KEY POINTS:
Hefty transport cost rises have forced the Auckland Regional Council to skirt perilously close to a maximum drawdown on reserve funds from its investments in the port company and elsewhere.
The council's transport policy committee has decided to establish a $4.27 million contingency fund in case cost pressures push the Auckland Regional Transport Authority's operating budget above an approved $83.55 million for the next financial year.
That followed a warning from staff that a budget request for $87.825 million from the authority would siphon off 51 per cent of annual net operating cashflows from council investment arm Auckland Regional Holdings - in breach of a policy cap of 50 per cent.
The authority shocked councillors with advice of a $9.1 million funding gap this financial year from inflation, largely due to fuel price hikes. Costs for bus and ferry operations rose 14.7 per cent and fuel bills for rail went up 21 per cent.
The committee decided the council should work with the transport authority in the next year to achieve budgets that could be funded.
Senior council analyst Mark Fleming had warned that the authority's budget request would, if accepted, draw down 69 per cent of investment cashflows in 2008-09 and rise to 82 per cent two years later.
He assured risk-averse councillors, who were stung by a ratepayers' rebellion in the council's previous term, that the $4.27m contingency fund could be drawn from investment contributions rather than rates if needed.
But councillor Bill Burrill felt that "eventually we will put the bucket down and there won't be anything left in the bottom".
Councillor Sandra Coney said the council continued to be "held hostage" by bus companies, whose patronage was rising only modestly in return.
Committee chairman Joel Cayford noted that public transport patronage had risen 2.9 per cent in the three months to September 30 compared with the same quarter of last year. "Until buses run on sunlight, we'll get increases in fuel costs.
"We don't want an increase in our budget but we have to provide for it sensibly."
He said the $4.27m contingency allowance was not a "slush fund" as the authority would not gain access to it without satisfying the council of further sharp cost increases.
ARC chairman Mike Lee, calling the cost escalation alarming, said transport operating expenses were significant in comparison with this year's $127 million overall rate take.
But if Auckland ratepayers are exposed to high transport costs, taxpayers are in even deeper.
If the transport authority gains access to the full $87.8 million sought, that will be matched by $97.9 million in Government subsidies, and fares of about $17.5 million.
Up to $18 million would come from regional investment funds, on top of $67.9 million already committed for transport capital spending.
