Auckland Council says its budget gap for the coming financial year has increased to $325 million, up from $295m - and on top of that there's another $50m in storm-related costs.
Councillors attended a closed-door workshop on Wednesday morning to receive a budget update, ahead of approving the annual budget next month.
Council chief financial officer Peter Gudsell said the increase was due to recent severe weather events, along with rising inflation-related costs which had pushed up council's costs over the past six months.
"We've seen cost increases reflect inflation levels in a number of areas," he said.
"These increases are particularly affecting the price of utilities such as electricity, and impacting the cost of asset renewals, meaning a rise in the amount of money we need to set aside for depreciation."
The council's budget has also been impacted by the storms earlier this year with a one-off storm related cost of $50m - including a proposed $20 million annual storm response fund that would cover costs such as higher insurance premiums.
Gudsell said the storm costs included extra repairs and maintenance to Auckland Council and Auckland Transport assets due to storm damage, and the establishment of the Tāmaki Makaurau Recovery Coordination Office.
"While these costs do not add to the ongoing operating shortfall, they will add to council's debt levels and therefore reduce the debt capacity that can be utilised to manage other costs."
The scenarios to address the budget gap involved a complete or partial sell-down of the council's $2 billion stake in Auckland Airport, cutting running costs from between $80m-130m, and rate rises between 3.5 percent and 7 percent.
Most people who gave feedback on the proposed annual budget supported selling at least some airport shares to boost revenue, but wanted fewer funding cuts.
Gudsell said the shortfall would require trade-offs.
"Different trade-offs have different consequences, and this now needs to be considered as part of the process to set the budget."
'Enough is enough' - Wayne Brown
Auckland Mayor Wayne Brown said the projected shortfall was more than the previous council planned.
"Enough is enough. We must get serious about councils' financial position. I did not create this hole, but I am determined that the council fix it, so it doesn't just keep growing," Brown said.
"The shortfall has been driven by our huge debt, increasing interest rates and inflation, and the fact that the last council took one-off funding to cover the last year's shortfall."
Brown said to cover the budget shortfall with rates alone would require an average rate increase of 22.5 percent.
"The budget proposal that was consulted on called for a mix of spending cuts, rate increases, the sale of non-earning assets like the airport, and the modest use of debt.
"All of these have their place as just relying on rates rises that would be around 22.5 percent, without providing anything extra, is unrealistic in this time of tight financial pressure on ratepayers, and using debt is what got us into this place."
Manukau ward councillor Alf Filipaina said he was disappointed the mayor chose to talk about a double digit rate rise.
"It just puts it down to scaremongering because we haven't discussed anything around a rate rise. We were just given that figure if the levers weren't utilised," he said.
"We haven't even discussed anything relating to a 22.5 [percent rate rise]. We've just been given that figure. All of a sudden, it's a headline."
Filipaina said the purpose of the workshops was to receive an update from council staff and be informed.
"Common sense prevails that we need to do something but that doesn't mean we have to use all the levers. That's a discussion point heading into and finding out what his mayoral proposal is going to be."
Today's workshop was an opportunity for councillors to hear from council staff.
The next step was for the mayor to release an updated budget proposal, at the end of this month.
"The council will meet to solve this problem over the next couple of weeks. Councillors need to be part of a balanced solution that doesn't involve just hiking rates or adding to our debt mountain," Brown said.
"It is time to take this seriously if we want to secure the sustainability of the core services and infrastructure expected by Aucklanders - like flood mitigation. We need to get this done so we can focus on the things I promised to fix."
Auckland's city centre business association was concerned the increased budget hole would result in more severe cuts.
Heart of the City chief executive Viv Beck said she was concerned core services were at risk of being shaved.
"Thinking about it in the environment of coming out of three years of Covid restrictions and what Auckland's been through, we are concerned around a really harsh austerity budget in that context."
The budget has been sent for public consultation, and final decisions will be made following an updated Mayoral Proposal.
The final annual budget will be adopted on 29 June, taking effect from 1 July 2023.