The council are currently consulting on their emergency budget with submissions closing this Friday.
COVID-19 has punched a $525 million hole in the Auckland Council’s budget. That’s because about 60% of the council’s revenue comes from things other than rates and those ‘other things’ have been severely impacted by the wider economic and social impact of the virus.
This has meant that the council are cutting as much funding as then can across the entire council family. As I highlighted two weeks ago, even with a 3.5% rate rise, it effectively means that if something is not already underway, it is now being put on hold.
As it is, this is expected to have disastrous results. For example the cuts to the safety budget are estimated to mean that up to 10 more people will die and 40 more are seriously injured than would have been if the planned safety projects had gone ahead. There are similar implications for the cycling budget and for actions to address climate change, at a time when we need to be doing much much more.
Yet there are some calling for no rate rises at all meaning that not only would there be projects delayed but that projects already underway would need to stop.
Last week I had an opportunity to give a verbal submission to councillors. Here is a summary of it though much of it is perhaps more about the council process than the budget itself and for some topics there’s a bit more information here than I gave, given I’ve now had more time to think about it and do some more research.
It feels to me that many of the assumptions used in making the budget are overly conservative. This is somewhat understandable given how unknown things are, and were even more so even a month ago. The combined effect of all of these produces the result we’ve seen but many probably already need questioning and will likely mean that the situation will not be as bad as assumed. For example, public transport use appears to be recovering fairly fast and so the reduction in fare revenue is likely not to be as severe. Likewise this first weekend at Level 1 has shown that there doesn’t seem to have be public concern over attending large events and so reductions in council revenue from things like events and use of its services may not be as bad as the budget anticipates.
Even a few sources of revenue performing better than the budget expects could have a significant impact on just how severe the budget needs to be. In our view, the council should have done more to highlight that and explain how it would respond should it have more funding. This is also partially tied to the next point.
A 4.5% rates rise option
In the council’s 10-year Long Term Plan set in 2018 it was expected that rates would rise by 2.5% in the first two years and by 3.5% for the remaining eight years – so from this budget onwards.
The consultation documents heavily push the 3.5% option by showing how calamitous anything lower would be. But it was the council who decided to include the 2.5% option. This was perhaps to show that impact of anything lower but it has left the 3.5% option looking like the ‘upper limit’ with the much harsher 2.5% option as the compromise. Whatever the reason, many groups are now pushing the 2.5% or even a 0% option.
In our opinion, the council should have also included a 4.5% option for two key reasons.
- It would have presented the 3.5% option as the ‘middle of the road compromise’ version.
- If the revenue assumptions noted above are wrong, it would help in showing the public what’s next, the next ‘cabs off the rank’ if you will.
Perhaps the council should also be doing more to highlight more the ‘value’ of rates in Auckland. For all the complaining, rates in Auckland are generally lower than those in other NZ cities. As an example, I looked up 10 properties at random across the main urban area in five cities and compared the rates payable to the capital value of the property. I’ve included both local and regional rates in this whereas in Auckland this is combined, however in Auckland I’ve included an estimated Watercare bill based on what they say is average household usage. Even accounting for the fact house prices in Auckland are generally higher than in other cities, rates in Auckland are generally cheaper than in other places.
Note, this isn’t going to be 100% accurate but was intended to just get an idea of the trends in different places.
It’s also worth noting that while many households are going to be struggling in the coming months/years, the council is offering rates relief – which I understand is often not taken up. Also many homeowners and landlords will potentially be benefiting from reduced interest rates.
We are disappointed and horrified at the scale in cuts to projects that will improve our responses to safety, cycling and climate change. These projects are desperately needed to address longstanding issues with our transport system.
Many of the projects that will be delayed as a result of this budget, especially the cycling projects, were projects that were meant to have been delivered years ago but only haven’t been due to inaction from Auckland Transport. As such, this budget only serves to add to that inequity.
It’s noted that within their supporting information, the council have a list of key considerations and one of them is below
protecting the most vulnerable – some changes may have material impacts on the most vulnerable people within our community. Such changes should be avoided or minimised wherever possible.
We think that pedestrians, people on bikes and those driving in known high-risk areas should definitely fall into the ‘vulnerable’ category and more effort needs to be put in so that this can be achieved. One such one is ….
Using Renewals better
Renewals are Auckland Transport’s single largest CAPEX budget item at about $162 million for the year. They also represent one of the biggest opportunities to easily and cheaply roll out safety and cycling improvements and there are often hundreds of crossovers between these programmes. For example if rebuilding/resealing a road, AT could paint back the road differently such as with narrower lanes to encourage slower and safer speeds as well as creating space for cycle lanes.
But currently Auckland Transport currently have no way to take advantage of those opportunities and as such roads are renewed on a ‘like for like’ basis.
At Auckland Transport’s current rates, it will probably take more than a century to rollout out much needed safety and cycling improvements across and so making better use of renewals could have a significant impact on this.
Look at all options for increasing revenue
Given the scale of the budget crisis we think it’s important to look at all opportunities to raise revenue and get better value for money. A few things Council should consider is
Charging for Park & Ride
The documents suggest charging for Park & Ride may only happen if a less than 3.5% option is chosen. We feel this should be in the 3.5% regardless.
Charging for them is supported by AT’s Parking Strategy yet AT senior management seem the most resistant to the idea, seeming concerned about the ridership impact this might have. This overplays the role that P&R has in generating PT usage. There are about 6,000 park & ride spaces across Auckland, so let’s assume about 12k trips use one. Prior to COVID, Aucklanders took around 350,000 to 400,000 PT trips every weekday meaning that only about 3.4% of all PT trips would potentially be impacted. Overseas experience shows that some may give up using PT if P&R charging was introduced but most users would either pay or find another way of getting to a PT station.
What is often overlooked in the P&R discussion though is that by being free, P&R spaces are ‘awarded’ to those that have the flexibility to get to the station prior to about 7:30. But that doesn’t work for lots of people, for example, they may need to drop their kids at school first, they may have a shift that starts later in the day or they may just value their sleep more. By charging for P&R we potentially open up the option of using PT to a wider segment of the population.
AT also don’t have to charge all spaces in a carpark. Perhaps it could just be the half or quarter of spaces closest to the station.
To give an idea of how much this could generate, there are a few private P&R carparks around. These mostly seem to charge $4-5 per day. Even if charging for just half the spaces, that could be nearly $3-4 million annually and could be enough for a few more safety projects, or enough to not cut a few PT services.
Tap into the Innovating Streets Budget
Many of the safety and cycling projects that are being deferred could be ideal candidates for the NZTA’s innovating Streets Fund which is offering to pay for 90% of the project.
But Auckland isn’t making the most of this and a letter from the NZTA to AT, included in the recent Planning Committee attachments notes that in general the applications we’ve received from Auckland fell short of multiple criteria.
The council and AT need to work harder to ensure they make the most use of this programme and that they’re not leaving any money from the government on the table.
Advocate for Red Light Camera Revenue
One of the victims of the budget cuts is the roll out of more red-light cameras. In total they want 42 installed over 10 years and so far 18 have been rolled out with eight of those only in December last year.
The issue is the Auckland Transport pay for the cost of these cameras to be installed but the revenue from them goes to the government. The council should advocate to the government to have that revenue returned to pay for more cameras to be installed.
From what I can tell from AT’s procurement data, they have spent about $1.4 million buying and installing those cameras and last year alone they generated about $2.7 million in fines. There’s also a contract signed just before lockdown to install a bunch more so we’ll likely see more announced soon. For this coming year, AT were seeking about $800k to install more.
Of course the problem with this stuff is there’s always someone who will claim it’s just revenue gathering but if Auckland is paying to install and operate them, surely Auckland should get the financial benefit of them. Perhaps even if the revenue was just ringfenced towards safety projects it could help further.
Cut Greenfield Growth
The council, or at least some parts of it, seem to be further pushing to encourage greenfield growth as a way of helping the economy. Not only is this an expensive way to grow it also has greater climate change impacts as residents are more likely to drive, even for short local trips. This means that by encouraging it the council are helping to undermine their own climate change goals. Another of the key considerations mentioned was.
climate change – different changes will have different implications for climate change. Budget changes that slow or reverse our progress in this critical area should be avoided wherever possible.
We believe the council should put on hold any funding for greenfield growth initiatives.