Auckland Council looking at $270m budget hole for next financial year, mayor says

11:06 am on 7 November 2022
Wayne Brown

Auckland Mayor Wayne Brown. Photo: RNZ / Lucy Xia

Auckland Council says it is experiencing increased financial pressure from rises in inflation and interest rates.

Auckland Council has updated the NZX after confirming it is looking at a growing budget hole of $270 million for the next financial year.

In an update ahead of the council's full Governing Body meeting this Thursday, the council said the funding gap was estimated to be $180m higher than the anticipated shortfall of $90m.

It noted "an incoming council would have a range of options and budget levers available to mitigate this".

"Inflation and interest rates have risen higher and more rapidly than economic forecasts had projected at the time the last budget was prepared," the update said.

It said as of late October, the total ongoing operating budget pressures for the upcoming financial year are estimated to be around $270m and this operating gap needs to be addressed "in a sustainable way that also supports the council's long-term financial position".

The update said council had the "financial flexibility to respond to the budget situation, but tough choices and trade-offs about the mix of budget levers will need to be made given the scale of the challenge".

It said the council needed to move towards long-term financial sustainability in addition to solving the short-term financial challenge.

In its update to the NZX, the council said it was experiencing increased pressure on operating budgets from recent rapid rises in inflation and interest rates.

It said council had the ability to respond through levers such as prudent use of debt, the level of rates increases, asset ownership options and changes to operational expenditure which could affect services.

The NZX update said the council remained strongly committed to maintaining a prudent and sustainable approach to long-term financial management.

Auckland Council chief executive Jim Stabback, in a statement, said council will prepare information on its role in the delivery of its various service, for the consideration of the Governing Body and local boards.

"This work will help inform advice to elected members and management decisions that are focussed on financial sustainability and improved outcomes for Aucklanders," he said.

Stabback went on to say: "The budget update being presented to the council's Governing Body on Thursday is part of our usual annual budget process, where every year around this time, elected members receive and consider a report on the council group's current financial projections.

"This sets the scene for a discussion and decision making, and is followed by public consultation that will occur early next year.

"Every council around the country will be going through this process as they begin planning for their 2023/2024 budgets.

"We cannot pre-empt the outcome of these discussions but can reassure Aucklanders that, through public consultation, they can have their say on our proposed budget for next year and how we manage the challenges ahead of us."

The council was required to prepare and adopt an annual budget for each financial year and this would be discussed at Auckland Council's full Governing Body meeting.

Budget decisions would be made following public consultation early next year and the final annual budget for the next financial year would be adopted by the end of June 2023.

In its annual budget for this financial year, the council noted it would need to address further adverse impacts of higher inflation and higher interest rates in future years as these factors were uncertain.

In a statement, Auckland Mayor Wayne Brown said a double digit rates rise was not the answer.

Brown said the budget hole was a "legacy of former mayor Phil Goff papering over the fiscal cracks and passing the buck to the new Governing Body".

He said Goff had not confronted poor performance by council controlled organisations and Ports of Auckland over the past six years.

"The new Governing Body needs to find the $270 million for 2023/24 through a combination of head office savings, operational efficiencies, relentless scrutiny of the expenditure and commercial performance of CCOs and the port, and limited rates rises," Brown said.

"We must also protect the essential services Aucklanders value and keep Auckland Council's waterfront land in public ownership in perpetuity."

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