Viewpoint – Challenges ahead

At Covid-19 Level 1, we now face the big challenge of working together to deal with the economic consequences. Like other cities and countries, we have to promote economic recovery and job growth. We also have to deal with the huge impact Covid-19 has had on Auckland Council’s finances – an estimated loss of $525 million in the coming financial year. This loss is a result of reductions in non-rates revenue, including the loss of dividends from the airport and port, loss of income from public transport fares and parking revenue, and reduced income from venues and facilities like the zoo, Motat, and pools and leisure centres. With the economic downturn, development contribution and regulatory income will also slow. We will also need to set aside around $65 million to enable households and businesses facing serious hardship to postpone their rates’ payments.

Council has a critical responsibility to manage its finances on behalf of the people of Auckland prudently and responsibly. With the loss of $525 million in income, we also have to cut our spending. We should not borrow to pay for day-to-day spending, although borrowing for infrastructure – which has inter-generational benefits – is standard practice. We also need to protect our very high credit rating, which allows us to borrow on favourable terms for long-term investment. The loss of one or two points in our credit rating would add $210 million or $450 million respectively to our interest costs over a decade.

Staff numbers will have to be reduced, with the loss of around 700 temporary or contract workers already, a freeze on recruitment, some likely redundancies, a wage freeze and voluntary staff pay reductions – in some cases up to 20 per cent of salaries. Some services will be reduced as a result of these losses, and some investment in transport, housing and environmental construction will be deferred for a year.

However, we are striving to maintain as much as possible key services like transport, water, waste collection, libraries, parks and playgrounds, and street cleaning. We know these are valued by Aucklanders. We are also striving to keep intact as much work on our infrastructure building programme as possible. This provides capital works in areas that our city needs, such as transport. It also helps maintain and create jobs and stimulate economic recovery.

We have put forward a proposed Emergency Budget to be passed in July. It proposes measures such as suspending the targeted rate on commercial accommodation while that industry is in distress, and allowing people facing financial hardship to defer their rates.  It also puts to Aucklanders the choice of a 2.5 per cent or 3.5 per cent rates increase. For the average rated property, this means a rates increase of $1.35 a week or $1.82 a week respectively. We have created the lower rates option to acknowledge that some people in the post-Covid-19 environment will have reduced incomes. However, that choice will also mean a further $17 million cut in services and around $60 million in reduced infrastructure funding.

Phil Goff, Mayor of Auckland
phil.goff@aucklandcouncil.govt.nz