Many Aucklanders will struggle to pay rates this year. Photo / File
Many Aucklanders will struggle to pay rates this year. Photo / File
Up to 150,000 Auckland households and 12,000 businesses could struggle to pay rates for the rest of the year and need help under a scenario by Auckland Council.
Work by finance staff and chief economist David Norman says if disruption from Covid-19 stretches out to March next year, rates income could fall between 10 and 30 per cent.
Council officers looked at the likely impact on different business sectors, including retail, hospitality, accommodation and communications. This was overlaid with estimates of the numbers of ratepayers likely to take up payment or postponement opportunities.
They also based their assumptions on market commentary about business stress and projected levels of unemployment, which Treasury has said could reach double digits.
Two days ago, Finance Minister Grant Robertson said applications for the Jobseeker benefit had risen by 30,000 since March 20.
Auckland has more than 500,000 residential ratepayers and about 40,000 business ratepayers.
Using two scenarios of Covid-19 lasting six months or 12 months, officers believe between 10 per cent and 30 per cent of Aucklanders will struggle to pay rates and need help.
In the worst-case scenario, about 150,000 households and 12,000 businesses may not pay rates to council for the next three quarterly instalments in 2020.
The grim outlook for many ratepayers is contained in confidential papers on the financial impact of Covid-19 the council has released publicly.
Mayor Phil Goff said a key priority is to help people postpone their rate payments and look at broadening it to businesses. Rates could be deferred penalty-free until August 31 for the final quarter of this financial year, which are due on May 28, he said.
"We are not in the business of forced sales of properties because people cannot pay their rates ... we are going to try and make this as easy as we possibly can to take the pressure off people who do need to defer or postpone their rates," he said.
Auckland Mayor Phil Goff. Photo / Herald
The council is also looking at payment plans for ratepayers facing hardship and help for the hotel and accommodation sector, devastated by the loss of tourism.
It is considering a rates remission on the "bed tax" for hotels and the accommodation sector in the final quarter this year, and suspending it for the first three quarters of the new financial year.
The release of the finance papers follows a marathon meeting of the emergency committee on April 16 where Mayor Phil Goff and councillors agreed to go out for public consultation on a 2.5 per cent rates increase alongside the planned increase of 3.5 per cent.
Goff is strongly defending the plan to increase rates, saying it amounts to an extra $1.35 a week at 2.5 per cent and $1.83 for 3.5 per cent for ratepayers, saying the money is needed to continue to borrow for capital projects the city badly needs and to stimulate employment.
"For those who say 'cut your rates', all that would do is dig a deeper hole and would mean we are not borrowing for infrastructure projects ... and wouldn't be doing our bit to help the economy," he said.
Officers have been sent away to consider the impacts of a zero rates rise on things like services, staff numbers, business and the council's treasured AA credit rating, which, if breached, could lead to higher interest rates for debt, forecast to be $9.6 billion by the end of June.
Lower rates this year, say officers, would need to be "caught up" next year. Not to do so, would mean longer-term impacts on service levels and investment.
The council is taking big hits from the loss of dividends from Ports of Auckland and Ports of Auckland, fewer cars on the road means less money from the regional fuel tax, public transport fares have dried up, as have parking fees and fines. So too, income from events and community facilities. Development contributions are falling.
Officers have warned it will probably not be possible to achieve a balanced budget in the new financial year starting on July 1 and be able to comply with its debt to revenue limit without "radical cuts to council's services and investments".
This could lead the council approaching the credit agencies about exceeding its debt to revenue limit of 270 per cent for one year. By the end of this financial year, council debt is expected to be $9.6 billion.
