Sense from a Green Councillor

Green City Councillor David Lee writes:

As Wellington International Airport Limited (WIAL) prepares to lodge its application for resource consent for a runway extension, it’s important Wellingtonians are aware of the full facts – because, if the scheme goes ahead, a vast amount of ratepayers’ money will be pouring into it.

The plan has its supporters.

Wellington City Council (WCC) supports committing $90m towards the estimated $350m cost.

That $90 million would come from basically 75,000 households so is around $1,200 a household!!

As a resident, planner and Wellington City councillor, I am passionately committed to investment to promote a strong local economy and vibrant compact city – but it has to be the right kind of development.

As a professional planner – I spent 10 years as an airport and land-use planner with the Royal New Zealand Air Force and several years planning major road projects for New Zealand Transport Agency – I am seriously worried about this proposal.

Let’s look at the facts.

Undoubtedly the airport is a valuable strategic asset for the city and the region. Good air connectivity is essential for commerce, trade, resilience and social wellbeing.

But it is concerning that the private company that owns the airport is proposing to contribute just $40-$50m of the proposed costs. Other councils in the region have been asked to contribute $60m, so the residents of Hutt, Kapiti and the Wairarapa are contributing more than the private owner of the airport will.

This is key. We have an owner who is putting up just one seventh of the cost. They’re asking for the following:

• Airport Owner $40 million
• Wellington City ratepayers $90 million
• Greater Wellington ratepayers $60 million
• Taxpayers $160 million

Does that seem fair? To me it is more like corporate welfare.

Air New Zealand and none of the other 19 airlines BARNZ represents are interested in flying long-haul into Wellington. None of the economic benefits of a runway can be realised if no airline is prepared to use it. 

On that evidence, the airport would struggle to achieve much more than an infrequent service to a single destination in Asia – perhaps Southern China, hardly connectivity to a major hub. And the Council’s own analysis discounts the chance of North American links. . 

There is a real risk that $350m-plus could be spent, with huge cost to Wellington ratepayers, for a couple of flights to China a week.  

Not a single airline has said they’ll put extra flights on. At best we may get a couple of flights a week from Wellington to Guangzhou and return.

I am urging that before WCC invests any further money in this application, that an independent, rigorous and robust business case is completed and the community is given the opportunity to assess whether the promised ‘benefits’ stand up to scrutiny and this very considerable investment is warranted.

I’m open to persuasion if some airlines commit to a significant number of extra destinations due to an extended runway. But without that commitment, it is just corporate welfare and a “Build it and they will come” hope mentality.

Good to see a Councillor willing to show caution with this huge amount of money.

UPDATE: A response from Infratil that they posted to the wrong thread:

David Lee’s article in today’s Dominion Post and the commentary attached to quotes from the article in the whaleoil blog are a mixture of platitudes, inaccuracies and comments that can only cause concern about the writers’ credulity
Lets start with the inaccuracies.
At present the Airport and the City are jointly funding a review of the project. This will address the business case and seek consents.
Once this exercise is concluded the various parties that have been identified as potential capital providers (Airport, Council, Government) will be approached to provide the construction funding.
Does anyone in their right mind believe that sums like $300 million get invested without comprehensive due diligence and analysis?
As to how much funding will be sought from the likely providers, absolutely nothing has yet been identified. Initial construction cost estimates have arrived at $300 million, but this can only be provisional until consents are received and final design work completed. The Airport has indicated that it expects to contribute a sum to reflect the commercial value of the extra services/traffic generated by the extension. Amounts of $50-100 million have been mentioned as the likely range for this value, but until the business case is fully formed and modelled, no one knows. What is known now is that the figures and analysis will be public and transparent once they have been identified.
The assertion that the runway could be extended and then not used or only used to fly to somewhere obscure in China is counter to any logic. In the first place, there will be a substantial commercial investment in the project, an investment that could only pay off if the extension is actually used. Secondly all capital providers will have ample opportunity to reach their own conclusions on the “will they come?” issue. Third, perhaps the Councillor missed the presentation made last week on the topic of likely routes. The key point of the presentation from InterVistas (the world’s leading experts on airline route economics and demand) was that long-haul routes to Wellington will link Wellington to a hub; Singapore, KL, HK, LA, one of the Emirates. Another point in that presentation which seems to have been missed is that several routes appear viable to InterVistas.
Platitudes?
Such gems of insightfulness provided as comments on the Councillor’s article “Good to see a Councillor willing to show caution with this huge amount of money” Hello? Really? What matters for Wellington is the quality of governance and oversight provided by its councillors. Caution is not a virtue on its own. This project is complex and the final decision will be based on a lot of information and analysis. As a ratepayer I’m not looking for caution so much as diligence, analytical capability and judgement.
Credulity?
The article quotes at length representatives of the current airline users of the Airport who are opposed to its extension. Ask yourself, is their opposition to the extension (and their funding of opposition initiatives) based on their generous concern about Wellington or a desire to limit competition?
This project is a long long away from its final form. It can only happen if it gets the backing of private and public capital providers. This is uncommon in New Zealand and clearly there is plenty of discomfort with the prospect of “socialise costs, privatise profits”. But for Wellington what matters is that the right decision is made.
That means investing if the investment has a strong case that it will generate community wealth and not to invest otherwise.
But the worst decision that can be made is to not invest when the project would have generate community wealth.
Saying “no” can be as wrong as or worse than saying “yes”, it depends on the facts, and at present no one has those facts.