Councillors – please don’t make a mockery of QAC’s statement of intent

We Love Wakatipu Inc commentary, 21 April 2020

Council’s proposed agreement to Queenstown Airport Corporation’s pre-Covid statement of intent on Thursday would totally abrogate its legal governance role and disrespect QAC’s capacity to actually do its job.

The council executives’ agenda item that recommends this course of action gives false grounds for the need to agree, conflicting reasons as to why it must, and its one alternative option is so nonsensical it seems designed for councillors to immediately dismiss.

Thursday’s agenda item says councillors must agree to the draft SOI “to enable QAC to be compliant…”  Staff and the mayor used the same argument last year. It wasn’t true then. It still isn’t. QAC just had to deliver it by deadline for the draft to be compliant, allowing their work to continue.

Council’s executive team should know this as we provided legal advice from a senior QC pointing out this and other aspects of proper process under the LGA last year. Council’s own legal advice later confirmed this.

So, to the second reason why council executives claim agreement is necessary now – enabling QAC to focus on its job.

Confusingly, there are three distinct versions given of this rationale. In the recommendation; “to enable QAC to commence re-forecasting immediately”. Under significance; “to enable it to commence immediately on a modified statement of intent”.

And thirdly, in both the recommendation and the narrative, we are told that QAC can’t produce a modified SOI until October 29 because they have to wait until “the immediate market challenges are stabilised, the impact is better understood and the company is in a better position to develop a relevant three-year statement of intent”.

Contrast this with QAC’s minority shareholder, Auckland International Airport.  Within two weeks of lockdown, it came out publicly with a detailed strategy (including raising $1.2 billion capital) to ensure its survival over the next two years. Sydney Airport is continuing with its May AGM to report its survival strategy to shareholders.

Why does QAC need over seven months to write the survival and recovery SOI it needs now?

For clarity, QAC does not need council’s agreement to start this strategy work. Surely it has already begun? And their final SOI is not due until June 30 – or July 30 if councillors extend the deadline, as they legally can and already did for the draft. 

There is no legal need and no practical pressure on councillors to agree to this draft SOI, which both QAC and the staff report acknowledge as irrelevant and redundant. The LGA sets out content requirements in schedule eight, reflecting the QAC board’s outlook, expectations and goals of the business in the world as they see it. To agree to statutorily required information known to be false would be a legally dubious move by our councillors and Mayor.

Instead, they should show their confidence “in the capability and capacity” of QAC board and management the staff agenda item claims, by getting them to do their job in a timely way.

The council executives’ report suggests councillors agree to the pre-Covid 19 SOI with only an “expectation” that, by October 29, QAC modify it under a section of the LGA (Clause 5 of schedule eight)  that gives QAC full control, with councillors allowed only to “consider” changes made.  Such “expectation” is not legally enforceable, council’s views hold no legal weight, and QAC’s strategic response to this crisis would continue under a council-sanctioned cone of silence until the end of October.

There are two other clear paths for councillors to take under the LGA to ensure this year’s SOI, the document that outlines the strategic and financial parameters within which QAC must operate, is not a mockery.

  • They can revert to treating this as the draft SOI that it is and, under clause 2 of LGA’s schedule eight, ask QAC to bring back a final SOI that reflects the uncertainties of the next three years as accurately as they can by July 30. This is the “good cop” option, in which they show trust in their relationship with QAC. Or…
  • They can carry on with the staff’s suggestion that it be treated as a final SOI, and by resolution direct QAC to do the same as above. So far, QLDC has appeared to be allergic to exercising its legal right to govern the company it is controlling shareholder of in this way – but it would give greater surety of results.

Within this legal framework, updates could be scheduled to allow for the inevitable tweaks required as the full impacts of this global crisis emerge. Where forecasts cannot be provided, alternative scenarios could be outlined.

By following proper legal process in either of these ways, councillors would ensure they, our community and business sector have visibility of QAC’s strategic approach as a basis for trust, peace of mind and their own business planning.

These are not even listed as options in the staff report. The second option it does list is legally dubious, meaningless and impractical.

Surely with four months since lockdown and almost no planes to divert them, QAC’s well-qualified and well-paid executive team and board should be able to formulate its Covid survival and recovery SOI?

Now is not the time to argue about airport growth, but nor is it the time for lax governance. QAC’s Covid caveat acknowledges its forecasts are inaccurate – but makes no mention of its objectives no longer fitting reality.

So by agreeing to the draft SOI, councillors would implicitly agree to QAC’s objectives of continuing down the dual airport growth track, developing landholdings to support growth and, among other things, total debt of $170 million by the end of 2023.

In one of six specific Covid comments in the draft SOI, QAC says it will not complete long-term development planning for either airport this financial year and it won’t seek expansion of Queenstown’s air noise boundaries “at this time”.

QAC also says “as and when” it completes its draft master plans, it will seek council’s endorsement and consult with the community “before any decisions on future airport developments are made”. The implication is very clear that they are QAC’s decisions to make.

If councillors agree to this draft SOI, they leave the window open for QAC to argue the current council implicitly agreed to these objectives.

One Comment on “Councillors – please don’t make a mockery of QAC’s statement of intent

  1. I personally think that this shouldn’t be pushed through, time is needed to understand what the future holds for our region. Airport expansion was never something that we needed before this time and now many factors have changed for our future and region that these should be taken into account and new research done. A decision based on pre covid19 conditions and research would be irrelevant to our regions future with the predictions that our local and regional council and national government are predicting. Let’s just take our time, the money could be spent on a lot more important things now! And when things get back to normal.. we need to reassess at that time for our future! We don’t need to decide the future now
    Cheers

    Like

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