AIA. The mayor, deputy mayor, CEO and CFO had been forewarned, but had to sign nondisclosure agreements.
Councillors were told just one hour before the sale was publicly announced that council no longer owned 100% of this council-controlled trading organisation. So there’s precedent to justify caution, and reason to apply guardrails.
This risk of share dilution and its ramifications are not mentioned in the 399-page draft LTP, its consultation document or any other related material.
And even more concerning, staff didn’t highlight the change or its possible implications for councillors. Consequently, it wasn’t even discussed during LTP deliberations.
As one councillor acknowledged, “It would have been useful and helped both understanding and transparency for this to have happened.”
Councillors have an easy solution at hand – list “QLDC’s 75.01% QAC shareholding” as the significant strategic asset, not just “equity shares”.
Further, they should return Queenstown Airport to this list. We’ve been given no reason why not. Auckland Council lists CCTO-held assets critical to delivering services as strategic. Why can’t QLDC?
ZQN is a large, valuable land parcel and provides our emergency runway for an AF8 earthquake. Surely that’s a strategic asset worth protecting?
Council recently opened workshops to the public, after calls for greater transparency. Deliberations on LTP submissions should be too.
- Cath Gilmour, We Love Wakatipu Inc chair and former three term councillor
