Auckland Council has been cutting contracting costs to meet the financial shortfall caused by Covid-19 and warns that non-essential services and construction projects could be next on the block.
Council estimates that it will have lost $250 million in revenue for the financial year ending June 30 and that it will lose a further $450-$650 million in the following financial year.
Applications for grants for community facilities, such as halls and sports clubs, have been deferred and were set to be reviewed during Alert Level 2 as Mahurangi Matters went to press.
During lockdown, Council suspended 1100 contractors for operations such as public works, event operations and non-essential maintenance. This is estimated to have saved $100 million.
But at the same time, Council has had to provide emergency relief to Aucklanders, including 26,000 packages of food and essential supplies.
Tourists stuck in 14-day isolation have also benefited from 148 hotel rooms paid for by Council, while 17 rough sleepers have been homed in emergency accommodation.
In a letter to Aucklanders, Council’s finance and performance committee chair, Desley Simpson, warns that the city will have to make some difficult financial decisions.
About 60 per cent of Auckland’s revenue is generated outside of rates from sources such as dividends, public transport, parking, fuel tax and events – all of which have been impacted by Covid-19.
Cr Simpson says the 2020/2021 annual budget the Council consulted on earlier in the year is now untenable and further consultation with the public for a new budget will be made in coming weeks.
Meanwhile, ratepayers who can prove financial hardship will be able to defer their rates payment (due on May 28) until August 31 without penalty.
Chair Simpson says instructions on how to request a deferred payment will be included in May’s rates notice.
A financial update recently released by Council warns that it will have to reduce spending from $2.6 billion to $1 billion in the next budget in order to stay within its debt limits.
The Council has to keep debt within 275 per cent of its revenue in order to maintain the city’s AA credit rating.
The report says that Council also has access to $1.2 billion of funds from 10 banks on standby.
These facilities are intended to provide liquidity in the event that the council is not able to access funding through the normal debt capital markets.
However, the report concludes that cuts to spending will likely still be necessary.
“The extent of capital expenditure reduction to maintain the debt-to-revenue ratio at 275 per cent is substantial,” it says.
“It would require many construction contracts to be cancelled and only delivering the most critical projects to maintain essential services and protect public safety.”