12 Nov 2020

Auckland Council cash saving methods likely not enough in face of $1b Covid-19 financial hole

5:34 am on 12 November 2020

Auckland Council thinks Covid-19 will punch a $1 billion hole in its finances by 2024 - but city dwellers won't find out how it will be paid for until December.

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Auckland Council's projected budget blowout could more than double to $1 billion, a new forecast suggests. File image. Photo: Auckland Council

The city's budget had already been hammered by a $450 million deficit it had forecast in April this year, and the council has signed off an emergency budget with millions of dollars of cuts. 

It means in the next year, no new sports fields, playgrounds, pools, libraries or community centres will start being built in Auckland.

The council has hit pause on a rollout of electric buses, cut spending on public art by 70 percent, and spending on regional park track maintenance by $260,000. 

Major roading upgrades and walking and cycling routes have been deferred while the council has slashed its payroll by 500 full-time equivalent roles and 600 contractors.

Auckland Council finance and performance Committee Chair Desley Simpson.

Desley Simpson. Photo: RNZ / Dan Cook

The council's finance chairperson Desley Simpson said those cash saving decisions were not likely to be enough.

"In the emergency budget we did put off at least $300m of deferred projects because we thought it would only be a year deferment, then we'd get going again. 

"While actually, we're seeing now we won't get going again. There is no business as usual and it's going to be a pretty tough three years."
In a new financial forecast given to councillors yesterday, the estimated cost of Covid-19 was expected to snowball by another $540m by 2024.

The normal sources that produce 60 percent of the city's income have all been hit hard by the pandemic, including concerts, visitor attractions, dividends from Auckland Airport shares, and the Ports of Auckland, where head of communications Matt Ball said revenue had been hit by Covid-19.

"We had no cruise ships coming into Auckland this year and we have no idea when they're coming back. Earlier this year car volumes dropped by 75 percent," he said. 

Exactly what could be on Auckland Council's chopping block this time around is not yet clear. 

Simpson said councillors had asked for risk analysis to help work out where to make savings with minimal impact.

The union for council staff, the Public Service Association (PSA), is watching closely for any more job cuts.

PSA national secretary Glenn Barclay said staff would be feeling unsettled.

He wanted to see the council let its debt levels increase, rather than axing too many more jobs or projects. 

"I know the council is concerned about what the impact of increasing their debt might be on their credit rating but with the cost of borrowing at a historic lows that would be quite a moderate impact." 

Auckland Chamber of Commerce chief executive Michael Barnett thought the council needed to take a step back and reconsider how it got revenue in the first place. 

"I think the council needs to be reassessing where they're investing. Should they be onus to the degree that they are in Ports of Auckland? Should they be operating concerts and visitor attractions?"

The public is likely to get its first glimpse of any more planned cuts or canned projects when the council's long term plan goes out for public consultation next month.