Viewpoint – Why Auckland needs a future fund

Auckland Council must secure its long-term financial position. Local boards are having to compete for funding with whatever financial crisis the council happens to be facing, year after year. The proposed Auckland Future Fund (AFF) is part of a long-term plan to help tackle the problem of chronic underinvestment in our region and communities once and for all.

Council’s financial position was already weak, before the enormous cost of last year’s catastrophic weather events, as it struggled to keep up with the costs of population growth. The underlying problem is that council borrowed too much, too fast, and invested poorly. Now, debt is more expensive with higher interest rates, and operating costs have risen significantly in consecutive years.

It is estimated that council will spend the equivalent of $12.9 million a week, or $1.8 million a day, on interest payments.

Council’s debt is projected to reach $15 billion in 2025/26, with almost $700 million in interest owing for the year. It is estimated that council will spend the equivalent of $12.9 million a week, or $1.8 million a day, on interest payments.

At almost $700 million, the interest on debt is comparable to $1000 for each rateable household and business in the region, or around a quarter of the average Auckland household rates bill of $4000 in 2025/26.

Auckland Council has used debt to cover budget deficits and fund major projects, mostly headline-grabbing central government mandates. Upfront costs have been given far greater consideration than the total cost of ownership over the life of the asset.

The City Rail Link (CRL), which will cost an estimated $5.5 billion to complete, is a prime example. What wasn’t made clear upfront is that it will cost Auckland ratepayers around $220 million a year to keep the network running. Now, council cannot afford to own, operate and maintain all of its existing assets, including the region’s transport and water networks, stadiums and community assets.

The message is clear: we have to get a grip on the long-term drivers of expenditure, and make public assets work harder and smarter for all Aucklanders. With a focused and disciplined regional wealth fund that yields higher returns, council would be less reliant on borrowing and rates, thereby reducing the tremendous burden on Auckland ratepayers.

As part of Auckland Council’s Long-term Plan (LTP) (10-year Budget) 2024/34, I am proposing to establish an Auckland Future Fund by unlocking $3-4 billion from council’s airport shares and port operations.

With higher returns around 7.5%, council would receive a net 5.5% return to fund its operations and provide for self-insurance, with the remaining 2% reinvested in the fund to ensure its value increases over time. In year-one of the LTP, council could be $79 million better off under a well-capitalised fund, compared to the ‘enhanced status quo’ with dividends from the airport and port. Over 10 years, council could be $627 million better off.

I have also proposed the lowest rates rise for any city in New Zealand at 7.5%. With a well-capitalised fund, council could keep rates rises at 3.5% from year-four of the LTP.