At the “extraordinary” Council meeting planned for this coming Monday, QLDC plans to “agree to” the Statement of Intent from Queenstown Airport Corporation. John Hilhorst wrote a letter to the Mayor and Councillors on Friday. Read it here.

The Mayor and all Councillors 
Queenstown Lakes District Council
Queenstown 
(By email, individually)

Friday 23rd August 2019

Dear Mayor Boult and QLDC Councillors

In Monday’s council meeting you will be asked to “agree to” a modified version of QAC’s statement of intent. If you were not prepared to agree to the SOI delivered to your June meeting, then you will find no solace in this new version where the additions and modifications have doubled down on presumptive growth.

In these links you will find annotated copies of both the new SOI and the advice on the motion as presented by council in your agenda for the meeting.

• For the SOI, the annotations identify what has changed in the document. You’ll see that all the modifications through pages 2-6 focus on strengthening the argument for expansion and growth. These have also included a less than subtle emphasis given to a perceived “local” demand for airport growth.
  
  While the changes on page seven acknowledge the proposed economic and social impact assessments, they offer no indication of any change in the presumption of airport expansion or of any prospect that QAC might be open to potential strategies other than continued expansion and dual-airport.
  
  Wanaka people will note the explicit removal of stakeholder and community consultation regarding the Wanaka Airport planning for the next two years, despite this work continuing (p.9).
  
  On balance, the modified SOI presents a stronger vision for expansion and continued growth at both Queenstown and Wanaka airports than the previous version, notwithstanding the ‘virtual’ pause it appears to concede.
  
• For the council motion, the annotations identify several errors in legal process and challenge the advice provided to councillors.
  
  This analysis highlights the high level of exposure council has to a judicial review or an audit by the Auditor General.

Please review the two documents attached and the analysis below.

Report for Agenda Item 1

It is deeply concerning that the information offered in this formal advice to councillors contains significant errors and misrepresentations of the legal process and council’s responsibilities.

Point 5

This seeks to falsely perpetuate the myth that council was obliged to “receive” the June SOI “to ensure that QAC could meet its obligation under the Act”.

There was no such statutory obligation, as conceded by council’s legal manager Alice Balme in her email of 10 July. The requirement was on QAC to deliver its SOI to shareholders by 30 June, and it had done so. “Delivery” is proven at law by evidence of delivery – by email, courier, post or hand delivery, and that the SOI was available in Council’s agenda was ample proof of delivery.

We have written to the mayor, councillors, Mike Theelen and Alice Balme (council’s legal manager) on this matter. You’ll see this was published to the page “It’s council’s call” (Just over halfway down the page under the heading “Query to Mayor Jim Boult on need for motion”. You’ll also see it in the email thread of legal points we covered with the mayor and councilors following the meeting of 27 June. It is also included in the SOI – fact sheet sent to councillors and published online. This was was also in the statement I presented at Public Forum in the meeting of 8 August. There is no excuse for this falsehood to be repeated in this current advice to councillors.

Point 7

This seriously misrepresents the legal process required from the LGA. Section 65(2) of the Act sets out the annual process for council once the SOI has been delivered to it. The law is unambiguous. Council must either “agree to” the SOI, or use clause 5 of Schedule 8 to require it to be modified. It is one or the other – there is no third option. Council must do this “as soon as practicable” and “take all practicable steps”.

This is a specific and required annual process following the 30 June delivery of the SOI, not an ongoing, anytime process as suggested in an email we received from Alice Balme, council’s legal manager, and implied in this advice to councillors. While it is true that both QAC and council could modify the SOI at any time of year (under clauses 4 and 5 of Schedule 8 respectively) and that Section 65(1) refers to regular and ongoing monitoring of the SOI by council, section 65(2) is explicitly concerned with the annual delivery by 30 June of the SOI to council.

The legal process of section 65(2) is in direct contrast with the advice in Point 7, which suggests that if Council doesn’t agree to it, then it is for the board of QAC to modify the SOI. The effect of this advice is to have councillors pass the onus for changes to the SOI back to QAC. With QAC in control and using the mechanism of clause 4 in Schedule 8 then Council would only get an opportunity to “comment” on QAC modifications and QAC only needs to “consider” these comments. This has QAC in the driving seat and leaves councillors impotent.

In contrast, the proper legal process of section 65(2)(b) unequivocally puts the control with Council (not with QAC), and explicitly gives Council a directive control where it can “require” specific modifications to the SOI.

It must be frustrating to councillors that their mayor and executive advisors have so substantially and incorrectly disempowered them on this issue – one so important to their constituents.

It’s council’s legal responsibility, if it doesn’t “agree to” the new SOI, to now use clause 5 as the mechanism to modify it.

We have brought this to the attention of council, the mayor and councillors on multiple occasions, as shown in the links provided above to the legal emails, SOI – fact sheet and presentations at public forum.

Point 8

This outlines the incorrect legal process that was followed by council after its 27 June meeting, and the advice in 17(a) would again direct council into this same process that would not comply with the law of section 65(2)(b).

This incorrect process has effectively neutered councillors by leading them into workshops that are opaque to public scrutiny, provide no written minutes, no clarity on any collective council position, and no legally traceable or enforceable direction or guidance for QAC.

The result, whether by design or default, is that 12 months after the QAC ANB consultation (with its 92.5% rejection by the community), and six months after receiving the draft SOI, and a further two months since the SOI was delivered to council; there is still no council resolution that provides its strategic objectives, as required to be included in the SOI for QAC.

Point 9

Our understanding is that the specific content of Mayor Boult’s speech prior to the August 8 council meeting had not been agreed to by councillors. While we understand he did send a copy of the speech to councillors the day prior to delivering it, there appears to have been no invitation for input or feedback, nor request to confirm their agreement. So the mayor’s claim that it was “on behalf of my fellow councillors” should be questioned.

As the speech was not a resolution of council, nor from any subcommittee of council, it’s legal standing in the SOI process is questionable.

Point 11

The suggestion here that the work on the proposed economic and social impact assessments could “be completed prior to year’s end” gives scant hope that these will be rigorous and objective evaluations of the costs and benefits of alternative strategies.

Indications to date suggest the focus of the economic assessment will be primarily to establish the importance of the economic contribution of the airport with the purpose of reinforcing the argument for its expansion and growth.

What will councillors do to ensure that it becomes more than this, so as to provide a useful resource to help understand the many issues and concerns raised by the community?

Point 17

This advice compounds the problem outlined above and again misrepresents to the councillors the law for section 65(2). If council does not agree to the SOI, then this Option 2 would again leave it impotent in the hands of QAC and ongoing “discussions”. The law directs council, if it can’t “agree to” the SOI, to use clause 5 of Schedule 8 to require the SOI to be modified. The law does not provide the option to “continue further dialogue”.

To be effective, Option 2 should set out a draft motion that could properly put clause 5 into effect. An example might be:

Council resolves:

1. To establish a subcommittee, under the facilitation of an independent chair, tasked with preparing this resolution for the next scheduled council meeting. This subcommittee will consider matters as identified under clause 9(1)(a) to(i) of schedule 8.
   
2. This subcommittee is given the authority to liaise directly with Council’s legal advisor and consult directly with the board of Queenstown Airport Corporation.
   
3. The subcommittee will report back to the next meeting of Council with a draft resolution that satisfies the requirements of clause 5(1) of schedule 8 of the LGA, with the modifications required of the statement of intent, including provisions to be omitted or included that would ensure the statement of intent gives effect to Council’s key strategic objectives.
   
4. In its process, the subcommittee will provide its draft resolution to the board of Queenstown Airport Corporation to facilitate consultation.
   
5. Council hereby gives notice to Auckland International Airport of its key strategic objectives that are to be met by modifications to the Queenstown Airport Corporation’s statement of intent.

The absence of a resolution planning how to effectively activate clause 5 is a serious shortcoming of this Agenda Report.

In the context of this vote, we note the public references to the mayor Jim Boult’s potential conflict of interests in this negotiation of council with QAC. Mr Boult resigned from Real Journeys on an unspecified date in November 2018, and became a director of Wayfare Group on the day it was incorporated on 2 November. He was chair of Real Journeys and he is now chair of Wayfare Group. Wayfare is the parent company of Real Journeys, Go Orange, Cardrona Alpine Resort (bidding to buy Treble Cone), Canyon Brewery and the International Antarctic Centre. It is the biggest tourism company in the Queenstown Lakes, operating on both sides of the hill. I understand that that the only area it does not operate in is visitor accommodation.

There is ample room for perception of a possible conflict in so far that the interests of these companies with regard to the expansion plans of the airport may not be aligned with the clearly expressed interests of the ratepayer community (92.5% rejection). As such, it would be wise for the mayor to stand aside from selection for a subcommittee formed per the draft resolution above.

Point 18

This is surprising advice, given that the modification done by QAC to the SOI has introduced new text and language to effectively double down on continued growth. The changes seek to amplify the perceived need for airport expansion and growth including expansion of ANBs. Given that this was the issue causing most councillors to speak against it at the meeting of 27 June, where a majority of councillors were not prepared to “agree to” the delivered SOI, the advice seems to conflict with the clearly expressed views of a majority of councillors. 

Point 21

Of course it would have financial and operational consequences, but this advice seeks the inference that these consequences would be negative, when the likely outcome is very positive. A reduction on airport expansion that chases low cost, low value “demand lead growth” could dramatically increase QAC’s profits and its dividend payments to council.

If the ANB limit were to be enforced, the most likely tool by QAC to manage demand would be to raise the landing fees. 

With landing fees comprising 72% of its income, this would substantially increase QAC revenue. At the same time, the capex would reduce to maintenance levels. These two effects would cause a massive increase in QAC profits. This is in stark contrast to the currently proposed expansion plans that promote debt funded investment of half a billion dollars, the servicing costs of which would more than hobble QAC’s $24 million before-tax profit. 

Managing flights to within the ANB would also mitigate the excessive growth rates experienced in our district, reducing the financial and other growth stresses on our local infrastructure and ratepayers to more manageable levels.

It could also change our visitor profile from budget conscious short stay visitor to higher value visitors who stay longer. This would increase the value gain per visitor, making for a more sustainable economy with the district changing from a fast food version of tourism and the district’s business moving up the value chain, with better profits and wages for locals.

Point 25-28

The process to date has not been consistent with the Act, as covered above.

Point 29

This advice carries an imperative for growth, which is not the case for this airport. Neither council nor QAC are required to create budget priced bulk air access direct to Central Queenstown or Wanaka, making them the fast food centres for tourism.

This is not a choice between growth versus a static future, as falsely characterised by the mayor in his statement of 8 August. More realistically, it’s a choice between:

• Continuing uncontrolled growth focused on low-value, high-volume tourism that undermines environmental values, exhausts social licence, overwhelms infrastructure and entrenches a low wage economy, or instead
  
• A change of direction to a more selective, higher-value, better-paid, more sustainable tourism economy that could deliver a much better quality experience for visitors and better livelihood and lifestyle for the local community.

While writing this today, I received an emailed offer like many before. It was for an all inclusive trip to Queenstown – including return flights ex Auckland, two nights five star accommodation with cooked breakfast and two full day lift passes to Coronet and Remarkables – all for the budget price of $499. With the ticket price for this being $1,800, it’s easy to understand why the district is bursting at the seams, and also why the majority of wages are at or near the minimum wage.

As a destination, Queenstown and Wanaka share many characteristics with Milford. It is right and proper that the airport in Milford is restricted for number of flights, as are the boat movements on the fjord, and soon the vehicle access through the tunnel. Just as the demand and access to Milford can and should be managed to protect both the environment and visitor experience, so to should QLDC and QAC manage demand into Queenstown. Similar cap controls have been applied to Schiphol airport to manage tourism in Amsterdam and cruise ships near Venice.

Contrary to the mayor’s assertions, proper management of the airport infrastructure to support sustainable social and economic life in our district does not require the constant and inevitable growth of airport capacity. Just as councils manage the transport in our cities, choosing between car-centric urban sprawl or intensive development supported by public transport systems, we can choose the character of this district we call home. 

Council is responsible for the protection of our outstanding environment and a healthy sustainable community. Limiting the airport to operate within the ANB is a completely viable option to achieve this purpose, and fits within council’s legal responsibility, being “to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future”. [s.10(1) of LGA]

QAC would retain a range of options with such limits in place that enable it to operate effectively, including simply enjoying the increase in profitability, or even moving to a location that could absorb more flights with less impact on its environment. In any of these it could continue to successfully “conduct its affairs in accordance with sound business practice” [s.59(1)(d) of LGA] and “be operated or managed as a commercial undertaking”  [s.4(3) of AAA 1966], as it is required to do by law.

Additionally, the airports of Christchurch, Dunedin and Invercargill could take further flights, with better potential economic and social outcomes for the region than focusing all airport expansion into Central Queenstown or Wanaka.

Such controls on airport growth would likely support the local economy’s movement up the value chain as has been long espoused by many in the tourism industry. Greater return per visitor would provide a more sustainable economy, better living environment and better mitigation for climate change.

Yours sincerely,

John Hilhorst

Cc all councillors, Council CEO, WSG, Office of the Auditor General and media