The Auckland Council’s first “proper” Governing Body meeting this Thursday signals that Wayne Brown’s mayoralty will need to shift away from daily press releases and onto the real work of governing New Zealand’s largest city. And it seems our new mayor, and his fellow councillors, are going to have a pretty rough ride with a $270 million operational cost gap to fill – largely caused by higher than expected inflation and interest costs. Radio NZ had some of the details:

Auckland Council has updated the NZX after confirming it is looking at a growing budget hole of $270 million for the next financial year.

In an update ahead of the council’s full Governing Body meeting this Thursday, the council said the funding gap was estimated to be $180m higher than the anticipated shortfall of $90m.

It noted “an incoming council would have a range of options and budget levers available to mitigate this”.

Inflation and interest rates have risen higher and more rapidly than economic forecasts had projected at the time the last budget was prepared,” the update said.

It said as of late October, the total ongoing operating budget pressures for the upcoming financial year are estimated to be around $270m and this operating gap needs to be addressed “in a sustainable way that also supports the council’s long-term financial position”.

The update said council had the “financial flexibility to respond to the budget situation, but tough choices and trade-offs about the mix of budget levers will need to be made given the scale of the challenge”.

It said the council needed to move towards long-term financial sustainability in addition to solving the short-term financial challenge.

In its update to the NZX, the council said it was experiencing increased pressure on operating budgets from recent rapid rises in inflation and interest rates.

It said council had the ability to respond through levers such as prudent use of debt, the level of rates increases, asset ownership options and changes to operational expenditure which could affect services.

The NZX update said the council remained strongly committed to maintaining a prudent and sustainable approach to long-term financial management.

None of this is a surprise, with the previous Council’s budgeting work (led by now Deputy Mayor Desley Simpson) having to pull a few rabbits out of the hat in response to revenue impacts from the COVID-19 pandemic in particular. Many of those challenges haven’t gone away – most notably much lower public transport fare revenue – and the more recent inflation and interest rate jumps just adding to the challenge.

The Council has actually done been quite effective in recent times to grow its revenue base while keeping general rates increases comparatively low through introducing the regional fuel tax, targets rates for water quality and environmental improvements, and most recently the climate action targeted rate. While there will forever be arguments around whether the Council and its CCOs could spend this money more effectively, and we are sure they could, the financial pressures now faced seem to be caused by factors largely out of Auckland Council’s hands.

These funding challenges mean Council will need to make some tricky decisions over the coming years – about how to raise more money and/or where to trim or delay expenditure. I can’t imagine there will be any support around the Council table to remove the regional fuel tax, for example, which brings in around $150 million a year and unlocks at least the same again from Government funding through Waka Kotahi. But what are some of the options Council could look at to get through this squeeze?

Get a better deal out of Central Government

Firstly, perhaps the best opportunity for the Council to reduce its financial issues is to get a better deal from the Government. Transport in particular is jointly funded by the Government and Auckland Council, and is such a large area of both operational and capital expenditure for the Council that a few key changes in funding arrangements could make a huge difference. As we’ve mentioned plenty of times before, the funding arrangements for City Rail Link where costs are split 50/50 between the Government and Auckland Council make no sense for such a nationally significant project. Even a small shift in this funding split could make a big difference to the Council.

The key opportunity for Auckland Council to renegotiate transport funding arrangements with the Government will be through ATAP – which we assume will be updated over the coming 12 months ahead of the next Regional Land Transport Plan. Government will presumably be keen to update ATAP too – given the previous version performed extremely poorly when it came to emissions reduction and there is now an Emissions Reduction Plan with a series of pretty hard targets around VKT reduction. Government is also likely to be concerned about some of the noises coming out of Auckland Transport, and rumours of delays to key projects, and ATAP is a good opportunity to moderate any divergence in direction with the Council.

Focus funding where it’s actually needed

Hayden Donnell had a really good column recently that highlighted how different the population growth rates are across Auckland – most notably how slow the inner suburbs are growing compared to some of the outer ones. Using some of our data on the location of building consents by Local Board, Hayden pointed out the huge mismatch between where it seems investment and effort is going (inner suburbs) and where growth is happening (places like Te Atatu).

…it’s definitely true our authorities are spending far too much on gold-standard infrastructure in his [Mike Lee’s] ward, Waitematā, which includes the rich central suburbs of Ponsonby, Grey Lynn, Herne Bay, Westmere and Parnell. Many of those areas are refusing to accept much new housing, citing the “special character” of their renovated villas.

Though the council often delusionally whimpers about creating a “compact city”, it has forbidden dense development on roughly 40% of the land within 5km of the city centre. Waitematā’s population actually dropped 9.7% last year. Fewer housing consents are issued there than anywhere else. The suburbs closest to the city centre are not just growing slower than anywhere else; they’re shrinking…

…The latest statistics from Auckland Council show it’s consenting more houses in the Henderson-Massey area than anywhere else. The influx of housing is bringing opportunity, but it hasn’t been matched by necessary large-scale infrastructure investment. Kennedy’s journey is so long because the west has almost no dedicated bus lanes, no rapid transit like the Northern Busway, and few cycleways to take pressure off the roads.

“The density of housing in West Auckland continues to increase, with no apparent plans to improve transport or town infrastructure, while people in sparsely-populated inner-city suburbs enjoy their frequent buses and thriving town centres,” she says. “The plan for how all these extra people are going to get in and out of west Auckland seems to consist of planners covering their eyes and going LA LA LA, I CAN’T HEAR YOU.”

Hayden’s at pains to highlight that this shouldn’t mean stopping important projects that are driven by a need to improve safety or rebuild a road in a way that’s actually safe for a variety of different users, but the population statistics are pretty stark and it’s clear fast-growing parts of West Auckland are missing out on investment that’s wrongly going in other places. With Auckland’s population actually shrinking in the past couple of years, investment solely driven by population growth (often the argument for vast expenditure on infrastructure to support urban sprawl) should be looked at really hard:Sell some golf courses

We’re serious here. The case against publicly owned golf courses is incredibly strong. This is especially true when the two golf courses the Council owns and manages directly (Chamberlain Park and A.F. Thomas Park) are right next to planned and existing rapid transit stations respectively and would be incredibly valuable opportunities for transit-oriented development. In fact a cool student project I stumbled across recently has proposed what the redevelopment of A.F. Thomas Park could look like – some serious value unlocked there. There are a few other examples here.

In any case, it will be interesting to see how the Council functions as it grinds into proper action over the next few weeks. We are still yet to see what the Council’s committee structure will be and who the key committee chairs are. Will Wayne Brown reach out ‘across the aisle’ to some of the more experienced councillors who have chaired major committees in recent years in an effort to build more widespread support? Or will he rely on a smaller and potentially unpredictable bunch of councillors who are perhaps more aligned with his ideology?

Only time will tell.

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  1. Hard to predict decisions. Todd Niall wonders when Aucklanders get to actually hear from the Mayor, rather than his handlers:

    “It is Wayne Brown’s personality more than his policies that will define his mayoralty, his ability to build consensus, relationships and make progress.

    At some point, Aucklanders need to see and hear more from their mayor, and less from the wordsmiths who have shaped and managed his messages so far.”

  2. If AT actually rolled out its 2015 Parking Strategy and implemented paid parking where peak demand exceeds 85%; that would plug a huge hole. Wayne is a man of business and surely must understand that parking space is a valuable commodity and the user should pay. This would Make Auckland Great Again as i could find a park for once :p

    1. Yes. And planning to reduce car dependence is also the most prudent financial path in many other ways.

      One of the issues that the Board, Council and Government should’ve been on top of is the use of “alliances” to squirrel away all the big roading projects out of budget decisions. And passing them to WK has the same effect.

      There’s heaps of money available; it just needs reallocation. But it’s locked up. Clever clogs, aren’t they? The same approach could’ve been used for progressive projects but… AT.

  3. Hayden Donnell incorrectly wrote “…it’s definitely true our authorities are spending far too much on gold-standard infrastructure in his [Mike Lee’s] ward, Waitematā, which includes the rich central suburbs of Ponsonby, Grey Lynn, Herne Bay, Westmere and Parnell. Many of those areas are refusing to accept much new housing, citing the “special character” of their renovated villas.”

    This was, for the past 3 years, failed former councillor Pippa Cooms ward. Her gold plating in her patch certainly annoyed enough voters to chuck her out of town to Wanaka.

    1. You seem to be over-rating the influence of ward councillors over the spending in each location.

      She was however instrumental in the process of councillors resisting govt directives about blanket intensification.

    2. Wholly incorrect.

      It’s not gold-plated, it’s about $43m to rebuild unstable Meola Rd as it was built on landfill. This was signaled by AT well before Ms Coom became a Councillor, and has been managed by AT all that time.

      No person would be railing against spending $43m to make a road stable; the alternative is that the road is closed, and you can imagine the howls of protest from those addicted to the motor vehicle.

      (Addiction to the motor vehicle is much harder to break than addiction to cocaine or heroine I suspect).

      1. If AT frame the Meola Rd project negatively in these budget-cutting decisions, despite its central government funding, they’ll be shooting themselves in the foot, having to find much more money from the renewals budget for this rebuilding work. If they do that, it’ll be out of pure hatred for anything multi-modal.

      2. I think you are wrong that people would be happy for AT to spend $43M for fixing < 750m of road that is supposably unstable. It not like the road is that bad – certainly in no danger of being closed. And the bumps act as a slight incentive to slow down.

      3. Meola Road was already fully rebuilt and tidied up as part of the MOTAT. tram, watermain and zoo works over 12 years ago. Why is being rebuilt again?

        1. Presumably because tidying up the surface of a road that is sinking is like painting over cracks in a settling house’s wall. They are going to be back in short order. But that is only my understanding. Anyone able to provide some (non-Orsman, please) references?

          Plus, they propose to rebuild it because it’s narrow even for buses, and has very limited facilities for walking and cycling. Let’s not shy from that. Yes, a lot of the costs come from other reasons, but it’s also a good investment if we actually ever want to make this city better.

  4. I better understand what I found confusing.
    Auckland population declining.
    But it is some of Auckland suburbs that are in decline.
    The CBD is NZs fastest growing area reaching 50 000.
    The population of Auckland is expected to reach 1.7 million in the next few years.
    So most of the growth of Auckland is in South and West Auckland

    1. I think the central city experienced a decline due to Covid reducing the number of university students and foreign students in particular. As a result, there were some empty apartments. In addition, the gentrifying Waitemata suburbs have few new houses being built and are too expensive for large families and those who are flatting. Hence they get pushed further out. Suburbs like Devenport are also experiencing gradual population decline

    2. The population is declining because we are still talking about the same subjects in this blog that we were talking about 10 years ago lol

        1. I worked with that “mysterious guy” on those ideas. And while of course we did get at least a nearby bikeway (Nelson Street), the traffic sewers are indeed still there. The City Centre Masterplan’s proposals to stop cross-traffic through the central city was the latest attempt to break the car stranglehold, but it now seems to be likely to go back into the bin for a few more years.

          How a 21st century city centre can be so determined to keep de-facto motorways through the very middle of it’s heart boggles the mind.

  5. Life in Henderson-Massey: Leave for work at 5:30am so you can leave work at 4pm to spend an hour in traffic so you can do a daycare pickup at 5pm in Westgate.

    This is definitely the lifestyle we should all be aspiring to, and a logical and sensible outcome of pricing young people and families out of central suburbs.

    1. I rode to work yesterday (shore to airport) and met a guy on an ebike commuting from out west to Mangere who was on his bike for the exact reason you talk about butty, he had to be home to pick up kids in arvo and the bike allowed him to do the trip in 47 minutes rather than deal with unpredictable traffic.

      We were chatting on the separated bike path which runs nearly the entire length of his journey (and a good chunk of mine).

  6. Wayne Brown is interviewed in today’s Herald by Bernard Orsman in an article called ‘3 points of focus’, which I’ve just read on press reader. Brown is quoted as saying “Auckland Transport will not be getting any money for unwanted cycleways, but he does want it to spend money on roads through the use of dynamic lanes”.
    He also says “The best things in Auckland Transport are, number one, the Northern Busway so we want the eastern and western ones under way,”
    The charge for a resident’s carparking permit is only $70 a year in Auckland, which only covers the administration costs. It a zero was added on the end it would still be cheap. All the public good arguments that university students used to use for fees are used for residents carparking. The left is unwilling to increase the cost because these charges are sometimes regressive (although the zones are mostly in the inner city) and the right are reluctant to do so because the are pro-motoring. The same goes for park and ride facilities being free.

      1. All cycleways are “unwanted” in the minds of people who have never ridden anything but a SUV or sedan for the last couple decades. Actual opinions of the wider population (let alone facts) are about as unimportant as medical research to your typical anti-vaxxer.

        So sad. Lost years are here again.

      1. Just a thought on using the recently reclaimed Harbour land as a basis for houses rather than containers and cars – how high above sea level is it? And allowing for upcoming sea-level rise, how sensible would that be? And given its recent nature of arrival, and that it is composed solely of dredged sea-bed sand and shingle, mixed with dead molluscs etc, how stable is it to build on, and does anyone have concerns about liquefaction and settlement? There’s probably a good few reasons why it is just port land at present…

    1. $70 a year to cover the administration costs of car parking permits. Auckland council’s problems expressed perfectly in a little bite sized piece.

  7. These figures for population growth also show suburban sprawl in the northern section of the Waikato District i.e. Tuakau, Pokeno etc, which are effectively within the greater Auckland area.
    It will be interesting if the Review into Local government starts talking about council
    boundary changes- e.g. extending the Auckland boundaries to say Rangiriri.

  8. Waitematā’s population actually dropped 9.7% last year → That is appx. 8,000 people moving out out of 83,000. Is it known whether these are people getting out of inner city apartments, or people moving out of the inner suburbs?

    After a long COVID lockdown in particular it would make sense that people get out of those apartments whenever they can afford it. That must have been brutal.

    1. There’s a stark pattern in the population change map, people are escaping the cities to nearby semi-rural areas. It can be seen in Auckland, Hamilton, Tauranga, Palmerston North, Wellington, Nelson, Christchurch and Dunedin.

      Presumably this is related to working from home making a long commute a couple of days a week a lot more appealing.

  9. If golf courses are to be redeveloped, then start with Remuera golf course, rather than the working mans Chamberlin Park.
    Wayne Browns 30% cuts to salary budgets should make some decent savings, if they go ahead. And his focusing on finishing the current planned projects in a thrifty manner while avoiding studies on more new stuff and things that will never get built, will save more.
    The unknown extra cost of the CRL likely makes the $270M hole look small, and is a real problem. To sort this out there will either need to be a larger contribution from central government or some more drastic cuts to other council spending.

        1. Sacking all the management? Get ready to see resource consent and building consent processing times blow out.

      1. More likely the processing will be contracted out to the staff who lose their jobs and set up as consultants. Or they could increase the fees again. RC & BC fees are already eye-watering, which has helped keep rates down.

    1. They can do more than one at once.

      The real prime opportunity is Takapuna golf course. Right beside the busway station, just needs an overbridge over the motorway from Smales Farm Station. Keep a shortened course, and it will be far more accessible for PT users. Build a good noise wall.

      The problem isn’t how “working man” or “rich guy” any clubs users are / are perceived to be. The problem is the sport is a massive land hog, which instead of serving a couple hundred people’s sporting needs at a time, could serve 10’s of thousands of peoples housing and commerce needs. That’s not to say outdoor green space for golf has no value, but that we could gain far more value by turing over some of that land to provide housing

        1. Great thing about repurposing golf courses is with denser buildings you can leave heaps of public green space.

        2. Make half of it housing and make a quarter at each end public parks. A quarter of a golf course is a significant sized park, let alone two of them, all on land that isn’t accessible unless you want a round of golf.

        3. There’s actually heaps of greenspace on the North Shore, it just all tends to be either beach reserves, or bush gullies which aren’t always easily accessible (great for trees and birds though).

        4. Exhibit A:

          Green space only has most of the stated benefits if it is accessible. Which most of these golf courses as they stand, are straight up not.

          We could have green space that is far, far better for the advertised benefits, even if some 30-40% of it were built out. Size isn’t everything.

  10. 100% guaranteed they will cut the footpath renewal program after renewing all the footpaths in the rich areas but not other areas. But if so then I will stop paying rates as I think councils should be required to maintain footpaths to a reasonable condition, its not optional.

    1. And for those built up areas that don’t have any footpaths? Same old, same old. Left paying rats so somewhere else can get their paths rebuilt…again. 🙁

  11. The obvious ones to cut are AMETI and CRL aren’t they. Let the government take them over. And sell the port, golf courses, airport, and anything else that a council do not need to own.

    1. The Govt could at least match the funding split for LGWM for the CRL. That really should be the bare minimum, given Light Rail is almost certainly not going to happen.

    1. LGWM cost $63m in the 20/21 year (NZTA $41m, GWRC $7m, WCC $15m) which was a big increase on the previous year ($19m all up), all without a single piece of actual physical work being completed. However, the progress of LGWM this year (22-23) includes re-building five street corners (pedestrian push-outs) along Vivian St, and, ummm, no, that’s all. Great value so far.

  12. Public transport throughout Aotearoa is a major expense for councils even with Government via Waka Kotahi putting in a sizeable potion.
    I see one interesting option here and that is to create one large Public Transport entity for the whole country which would own and operate all public transport.
    This would firstly remove the shareholder profit margin / dividend from the operational cost and greatly reduce the running costs.
    This Motu wide operator could then seriously look at the reoccurring question around rural services and also be able to through the use of road, rail and water services be able to provide a truely integrated service for everybody.

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