Giving ratepayers money to the Crown

At the March  meeting of the Hastings District Council, Hawke's Bay Airport Limited advised they hoped next year to pay an $84 000 dividend. Presumably in proportion to their shareholding Napier will receive about the same and the government double the sum.

Any return to councils will of course be appreciated, but it might have been very much higher were it not for an utterly extraordinary decision made a few years ago by the Napier and Hastings Councils.

Way back in 1963 the then five territorial councils, Napier, Hastings, Taradale, Havelock North, and the County signed an Joint Venture agreement with the Crown to upgrade the Beacons aerodrome just north of Napier to accommodate the soon to arrive NAC Fokker Friendship turboprops. The councils jointly provided nearly 500 acres of land and also funded half the  cost of the construction.

The agreement contained some very significant clauses. The councils had sole right to appoint directors, the councils owned the land, and the councils could build anything they wanted on the land so long as it did not endanger aeronautical operations.

Roll on to 1989 and the County and Havelock North disappeared following a major local Government  reorganisation. Napier had adsorbed Taradale many years earlier. The airport shares then consolidated into approximately quarter each for Napier and Hastings and half for the crown.

In 2008  the two councils agreed to replace the JV agreement with a new corporate structure. This agreement gave the Crown the right to appoint two of the four board members, and for the two councils to rent the land to the airport for 60 years at one dollar a year.

Effectively Hawke's Bay people lost control of their airport with corporatisation. More importantly it will transfer millions of dollars of future income from the councils to Government.

For a start if the councils had charged the airport rent for use of the land, that income would have been tax free in the hands of the councils. Instead it becomes taxable income to the airport businesses, effectively loosing 28% of its value.

The amount remaining after tax is then owned approximately 50/50 by the councils and Government meaning the crown has taken a total of 64% or nearly 2/3rds of the value of the rent, where as had the councils charged rent directly they would have received 100%.

So how much is all this worth. Well if the land was worth say $5 million and the councils charged 10% of that value annually, the rent would be worth $500, 000 a year, split 50/50 Napier/Hastings, or $250, 000 each.

That is the councils will receive only about one third of the rent had the airport been directly charged a fair rent for using the land. Even if the value of the land or the return less the councils would still have received significantly more than they will. The loss to our community of this arrangement over the 60 years could easily be a very substantial 30 million dollars.

The details that has led to this situation was kept away from public scrutiny with disclosure under the official information act denied, and delayed until it was a done deal following official requests to the ombudsman.