My Account
Auckland Council estimates that this year’s storm and cyclone events could cost the city between $900 million and $1.2 billion.
These initial estimates include some short-term impacts on revenue, operational costs such as immediate cleaning, maintenance and repairs, as well as capital costs to renew damaged assets.
The capital costs form the largest part of these estimates and are based on a like-for-like replacement or reinstatement of damaged assets. It does not include any provision for enhanced infrastructure resilience or acquisition of private properties impacted by these events.
Council says the costs in the current financial year will largely be addressed through reductions in other expenditure, insurance recoveries, and some increase in debt compared to current forecasts.
The council group is continuing to assess the impacts, and the associated costs remain highly uncertain, and it will take some time until the full extent of the damage and the detailed financial impacts can be determined.
A spokesperson says the storm and cyclone impacts will make the task of balancing the Annual Budget 2023/24 even harder.
Council is currently consulting on this budget and has proposed to reprioritise capital expenditure and provide additional operating costs in response to these events.
Industry constraints mean it is unlikely that the capital investment for the council group will be much higher than the $2.8 billion currently planned for 2023/24. However, storm-related asset renewals will likely delay other high-priority investment forward into the following year.
Therefore, it is likely the bulk of the need for additional capital investment and funding will occur from the 2024/2025 financial year onwards.
Financial and funding impacts
Council is able to cover the increased capital requirement from these two challenges within existing debt limits, and can consider a mix of funding options through its 10-year Budget 2024-2034.
Council’s financial strategy has set a limit for debt not to exceed 290 per cent of operating revenues. The proposed Annual Budget 2023/24 indicates, after taking into account the debt reduction from the sale of airport shares, that the ratio out to 2030/31 will track below 220 per cent.
Initial financial modelling suggests that even without the proposed airport share sales, debt/revenue would remain within limits. However, solely relying on debt would create significant challenges for Council’s operating position from the 2024/25 financial year.
Tough choices will be required in the 10-year budget to resolve this medium-term budget challenge. Funding options available to Council include:
- Reducing or deferring other capital spending
- Further sale of assets
- Further service reductions
- Considering the level of future rates increases
- Working with the Crown on potential changes to funding arrangements, including new revenue tools and the possible use of future better-off funding as part of the Three Waters reform programme.
City Rail Link (CRL)
Council has received a request from the CRL for an additional $1.074 billion of funding for the project from the two sponsors – Government and Council. This reflects a $1.074 billion increase to the previously estimated total project cost of $4.419 billion, which was approved by the sponsors in May 2019, to a new total of $5.493 billion.
In addition, Council has also been informed that construction of the stations and supporting rail infrastructure is now likely to be completed by the Link Alliance in November 2025. KiwiRail and Auckland Transport will then carry out the additional work required to open the CRL to its first passengers.
The cost increase and delay have been primarily driven by the Covid-19 pandemic and associated lockdowns, which has resulted in staffing, supply chain and technical-related challenges associated with a project of this scale and complexity, and inflation in construction costs.
Council’s Governing Body will consider its share of the formal funding request and discuss the budget implications of the increased cost and project delay when it meets next week on March 23.
Media release – March 15
