Recent articles on the airport here at CCO have focussed on the wisdom of an effective privatisation through a long term lease at a time of Covid19 and whether it would deliver as good an outcome for ratepayers as a pause in the process until a post-Covid outcome would.
But there are a number of other issues that also need to be considered too and today we look at them.
By The Editor.
What Council makes out of the airport.
Council has regularly announced profits from the airport until this year. They have varied over the years between $2.5m and $8m per annum. Profit increased over the decade 2010-20 by an average of 17%.
However they are not the only way the airport delivers revenue to the Coffs Harbour City Council (CHCC).
An analysis of the airport budget for the 2020/21 financial year and previous accounts from other financial years shows five line items that on investigation show not only has the Regional Airport not cost ratepayers anything but that it has also been responsible for generous annual payments to the Council for;
Administrative services; Currently approximately $300,000 p.a. even though for the past 10 years the airport has been managed under contract;
Rates; Currently approximately $220,000 a year; and,
Dividends; Currently approximately $400,000 p.a.
The above amounts to approximately $920,000 a year in total over and above a delivered operating profit. Clearly any new operator would still have to pay the rate component.
In addition there have been other contributions to CHCC expenditures including roughly $900,000 to an upgrade of Hogbin Drive.
A ‘privatised’ airport might not get government funding support
Most investment in the airport has come via grants from both the federal and state governments. The airport was upgraded and conditionally given by the Commonwealth to the CHCC at no cost over the late 1980’s and early 1990’s.
This concluded with the CHCC, subject to a further targeted grant from the Commonwealth, assuming full financial responsibility for its further development and operational maintenance from 1 October 1991.
Once essentially privatised though such federal and state grant largesse would not at all be guaranteed for what would in effect become a private monopoly.
This of course would in all likelihood mean increased charges for airport users as has usually been the case where monopoly airports have been privatised.
CCO understands a condition of a successful lease is the completion of the preparatory work for the Technology Park. The CHCC has already received $10m from the federal government but must also commit $5m of its own money and is hoping that the State Government will deliver a grant of $10m too, with negotiations in relation to the latter currently ongoing.
Cr’s Amos, Arkan and Swan are right to seek information on whether Council would have any control over issues such as landing times and who might become tenants in the Technology Park if the airport is leased.
Many residents under flight paths and living near the airport would in all probability share these concerns too.
Why a ‘guarantee’ not to spend the money on the CCS in Gordon Street is not binding or enforceable
According to a report by Emma Darbin in the Friday 4 September edition of News of the Area (NOTA) (Page 12) “Council also resolved that any proceeds received from the long term lease of the airport will not be used to fund the Cultural and Civic Space Project” (CCS).
CCO has had it confirmed that this indeed did form part of the discussions among Councillors on the airport lease and that this ‘promise’ may have influenced how one Councillor eventually voted.
This ‘promise’ cannot be enforced.
A Council in 2020 cannot ‘bind the hands’ of any new council in the future.
Should, say, Mayor Knight’s 2021 ticket win a majority at the next Council elections, as an example, they could vote that the lease monies from the airport lease be spent on the CCS.
That would be perfectly legal.
In addition even if the above was not the case the lease money from the airport would have to be ‘ringfenced’ within CHCC accounts so that they could not find their way into any broad CCS related expenditures.
Having recently discovered the ‘opaque maze’ that are the CHCC accounts all one can say is that in our opinion it would then be a matter of “good luck with that!”
Why getting a manager to run the airport for ratepayers is not a major issue
One of the more absurd arguments being used by the CHCC Executive to argue for the essential privatisation of the airport is that they don’t have the ‘skill set’ to manage it.
Yes. That is why the excellent Mr Dennis Martin did that magnificently for the previous 10 years.
So as an idea why not hire a new expert Airport Manager? The CHCC could start by contacting The Australian Airports Association and getting a list of their members for starters. They are not hard to find.
Given this is not exactly an onerous proposition it does lead one to wonder just how seriously the CHCC Executive researched alternatives to their preferred lease model. And everything we have seen that is publicly available on the matter suggests the answer to that query in our opinion seems to be; “Not very.”
No, this seems increasingly to be more about a ‘fire sale’, or as the Aircraft Owners and Pilots Association of Australia (AOPA) put it; “A dash for cash”.
Was Council so bedazzled by an offer for the airport from a superannuation fund backed group several years ago, and is now so commited to the ide,a that in a time of unprecedented turmoil in avaition and elsewhere they don’t now know how to operate a hand brake?
And see AOPA here quoting former ACCC Chairman Graeme Samuels on his view on how privatised monopoly airports have failed airport users; https://aopa.com.au/airport-privatisation-dogfight-airlines-calling-out-government-inaction/
This is this Thursday’s rescission motion on the lease of the airport.
Councillors Arkan, Amos and Swan, have given notice of their intention to move the following rescission motion:
That the resolution 2020/194 titled BS20/50 Coffs Harbour Airport Long Term Lease – Stage 3 Tender for Binding Bids, set out below, be rescinded.
1. Progress the airport lease through negotiation in line with the recommendation contained within the Binding Bids Evaluation Report (Confidential Attachment 2).
2. Receive a further report on the outcome of the negotiations.
3. Resolve that any proceeds received from the long term lease of the airport will not be used to fund the Cultural and Civic Space Project.
If the motion is successful, we intend to move the following:
1. Bring back a report containing further information on the implications of potential financial impacts of an additional 50 year option.
2. Provide a further detailed direct comparison on the financial implications and advantages of maintaining airport management under Council control verses leasing options.
3. Seek further clarity as to our control over hours of operation, projected flight paths and anticipated arrival and departure times over the length of the lease.