Auckland, July 24, 2020
The impact of Covid-19 on our City has been dramatic, with the full economic effects still to be felt.
The good news is that, by working together, we stopped the community spread of the virus, saving potentially thousands of lives and preventing our hospitals from being overwhelmed.
However, the economic cost of the virus, causing the lockdown and worldwide recession, is high, not least the effect on Auckland Council’s finances.
Emergency Budget
Council income has been slashed by nearly $500 million, meaning that we need to dramatically cut our expenditure.
That is why the Council has had to pass an Emergency Budget.
Since the budget went out for public consultation; on top of that we have also had to find a further $224 million to pay for new infrastructure to increase water supply.
After this year’s worst-ever drought, the Met Service forecast is for a drier spring and summer, with the risk of severe water restrictions. Few in Auckland would question the need to make this investment, so the money has to be found.
The Emergency Budget is the most challenging budget Auckland Council has ever faced.
We have had to balance the need to cut spending with the need to protect the vital services we provide for Aucklanders and keep as much as we can the investment we need to make in infrastructure to match future population growth.
We cannot just borrow to pay for all of this. If we do not manage our finances prudently, we risk losing our credit rating, adding hundreds of millions of dollars in higher interest rates and putting the debt unfairly on future generations.
Curtailing expenditure
The first thing we did was to cut our spending.
Staffing has already been cut, with over 600 temporary and contract workers going. Another 500 permanent jobs will also be lost. Any non-essential services have had to be cut back.
The Council must become a smaller and leaner organisation that does more with less. Council spending has been cut by more than $200 million.
Secondly, we will sell surplus property to the value of around $220 million and use that capital to avoid cutting infrastructure projects. There is no better time than a recession to spend money on building for the future, while stimulating economic recovery and creating new jobs in the construction industry.
Infrastructure investment
By careful management of our budget, we will invest this year over $2.2 billion in new infrastructure, more than the average of $1.6 billion spent annually over the past five years.
And while some services have had to be trimmed back, we will continue to provide critical and valuable council services like public transport, libraries and community facilities, parks and playgrounds, and waste and recycling services.
The loss of nearly $500 million in income is the equivalent of a rates cut of around 28%.
As a result, we will need to leave in place an average general rates rise of 3.5%, as originally announced. While we would have liked to cut that, the cost in terms of lost services and infrastructure was too great.
Rates increase
The difference between a 2.5% and a 3.5% rates increase for the owner of a $1 million property paying the average general rate is around 47 cents a week more for the higher rate.
The lower rate would, however, have slashed spending by another $17 million and cut our investment in infrastructure by $60 million.
Instead of a general rates cut, we have targeted support to those facing real hardship because of Covid-19, putting aside $50 million to allow postponement of rates without penalty.
It was a tough budget to put together, but in the end all 21 local boards and the overwhelming majority of Councillors came together to agree on a budget that best serves the people of Auckland, now and for the future.
Phil Goff is Mayor of Auckland. He writes a regular column in Indian Newslink.
