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23 January 2006
Manukau City Council gambles on the share market
On Friday 20 January, Manukau City
Investments Limited (MCIL) purchased 5 million Auckland
International Airport shares on behalf of the Manukau City
Council. The Council, through MCIL, already holds over 116 million
shares in the company.
To fund this purchase, Manukau City
Council gave approval for MCIL to raise a loan of approximately
$10 million. This approval was narrowly passed by a single vote at
a hotly debated closed door meeting.
Manukau City Councillor Jami-Lee
Ross stood opposed to the purchase and says the Council is
entering dangerous territory by gambling ratepayers’ money in this
fashion. “Manukau City’s holding in the airport was only
originally gifted to the city many years ago. However, playing the
share market now is outside of the scope of the Council’s role.
“The Council has also chosen a
high-risk buying method by borrowing money for this spending
spree. The share market is a volatile place and common sense would
tell us that investing with borrowed money is not a wise thing to
do.
“With interest and loan repayments
this purchase translates into reduced share dividends by around
$500,000 each year. This essentially means the half million dollar
shortfall will have to be raised via rates which I doubt Manukau
City residents will ever see any benefits from.”
Mr Ross is also concerned that the
Council has committed itself to a $10 million loan without any
consultation with the public. “Council’s own policies state that a
decision of this magnitude is of high significance and only to be
made after extensive consultation. Instead the Council has made a
huge decision behind ratepayers’ backs with absolutely no public
discussion.”
In the official Council media
release on this share purchase reference is made to the 10 percent
threshold required to prevent compulsory acquisition. “I
acknowledge that this may be a reason for an investor to increase
his or her shareholding in a company, but Manukau City Council has
ignored the fact that the Auckland City Council already owns 13
percent of the airport in its own right.
“Manukau City’s interest in the
airport is currently protected by the two Councils’ combined
shareholding. This multi million dollar acquisition by Manukau
City would therefore appear only as an ego booster paid for with
other peoples’ money.”
Mr Ross concludes by saying that he
was very optimistic about the creation of the MCIL Council
Controlled Organisation last year, but is now concerned at the
direction it is taking. “Council has started the new year by
blowing $10 million in one hit. If Council can’t control its
spending from here on in, 2006 is going to be a pretty dismal year
for the ratepayers’ of Manukau City.”
ENDS
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