From a cost-benefit perspective, the return on the investment in the Central Rail Link is now $2.4 billion in the red. Video / City Rail Link
COMMENT
Any analysis of Auckland Council's "Emergency Budget" shows the mayor and councillors' claims they are implementing austerity measures are simply not true.
Mayor Phil Goff says: "This is an emergency budget. We cannot respond to this as business as usual. We have to cut our spending and manage our finances responsibly". He also said: "This means that the council needs to cut its spending across the board, with fewer staff, a reduction in services and deferral of some of our big construction projects".
The Covid-19 pandemic has resulted in a $525 million reduction in total council revenue, the highest annual reduction in the city's history. That much is true.
Finance and Performance Committee chair Desley Simpson has claimed: "We are cutting costs wherever possible and finding savings and efficiencies where we can".
One inconvenient fact is, although overall revenue from last year has gone down, revenue from rates is budgeted to go up by five per cent.
Another inconvenient fact is, although the Mayor has promised to cut spending, total expenditure is budgeted to increase by another five per cent.
In relation to pay, the Mayor stated "If we put a voluntary pay freeze for the coming year – that is to be negotiated – that's about $8-9 million, the voluntary cuts around $3-4 million".
These numbers must be put in perspective. Of the total council staff, 86 are paid more than $250,000 a year, and 2831 – or 22 per cent – are paid more than $100,000. The council proposes a six-month voluntary pay reduction for these staff, but it is capped at just 5 per cent. This would result in an estimated saving of just 0.3 per cent of total council payroll costs.
Yet another inconvenient fact is, despite this saving and a "freeze" on recruitments, councillors are still proposing to increase the overall payroll budget.
Increasing expenditure from last year's level is not austerity. It is increasing the burden of the council on ratepayers at the very time households can least afford it.
When looking at proposed projects, Goff has also said he wants "to invest as much as we can in construction projects that will stimulate the economy, grow jobs and create assets for Auckland". One of those key investments is the City Rail Link.
The proposed benefit was to give commuters a faster journey to work, estimated to be worth around $2 billion. With an initial construction cost of $2 billion, the project was supposed to break even.
Karan Menon. Photo / supplied
The problem, however, has been with cost management increasingly making this project less viable. After $700 million has already been spent, a revised cost forecast puts the estimated cost at $4.4 billion, with no guaranteed end date. The cost has more than doubled, and construction is still far from finished.
From a cost-benefit perspective, the return on this investment is now $2.4 billion In the red, or $4018.14 for every ratepayer. The prospect of further blowouts appears likely.
This "Emergency Budget" is being pitched to the public as a drastic and urgent austerity measure, with cuts in spending and revenue due to a crisis the likes of which we have not seen before.
Unfortunately, there is a gaping chasm between what the council is saying and what is actually proposed. In reality, there is no decrease in expenditure but instead an overall increase. The impacts of the proposed pay cuts are marginal, at best. Projects designed to "grow the economy" are generating a net cost, with the returns fading.
The real figures in the "Emergency Budget" do not support Mayor Goff and Councillor Simpson's claims of cutting spending and managing the finances responsibly.
