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Aucklanders face the prospect of steep rate rises next year as the Super City finances go from bad to worse in the midst of the cost of living crisis.
Council sources said stubbornly high inflation, wage rises and interest costs have seen the projected budget hole of between $90 million and $150m balloon to $270m.
Unless big savings are found fast at Auckland Council and the wider council group that could spell rate rises of up to 12 per cent, sources told the Herald.
Falling revenue from things like resource consents as the economy heads south next year is also adding to the deficit.
Auckland Mayor Wayne Brown is looking for savings from the council, council-controlled organisations and Ports of Auckland. Photo / Michael Craig
The dire financial outlook presents a big headache for Mayor Wayne Brown, who during the mayoral contest would not say how much he would raise rates in his first term until he understood the state of the council finances.
Last night, Brown declined to comment on the budget deficit but said whatever numbers are made public will not include an expected blowout in the $4.4 billion City Rail Link (CRL).
In a gloomy inauguration speech 10 days ago, Brown warned Aucklanders are “sailing into an economic and fiscal storm” but he planned to keep rates low, parks in good shape and the zoo or museum an affordable treat for everyone.
The latest financial update - the first since former Mayor Phil Goff presented his final budget proposal in June for a 5.6 per cent rate rise this year - is due to be published today.
The current 10-year budget has a 3.5 per cent rates increase pencilled in next year.
The financial update will be discussed at the first proper business of the governing body on Thursday, comprising the mayor and 20 councillors.
It is understood Brown will set out a plan to tackle the $270 million shortfall through a combination of rate rises, savings and demanding better performance by the council, council-controlled organisations (CCOs) and Ports of Auckland.
One option for the governing body is selling the council's shareholding in Auckland Airport. Photo / Dean Purcell
The new mayor has already backed away from a campaign promise to force the port to pay rates and dividends of $400 million a year, now saying that is not possible through port operations.
One option Brown could consider to reduce debt and the cost of debt servicing is selling the council’s 18 per cent shareholding in Auckland Airport, valued at about $2 billion.
Any suggestion of selling the airport shares would face strong opposition around the council table, particularly from left-leaning councillors.
Mayoral sources say Brown accepts inflation and falling council revenues are part of the problem, but he also blames head office overheads and inefficiencies in delivering services not just at Auckland Council but throughout the wider council group.
The Herald understands Brown will ask councillors to agree to a forensic, line-by-line analysis of the council, CCOs and port company. This work will have to happen in a hurry as the mayor has to publish the first draft of next year’s budget before Christmas.
The governing body’s work of finding savings is made harder by Brown ruling out cuts to what he calls " the essential services Aucklanders’ value”, although he has yet to spell out what he means by “essential”.
In a statement last night, Brown had a crack at former Mayor Phil Goff for using a $127m payment from the Government to “paper over the fiscal cracks” in this year’s budget and push out hard decisions to the new council.
The council received the money as part of a $500m “better-off” payment for handing over $11 billion of council water assets under the Government’s Three Waters reforms.
At the time Goff defended using the money to help plug a $175m budget deficit, saying it helped ratepayers burdened with inflation and higher interest rates.
On the CRL, Brown said the board and management of the country’s largest infrastructure project have not told either their central or local government shareholders the expected cost of the blowout, despite multiple requests.
“It’s completely unsatisfactory,” he said.
The Herald sought comment from Goff but he hadn’t responded by time of publication.
