Auckland councillors pass 3.5% rates rise emergency budget

6:49 pm on 16 July 2020

Auckland councillors have voted to pass its emergency budget - 18 in favour; three against - and impose a rates rise of 3.5 percent.

The council's plan meant cutting a total 1100 staff across council and services, with 600 contingency workers already notified and another 500 job cuts yet to be given notice.

It was forking out $239 million in capital expenditure and $15m in operating expenses to cover infrastructure for securing Auckland's water supply.

Speaking after the budget passed, mayor Phil Goff said the Budget was passed "overwhelmingly with 18 votes to three... This was an exceptional Budget for unprecedented times".

Covid-19 was set to leave a half-billion-dollar hole in the council's Budget and futureproofing the City Rail Link last year had "emptied almost all the buckets the council had" - and then later, drought-related water costs of about $250m.

It was not a case of simply borrowing more money, Goff said.

"Because we're a high-growth city we have borrowed really to the maximum extent (while) keeping below the debt to revenue ratio set by our credit rating agencies. Why did we borrow? Because we needed the infrastructure to match the growth. There was a deficit of infrastructure. We had lagged behind leaving a trail of traffic congestion, a housing shortage and affordability and lack of environmental protections.

Auckland mayor Phil Goff announces the council has agreed to a budget with a 3.5 percent rates rise.

Auckland mayor Phil Goff Photo: RNZ / Dan Cook

"So we couldn't simply borrow, though for the immediate period of time we will spend above the debt to revenue ratio, probably rising to 290 percent...

"We had to slash our spending in some areas we have cut council spending by $250m over the next year ... we have had to lose staff ... that is incredibly tough and also affects our ability to deliver services in the way we wanted to."

Goff said there was no easy way out.

"[If] we bugger up our finances and we look for soft options that aren't there, we're serving nobody's purpose."

The council had been deliberating between a 2.5 or a 3.5 percent rates increase, and was aimed at repairing a $750m deficit while also funding repairs to the city's damaged water infrastructure.

The council had struggled with the 3.5 percent rates rise, he said, but a 2.5 percent rise would have meant cutting essential services "to the bone" as well as cutting infrastructure spending by $200m, Goff said.

The difference the increase meant for the average rate payer was about 47 cents more in rates per week.

Library hours, not mowing parks, removing litter bins, "a whole lot of small but meaningful things" would have gone under just a 2.5 percent rise, he said.

He told RNZ's Checkpoint he hoped people would not end up in a situation where they had their home repossessed by the council because they were unable to pay rates. "We'll bend over backwards to help people in that situation."

Whenever you put the price of anything up, there is resistance to that.

"There are people for whom it will cause pressure and I think the way to tackle that problem ... the answer is that you've got to lift the income of those people through social transfers through central government, that's the way to do it."

Rodney ward councillor Greg Sayers was against the 3.5 percent increase, saying it increased costs for residents already burdened with fuel taxes and water charges.

"It's the compounding effect on Aucklanders, particularly the most vulnerable."

Councillor Deslie Simpson said there was now a second rates remission scheme available for ratepayers.

"We realised that this particular one would help ... people who were in hardship."

Auckland Council finance and performance Committee Chair Desley Simpson.

Auckland Council finance and performance Committee Chair Desley Simpson. Photo: RNZ / Dan Cook

Of the Budget, she said: "It's not perfect but we don't live in a perfect world. Covid-19 is not over."

"Local boards have lost a lot of money our of their budget, so for me there wasn't really a choice. It had to be 3.5 percent. I know it's painful. It's painful for everyone."

Whau Board councillor Tracy Mulholland supported the 3.5 percent increase and said any lower would have had the finances on a knife edge.

"To support anything lower than that in these times would cripple the delivery of services and long awaited infrastructure," she said.

"The future's not served by leaving critical services and facilties to wither."

Goff said all 21 boards had unanimously supported the 3.5 percent rates rise.

"For the first time in the history of this council, I think, they were unanamious that ... we needed a 3.5 percent rates rise," Goff said.

"We were due to spending $2.7 billion on infrastructure this year ... we have trimmed it back but we will still spend... $2.5bn this year."

Infrastructure spending; water rates likely to rise

The council had decided to not cut infrastructure spending because there was no better time to spend on infrastructure than as the community went into a recession, Goff said.

Budget infrastructure spending:

  • $224 million for new water infrastructure, to reduce the risk of severe water restrictions in the wake of the drought the region had been facing
  • $40m more for transport infrastructure, including for safety improvements
  • $450,000 will ensure that libraries can continue to operate at full hours
  • $50 million for rates relief and also suspending the targeted rate on visitor accommodation

It was also considering asset recycling - focusing on selling off properties and rejigging commercial arrangements - as part of the council's four-prong approach to patching up the gap in its emergency budget, along with increased borrowing, less investment, and savings and service reduction.

Properties across the region that were considered for sale included recreation reserves, carparks, offices, commercial premises and vacant land.

Goff said the "so called assets we are selling are bascially property we have no use for at the moment and no forseeable use for at the moment. Therefore it costs us money to keep it".

Local boards had mixed feelings on asset recycling - some supported, some only conditionally supported and others opposing.

On Checkpoint tonight, Goff admitted Watercare were likely to raise water rates as well, to help pay for the water infrastructure.

"The only peoiple who can pay for the costs of providing that water infrastructure are those people that use the water."

"On the flipside I think probably Auckland has the best quality water and the cheapest water in the country and .... from a consumer point of view we use less water than any region except the Bay of Plenty."

He dismissed reports that some residents had already seen significant water rate rises, but said Watercare had already raised its water rates by 2.5 percent and would have to do so again.

"That wouldn't have been something that people would feel hugely heavily, but they're going to have to look at their rates again, there's no doubt about that."

He defended not making use of the wage subsidy, saying the council revenue fall had not met the 30 percent threshold.

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