Govt’s hostile takeover bid for Wellington City

Analysis: If Wellington City Council were a listed company, there would have been a trading halt required on Tuesday.
Because the Government’s unexpected disclosure that it was taking advice on intervening in the city’s governance was the next closest thing to a hostile takeover bid, and seems to have sent confidence bouncing all over the place.
As it was, the shares of Infratil, the majority shareholder in Wellington International Airport, bobbed up a couple of points on Tuesday. That came after Finance Minister Nicola Willis hinted at intervention, in an interview with Heather du Plessis-Allan on Monday evening.
The big infrastructure firm’s investors can’t have enjoyed last week’s will-they-won’t-they uncertainty around the council selling its 34 percent airport share; the prospect of a Crown commissioner’s steady hand on the tiller must have seemed preferable.
Mayor Tory Whanau tells me she’s meeting with councillors to find a way through the insurance exposure exacerbated by last week’s amendment to the city’s long-term plan – an uninsured exposure she’s put at $2.8 billion and rising. “I am focused on finding a solution to the council’s insurance risk,” she says.
So, how broken is Wellington City Council? The short answer is, by most objective metrics, not very.
It’s more broke than broken. On the downside, S&P Global lowered its long-term credit rating from AA+ to AA last month, as foreshadowed by Newsroom nearly a year ago. And the ratings agency warns it could lower the rating again if it considers the council’s financial management to be weakening further.
“We could also lower our ratings on Wellington City if the overall commitment of the New Zealand local government sector to strong finances continues to deteriorate, as indicated by large sector-wide cash deficits and further growth in the sector’s already-elevated debt burden.”
Another ratings downgrade would mean ratepayers paying millions more to service the council’s big debt.
S&P delivered its rating action ahead of last week’s council u-turn on the airport share sale; it described the sale as “a key component of the long-term plan” that aimed to improve Wellington City’s insurance coverage for earthquakes.
Without that, Whanau told me in August, the council now has about $2.8 billion of its assets left uninsured – it hasn’t been able to sustain the rising premiums. “Should the worst happen in our city, like an earthquake, we have very little to access in terms of rebuilding our city. Hence, the sale of the airport.”
Wellington’s debt-to-revenue ratio of 241 percent was already in the top five of all councils this year, and forecast by S&P to rise to 286 percent in 2026/27. New Zealand councils, to put that in perspective, are the most indebted of local authorities in comparable nations rated by S&P.
With aged water mains and sewers bursting in the streets, Wellington has a big backwash of water infrastructure projects it must now pay for after the repeal of the previous government’s Three Waters reforms – one of those projects (the Moa Point sludge plant) is already being financed with an additional $7.6m a year levy, on top of rates.
The city’s average rates increase is 16.9 percent which, as Local Government Minister Simeon Brown points out, is among the highest in the country.
And of course, councillors are badly split over issues like the protection of heritage buildings, bike lanes, and roadworks that are causing serious financial pain to some business constituents.
That’s a long list of downsides.
On the upside – this is local democracy! In this electoral term, Gore, Kaipara and Invercargill have been more riven; Auckland, Hamilton, Tauranga and Queenstown Lakes are more indebted; West Coast, Hastings, Napier, Gore, Clutha, Buller and Central Hawkes Bay all had to suck up higher rates rises.
Brown is not taking advice on intervening in any of these councils, to our knowledge, though Gore came close to seeking Government help last year.
I spoke on Tuesday night with law professor Dean Knight, from Victoria University of Wellington. He doesn’t think the thresholds for intervention in Wellington City Council are even close to being met.
The Local Government Act specifies that the minister may intervene when there’s a state of emergency, a “problem” that’s likely to detract from a council’s ability to govern locally, or a significant or persistent failure by the local authority to perform any of its legal functions.
This includes a failure by the local authority to demonstrate prudent management of its revenues, expenses, assets, liabilities, investments, or general financial dealings – that that’s where Wellington’s council is most vulnerable.
“That’s when a local authority is going to go bankrupt, or something of that order,” Knight argues.
“There’s a magnitude that’s got to be met for that to be a significant problem. It’s not just people disagreeing with an ideological policy position about whether it’s better for the council to have an investment in a local infrastructure asset like airport shares, versus having a more portfolio investment in a Prudential Investment Fund.”
In 2020, former local government minister Nanaia Mahuta installed first a Crown review team and then a commission to take over Tauranga City Council. She cited seven “significant governance problems” including  “poor behaviour”, “infighting”, “leaks of confidential information”, and the inability of elected members to “set rates at a realistic level”.
It came after a damning independent report into the council’s governance, a split vote to ask the minister to appoint a Crown observer and manager, and the resignation of mayor Tenby Powell.
A key difference, though, is that Tauranga’s councillors were unable to agree on their statutory duty to pass a 10-year long-term plan for spending and infrastructure. Wellington has passed its 2024-34 plan; last week’s airport vote has created uncertainty around that plan, but not upset it entirely.
Mahuta tells me that Brown should be receiving bird’s-eye view briefings of the general governance and financial health of all councils. “If there is evidence that political ructions are disruptive to council responsibilities, the minister will be getting reports in weekly brief,” she says.
“If ructions are significantly failing regulatory responsibilities, the Department of Internal Affairs will send in their regulatory expert to make an assessment and recommend action. There are about two or three stages before the decision to appoint commissioners is considered.”
Brown says he’s formally requested advice this week, and he won’t put a timeline on a decision. The law empowers preliminary steps such as a formal written notice seeking information, or sending in a Crown review team – as Mahuta did in Tauranga.
At the point that Brown decides intervention is warranted (and he can choose to leapfrog those preliminary steps) he may choose between a Crown observer, or a Crown manager like Lawrence Yule’s role overseeing $70 million of flood remediation work in Wairoa and northern Hawke’s Bay.
The nuclear option, of course, is to sack the council and put in a commission.
I’ve spoken this week to Tenby Powell and to Wairoa Mayor Craig Little; both say the Crown intervention in their region was a blessing, enabling quick decisive action that city or regional councillors seemed unable to take.
“I know Tory, and she’s a great person, but don’t forget this: under her watch, she’s taken on something that is bloody bigger than her, and she’s trying to do her best,” says Little.
“And I think people need to get away from blaming her alone. She’s doing the best she can, but when you’ve got no money, you got no money, and it’s really hard. She had a solution, now she needs a new one. So I do feel sorry for her, I really do.”
Tenby Powell is in Lviv in western Ukraine, working with his 27-year-old son to deliver ambulances to wartorn communities, when we talk. “When I asked for intervention, I was desperate to ensure it was going to be the right people. And as it transpired, it has been.
“I was very keen to see the city run like a board of directors. The commissioners did engage with the community, they did consult very widely, but at the end of the day they made the right decisions for the city, and they weren’t swayed by the politics of re-election.”
So is Crown intervention justified in Wellington? “I think government intervention in a range of places is probably necessary. People talk about potholes and roads and stuff, but water is absolutely the most critical, and Wellington’s water infrastructure should have been addressed decades ago.”
He believe tough decisions are needed that local voters will struggle to accept. “Wellington doesn’t have any choice. This is what people don’t realise. You can’t exist in a city under those circumstances. And selling assets like the airport is all very fine, but it’s a one-off. The issue is around sustainable funding for future growth.”
Anne Tolley, who chaired the Tauranga commission to some acclaim, tells me “it is a very high bar to reach” for any interventions in local authorities.
Internal Affairs policy and operations general manager Richard Ward confirms the department is preparing advice on potential intervention in Wellington City Council, at the minister’s request.
As a matter of course, he says, Internal Affairs collects a range of financial data from council plans and annual reports, and briefs ministers as necessary. He says the department does not have regulatory experts that are sent into assess councils.
“Under local government legislation, councils are accountable to their communities for their actions and decisions and councils are expected to solve their own problems,” Ward emphasises. “The local government legislation does allow the minister to intervene in a council if there is a significant problem. However, the threshold for intervention is high.”
What’s been missed by most commentators is that on June 23 last year, then-local government minister Kieran McAnulty gazetted a notice spelling out the criteria for intervention in a local authority. That would make it difficult (though not impossible) for Brown to act hastily or heedless of good evidence.
The guiding principles for ministerial action include protecting local authorities’ accountability to their ratepayers and residents; and recognising elections as the primary mechanism for communities to express satisfaction or dissatisfaction with their elected representatives.
Due regard must be given to a local authority’s acknowledgement of its problem, any commitment to its resolution; and that action the council is taking to fix the problem.
The minister must also consider the costs and benefits of assistance or intervention, which should be proportionate to the nature and extent of the problem, and its potential consequences
“It’d be a massive call for any minister to intervene against Department of Internal Affairs advice or act before the threshold previously adhered to was met,” McAnulty says. “If he did, then it’d show it’s a political decision.
“But, that’s how this minister operates. His dismissal of the recommendations of the review into the Future of Local Government Review was politics instead of substance, and scrapping the Affordable Water Reforms without a workable solution was irresponsible to say the least – a political solution to a serious problem.
“He has lined local councils up to take the blame for his decisions. So, while it’d be a reckless thing to do, it wouldn’t surprise me.”
If Brown intervened and council opponents believed he hadn’t met proper thresholds, they would look to seek judicial review –and the gazette notice would provide a High Court judge the specific, measurable criteria under which to assess the Government decision.
So what are those specific, measurable criteria on which Brown would rely?
Brown rejects any suggestion that the proposed intervention is left/right politically-motivated – Whanau is a Green mayor in a council that’s often been dominated by progressives.
“This is very much a right-wing Government,” he agrees. “But what I would say is that the issues here are around the impact on ratepayers who are already facing one of the highest increases in rates in the country. And my concern is what impact relitigating the entire long-term plan may have on them.”
Newsroom asks him whether he has confidence in Whanau.
There is a long, pregnant and very deliberate pause – and then he turns and walks away to the debating chamber.