Auckland, June 15, 2020
Auckland Council is forecasting a $525 million dollar hole in its budget as a result of Covid-19.
It is not alone. Across the country, City and regional Councils are adjusting their budgets.
Wellington City Council is deciding what to do with a $70 million dollar shortfall, Hamilton City is facing a $22 million dollar drop in non-rates income and the Northland Regional Council is facing a $4 million shortfall.
Restoring 60% or even 80% of these funding shortfalls over the coming year would be a lifeline for the local businesses who rely on Council contracts.
Range of options
When a local authority is facing a financial hole it has a range of options.
It can increase its rates and fees, sell assets, borrow more, cut its current spending and or decide to defer new planned projects or maintenance.
Most are likely to employ all these tactics at the same time. Take the Northland Regional Council, this $4 million dollar shortfall will mean $1.2 million will be cut from its existing budget, roughly $800,000 of new work delayed, and another $410,000 saved by not filling vacant positions.
While local government is facing a funding crisis across the country, our central Government is spending up large. They are promising spending at levels we have never seen, so much that they are having to bring forward ideas and ask the regions for “shovel-ready” projects in order to stimulate the economy and create jobs.
All the while, Councils are slashing and burning line items and delaying projects that were already in motion and in some cases ready to go.
This mini-austerity over the country, is like a death of a thousand cuts for smaller local businesses and service providers.
Central Government War Chest
It should not be a controversial or surprising idea that central Government should use some of its $20 billion Covid-19 war chest to plug some of the gaps in council revenue.
That is not to say that the government should just hand over all the money needed to make up the difference; it is right that Councils should be forced to examine their spending, eliminate waste and prioritise work. But if we are to choose between big central government spending on projects that will take years to get going, or topping up budgets to allow local work that is already underway to keep going it’s time to choose the latter.
Local governments contract smaller businesses to do all the unsexy stuff that make our lives better.
They ensure that water flows into our homes, that waste leaves them, that drains do not block or are unblocked when they do.
They contract out the maintenance on our local roads, ensuring that the lights at intersections work, that hazard signs are erected and maintained, that local parks, pools and public transport keep ticking over and are safe and up to date.
It is time that the central government gave control of a small portion of their war-chest to local government and in doing so provide a lifeline for the many small businesses that are in grave danger.
Julian Wood is a Researcher at Maxim Institute based in Auckland.
