Scoop has an Ethical Paywall
The runway extension – a defining and costly election issue
by Michael Reddell
Thursday’s Dominion-Post featured a full page advertisement, notionally inviting people to make submissions on the resource consent application to extend the runway at Wellington Airport. The advertisement was mainly an opportunity to tout the case for the hugely-expensive proposed extension – in what must be one of the most expensive locations in the world in which one could add 300 metres to a runway and still not comfortably meet international safety guidelines.
The pretty graphic highlights 20 Pacific Rim cities which planes could reach from Wellington – without ever mentioning that the most likely outcome, if the project succeeds at all, is flights once or twice a week to one or two of them.
All one really needs to know about the proposal is that the owners of the airport think the project is sufficiently unattractive that there is no way they would proceed with the extension if it involved investing their own money.
The owners – WIAL, majority-owned by Infratil – have been quite clear that the project will only proceed, even if it gets resource consent, if there is a massive public subsidy – huge contributions from some combination of local, regional, and central government that would not be reflected in a commensurate ownership interest in the airport. But there is no mention of this fact.
In a little note at the bottom of the advert it is described as a “high level factual summary of some of key effects from the extension”. I did spot the odd fact in the advert, but mostly it was boosterish opinions, clothed in consultants’ reports – and all summarized in the huge alleged national benefit estimates.
I’m deeply unconvinced by the economic case for this airport runway extension – the benefits appear to be overstated, and the discount rate used to evaluate them seems too low. I would have no real objection if private shareholders were paying for it. But they aren’t.
I wrote a few posts about this proposal late last year, here, here, and here. Ian Harrison, at Tailrisk, has a nice piece here on the same issue.
I’m not making a submission. As a matter of principle, I don’t think the Resource Management Act should be used to block business developments, unless there are compelling environmental grounds – and I have no expertise in environmental issues, and am interested only to the extent Lyall Bay remains a pleasant spot for the family to swim.
The real debate should be around decisions new local and regional councilors consider making about injecting public subsidies to this operation (over and above what has already been spent). The quality of public sector investment spending is typically quite poor, and around the country airport investments (eg Rotorua) are no exception.
As the local body elections are just weeks away, the focus needs to be on the attitude towards the project that each candidate takes. So much money is involved, and attitudes to this project seem to reveal so much about candidates’ views on the role of local and regional government, that for me it will be a defining issue.
I will be seeking out candidates who are clearly opposed to spending public money on the extension. In the huge field of mayoral candidates, there appear to be a couple of options – but their fine print needs checking. I haven’t yet done my research on the council and regional council candidates. I encourage regional readers – because although the Wellington City Council has been driving this, they’ll be looking for money from other local authorities in the region – to prioritise this issue.
My fear is that once the election is over, there will be a behind-closed-doors process rushed through, with no rigorous evaluation of the economics of the project. Cheer-leading from the local business community – always keen on the sort of public subsidies and activities that don’t face the market test that keep Wellington afloat – reinforces the risk.
This article was first published on Michael Reddell’s Croaking Cassandra blog.
Michael – thank you for again making a lot of sense and pointing out the bluff and inadequacies of WIAL’s promotion (using our ratepayer dollars?) of what basically amounts to corporate welfare. We hope you would consider making a submission as you do (more than) have the economic credentials to point to holes in their CBA and also the underlying InterVISTAS reports on market catchments that all these big numbers are based on (and which are part of the resource consent application). However, if your family enjoys swimming in Lyall Bay you should also note that there will be exclusion zones around the construction (including the surf wave focusing device the size of the inside of the Stadium in the middle of the bay!) – and these zones look to be wide enough that large parts of Lyall Bay will be off-limits to recreation for significant amounts of time. In terms of local government candidates – only Helene Ritchie and the 3 Greens have consistently voted against handouts to Infratil for this project. Nicola Young and Jo Coughlan finally started remembering their right-wing credentials once commentators pointed out the corporate welfare angle, but their votes have been pro-airport to date. And it’s votes that count, right? In terms of mayoral candidates there are only 3 opposed to this project without meaningless caveats: Helene Ritchie, Keith Johnson a fellow economist and Johnny Overton. An important question to ask mayoral candidates: “Will you sit on the board of WIAL once you become Mayor?”. This obvious conflict of interest seriously undermined Celia Wade-Brown’s green credentials and hampers the independence of any Mayor.
No I would not sit on the WIAL Board. This is despite the fact that I chaired the Airport Authority for eight years, and the New Zealand organisations of all then 26 Airports in the country, for five years. I advised Celia not to. Unfortunately she did not take my advice.
The mayor’s responsibility is directly to all the citizens of Wellington – independent and beholden to no one part of the Wellington community, and certainly in this case, not to the so-called “collective decsio-nmaking” of this commercial Board, WIAL. The conflict is blatantly clear to me.
Great column, but you must make a submission against this absurd proposal. I am outraged that members of this city’s Council think it is a wonderful idea to expose ratepayers to carrying the burden of the financial risk for this dog. Vote them out this October before it is too late.
Very good article Michael. It is important that very hard questions are asked given the scale of the proposed investment. I can’t speak for other councillors but to me there are a lot of critical hurdles that the runway proposal would need to get over and obviously we simply do not have that information at present. Those hurdles are:
Resource consent
Clear evidence of sufficient airline commitment – on the right routes, with sufficient frequency, and lengthy enough commitment.
Clear evidence of sufficient economic benefit to justify the scale of the investment. That will need to include some judgements about business attraction as well as tourism, students etc.
Weighing up that economic benefit against the benefit from alternative uses of the same money.
Weighing up whether similar international connection would be possible to achieve in another way – for example as the deal with Singapore Air currently does. I note that the runway extension would pay for something between 15 and 20 Singapore Air deals essentially in perpetuity.
So there are a lot of hard questions to come. The Chamber of Commerce itself said we should do exactly that.
The other thing is that if it proceeds there will need to be an investment vehicle – something that owns the extension – that is separate from WIAL (I’ve mentioned here before the concept of ‘Wellington Runway Extension Ltd’) with a shareholding that reflects the level of funding from various sources.
I hope that helps – this is no gimme even if consent is granted.
Kind regards
Andy Foster