Tomorrow councillors will make their decision on the council’s emergency budget which is in response to the $525 million hole that has been punched in the council’s finances by COVID-19.

In their consultation, launched at the end of May, they asked about two solutions, a 3.5% increase which would see many projects put on hold with Auckland Transport estimating it would put mean $312m to $352m of shovel ready projects would be paused. This included including disastrous reductions of the safety and walking/cycling budgets that are estimated to mean up to 10 more people dying and 40 more seriously injured than would have otherwise been. The 2.5% option with even more severe implications.

We don’t know what way councillors are leaning on the options but we do know there’s been a lot of pressure from some areas for the 2.5% increase or less. Last week the council released the results of the consultation with 28% preferring the 3.5% option, 29% the 2.5% option and 25% asking for a 0% option. Although more than a quarter of the submissions came in as pro-forma responses from the Wellington based low rates group Auckland Ratepayers Alliance.

One of the big questions with the emergency budget has been what impact the government’s ‘Shovel Ready’ funding might have. The council family submitted 73 projects for funding and with many of those projects also on the list to be delayed was some suggestions this was all just a ploy to get them funded by the government.

At the beginning of July the government finally started to announced the outcomes from that funding, although only a very high level and that Auckland would get about $500 million. That sounds like almost enough but not all of it is for council projects, with the only project announced a $22 million towards the Auckland City Mission’s HomeGround project already under construction.

Frustratingly for council the government wouldn’t tell them just what projects will be funded, spurring Finance Committee chairwoman Desley Simpson to write an article for The Spinoff pleading with the government to tell the council what will be funded so they can set their budget.

It appears it wasn’t till Monday night that the government gave the council any information.

In a letter to Mayor Goff, ministers Grant Robertson and Phil Twyford assured Auckland Council that they would be able to count $98 million dollars of transport funding towards the council’s Emergency Budget for this year. There is also a commitment for another $98 million; however, these are for projects not currently funded in the Emergency Budget and therefore will not impact on this week’s decision making.

It’s disappointing that the letter from the government is so light on detail and I certainly hope they’re not just holding back what projects will be included so they can get more political mileage out of it closer to the election. It also means there’s another ~$300 million to other non-council projects around the region. This suggests that perhaps not all that many of the 73 projects are being funded.

Regardless, it seems that about $100 million can come off that budget hole which is good. What is not so good is that it’s also been revealed that they need to find another $244 million for Watercare projects as part of their response to the drought. It seems when it rains it pours – just not enough in the dams.

One aspect that will hopefully help lead to a better outcome is the feedback from local boards with them unanimously supporting the higher increase. As part of the papers for this weeks meeting it says.

  1. Local boards unanimously supported the proposed 3.5 per cent general rates increase.
  2. Two local boards specified conditions for their support. Howick Local Board on the proviso that the reserves and public open space properties, that are listed subsequently in its resolutions are not sold. Rodney Local Board predicated on the allocation of a minimum of $2 million to the Auckland Transport Unsealed Road Improvement Programme.

Also as part of this is a summary of the their feedback on transport and in particular the proposed reductions in the safety budget. It’s positive to see that most of them are very supportive of the safety programme. This suggests the four boards that support reducing the safety budget, either explicitly or by omission, are Franklin, Hibiscus and Bays, Howick and Orakei.

  1. The majority of local boards that provided feedback on the proposed temporary reduction or deferral of community safety funding did not support it. These local boards are: Aotea / Great Barrier, Devonport-Takapuna, Henderson-Massey, Howick, Kaipātiki, Māngere-Ōtāhuhu, Maungakiekie-Tāmaki, Manurewa, Ōtara-Papatoetoe, Papakura, Puketāpapa, Rodney, Upper Harbour, Waiheke, Waitākere Ranges, Waitematā and Whau local boards (17 local boards).
  2. Albert-Eden Local Board suggested funding raised by the regional fuel tax and earmarked for road safety projects should not be deferred and should be used during 2020/2021 for road safety projects, and note the strong support for addressing road safety received through Albert-Eden submissions. Hibiscus and Bays Local Board also noted the concerns raised by submitters.
  3. Only Franklin Local Board supported this proposal but requested that implications from the reduction to community safety funding are informed by local priorities as represented by local boards.

There is already going to be a lot of hurt to the community from the 3.5% option and compounding that with a lower rate increase it seems unconscionable that the councillors would consider the lower rates option.

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34 comments

  1. In the chaos of Covid-19 and the election campaign, the opportunity has been lost for a deeper public conversation about how local government is funded. The issue is regularly brought up that the status quo is unsustainable but nothing ever changes because central government doesn’t want to think about the issue.

    Councils keep having to raise rates, this is deeply unpopular with ratepayers and as a result there’s a lot of ratepayer push-back against any council spending. Even maintenance of basic services (see: 3 waters infrastructure) gets neglected let alone capital works that improve amenity values or enable growth.

    Local government really should receive at least some of its funding from central government. There are lots of options. I think sharing a portion of GST collected in that district (though this would increase admin overhead for multi-district businesses) and bulk funding based on population (based on projected population for growing regions?) are both attractive.

    If central government began funding local government then the problem becomes how does central government pay for that. This is another big public conversation that NZ should be having but isn’t because no-one wants to talk about it. Central government already needs to raise more revenue but any political party that suggests raising taxes is mercilessly attacked by other parties for short-term political gain.

    The sooner central government fixes the structural problems with its own revenue base and that of local governments, the better it will be for NZ. The further into the future it is postponed the higher the eventual cost.

    1. I am a fan of the American-style sales tax referendums to fund larger projects. If the projects they are seeking to fund are clearly articulated and needed, they often seem to pass and this would help to free up funding in the rates budget for maintenance and smaller projects.

      1. That sort of thing has to go through Central Government to start with , and if you can remember the stink over the fuel tax it won’t pass at all .

        Also in the states local and state Government have different rates of sales tax and you don’t know what you are paying until you get the bill .

    2. The problem with your suggestion is the quality of much of our local government is not good, characterised by poor to non-existent media oversight, cronyism, occasional downright corruption and abysmal voter turnouts allowing sector group capture from local business and farming groups. Giving these people more money would simply see a lot of it squandered or siphoned off in crony deals. Auckland is probably the best governed of our cities, simply by dint of size allowing for better quality candidates and oversight. I think allowing decentralised funding models must first be preceded by some sort of reform of how local government is managed, elected and over-seen to ensure greater democratic participation and more representative councils.

      1. I totally agree with those pitfalls you’ve highlighted. There would need to be some controls around spending and greater oversight. There’s also some scope to take responsibility away from local government (as is being done with 3 waters infrastructure).

    3. One of the big problems really comes down to how the council charge and report the cost. Because they charge every 3 months and tell you how much the yearly cost is it looks like a lot of money. Compare that with say power where I get a monthly bill and don’t even really think about how much it is costing me a year. Our rates bill is less than our power bill, and all the power company do for their money is let some water fall down a mountain and turn a turbine that was built by our government 70 years ago and then transmit that over some power lines that were built by our government 70 years ago.

      1. You can pay your rates monthly if you want. Just setup a direct debit. I pay mine weekly.

        Paying weekly in advance instead of quarterly in advance is much better for my bank balance

  2. The half a billion dollars they spend on ‘Council support’ operating expenditure seems impermeable to any cost cutting. Let me guess- those are the people who wrote the budget.

  3. “There is already going to be a lot of hurt to the community from the 3.5% option and compounding that with a lower rate increase it seems unconscionable that the Councillors would consider the lower rates option.”

    Matt you write some interesting pieces, but your summary statement ignores the reality of how we got to this position.

    When Rodney Hide corporatised local councils to create the Auckland Council behemoth, he removed mechanisms for accountability and scrutiny. He created a structure of emasculated Local Boards and a powerful un-elected group of gravytrainers. The result is an ever increasing rates bill for ever decreasing benefit. Auckland is in dire straits through continual mismanagement and the growth of self-interest fiefdoms. Demanding more hard earned cash for CCOs that have recorded a decade of terrible performance illustrates what unconscionable really means. The only way to deal with a monster is to cut off its head which = restructuring CCOs into accountable, elected persons answerable to our representatives. The agglomerated 0% respondents are the true voice fighting the results of Super City amalgamation, which is a failed experiment in autocratic bankruptcy.

    1. As far as I am aware Auckland has had much lower rates increases than other NZ cities. Even 3.5% isn’t that much considering most of the things the council spends money on increase by about that much every year. Comparing the increase to the CPI (which has a large imported cost in it such as the cost of TVs) is meaningless.

      While I think AC and AT could do better, they are certainly a lot better than our old council was.

      1. Try paying rates in manawatu. I pay more on a $270k house there, than a one million dollar house in auckland. Auckland rates are lower than many other councils.

  4. They can start by firing the hopeless watercare boss who despite being paid the best part of a million dollars each year thinks its good enough to have it as his part time job!

    1. I agree. Surely the CEO does bugger all. Most of the things a CEO is concerned with (marketing / sales / strategy / etc) would barely apply to watercare.

      1. you mean we don’t need a strategy to supply auckland with water?

        Surely the sales manager takes care of sales
        the marketing manager takes care of marketing
        the CEO runs the company

        1. Problem is this CEO a) hasn’t done his job to prevent the current situation and b) does this job part time, and c) gets paid a huge amount of money for a role that doesn’t need a lot of the usual CEO skills since this is effectively a utility owned by council. He has barely made any public statements etc and has been noticeable by his absence.
          Yes all big organisations need a CEO, but they need one that is dedicated to the role and gets the job done whilst being paid a more reasonable amount of remuneration for their work. You could halve his salary and still find someone with better skills than him.

        2. AKLDUDE ;- And I’ll bet he also gets free water ?

          And I agree with you about the Salaries any one over $2k need these halved or brought done to $100,000.00 and then not raised when things get better and if they want a car they should purchase it themselves and pay for it’s upkeep . As a classic when you get a bus to greenlane clinical centre look at alll the dhb cars parked up there as it seems to more staff cars than patients cars , and they wonder why they have no money for other health things .

        3. what do you mean he works part-time?

          I’ve heard the guy on the radio allot talking about the water situation, not sure why you say he’s noticeable in his absence?

          Personally i don’t think it’s the CEOs jobs to get out there and spread the message, that’s what the comms teams is for.

      2. Whether he or she are called CEO or something else Watercare needs someone at the top, I can’t think of many organisations that don’t have a CEO or equivalent.

  5. The cuts to council activity has direct impacts on the lives of people not yet old enough to vote or pay rates; and those not even born. Council is legally responsible for planning for these future generations. In responding to a cut in council revenue by offering to the public a choice of further cutting expected revenue was an unconscionable, ideological and negligent decision.

    I also agree with the above comments about bigger problems at play here. But if these problems can be sorted to enable lower rates, they are a prerequisite to lowering rates.

    The councillors and council staff who allowed the option of a 2.5% rates rise to even be offered need to reflect on their assumptions.

    1. On the other hand, for the many people who are now out of work both 2.5% and 3.5% are unpalatable, yet neither are really sufficient to meet the city’s spending blowout.

      Maybe we need to look at broadening the income base for Council, such as getting some of our share of GST coming into local government. I’m not sure that the current model is sustainable.

      1. If you’re out of work then a rates bill even with a 0 % increase is probably unpalatable.

        If you’re unemployed you’re still going to be paying GST on your essential expense so end up getting slugged either way.

      2. Or instead of always looking at the income side, look at the expenditure side.
        If any normal business was struggling and put up its prices to get increased income its customers would likely go elsewhere, speeding the demise of that business.
        Council always looks at increasing its income rather than expenditure because it has a captive customer base.

  6. “There is also a commitment for another $98 million; however, these are for projects not currently funded in the Emergency Budget ”

    Does this mean the council, elected by Aucklanders, has provided the government with a list of projects that Auckland needs, and the government has decided Auckland shall have some other projects instead?

  7. I think people should be able to opt for a rates freeze, but they would also have to freeze the value of their property and any rents charged. If they took the rates freeze they would be restricted to selling at last year’s government valuation. Once they opted out of the rate freeze they would only be able to increase the sale price of the property by the percentage rates increase they agreed to. This would share the burden of economic adjustment more equitably.

  8. 1% rates increase where I am, comparable with the low increases being set all around the country.

    If you need 3.5% even after cutting projects, your system is absolutely broken.

    Auckland’s perpetual need (junkie?) for growth and consumerism is coming back to bite it in the bum.

    1. There is no mechanism by which local government can control growth in their district. They can only try and respond to the choices that the population makes. Most of Auckland’s infrastructure spending is catch-up for growth that has already happened.

  9. AC has strongarmed their contractors to reduce their rates but demand a rates increase from their customers. And their operations costs (mostly salaries) have skyrocketed. All of course with no accountability. So of course I don’t support an increase. Not that they have taken any notice of public sentiment.
    I am happy the government didn’t fund all the AC projects. AC aragantly inflated the project costs in their wish list for the share of the money scramble.

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