Considering the fallout from Covid-19, why couldn’t Auckland Council deliver a zero rate increase?
Fair question and one I asked, more than once. As much as I was aware of the difficulties council faced losing half a billion dollars of income on top of the need to deliver a second version of our annual plan – the Emergency Budget — I was also acutely aware of the financial difficulties many Aucklanders found themselves in. Jobs had been lost; businesses were hurting and across the city, families were struggling. Surely, we could just cut our costs and give ratepayers a break? At this stage, I was firmly in the zero per cent rates increase camp.
However, as our financial advisers took me through the numbers, absorbing such a huge loss of revenue, I began to appreciate the gravity of council’s predicament. Despite an initial loss of 600 staff (and more to come); a savings target 12 times the original aspiration; increased debt and deferred spending; there was no viable way the organisation could continue delivering critical services that we are legally obliged to deliver and that communities rely on, with rates set at anything less than a 2.5 per cent increase.
Every single councillor came to the same realisation and unanimously supported consulting with communities on 2.5 or 3.5 per cent rates increase. Both options required significantly different levels of cuts to our services because of our revenue loss.
It was clear from the 34,915 submissions received that Aucklanders understood the importance of our Emergency Budget and had a lot to say. Sadly, what we didn’t communicate well was why we couldn’t do zero.
Feedback showed a real split between those believing we should keep rates as low as possible, and those advocating for higher rates to protect the community services they love. The results indicated public support for the 2.5 per cent option. Based on the feedback, I too was sitting in that camp.
Then two important things happened.
All 21 local boards representing the diverse communities of Auckland supported the 3.5 per cent option after considering the impacts of the two options for their communities, analysing local feedback and deliberating in emergency board meetings. Never in the history of Auckland Council has every single local board had the same view on rates increases — never.
Secondly, the impacts of our worst drought on record came to a head. Remember it was winter and water restrictions were (and still are) in force and the MetService is predicting another dry spring and summer. Watercare told us they would likely not be able to avoid severe water restrictions without a confirmed increase in supply.
The ‘good’ news was, with some nifty negotiation, we secured extra water supply from the Waikato. The ‘bad’ news was it came with a $239 million price tag needed to deliver essential new infrastructure to cope with that extra supply, increasing the council group’s shortfall to some $700m! I then looked closely at the revised cash impact of 2.5 and 3.5 per cent for the average Auckland ratepayer. There was $24.62 difference between the two. Knowing the Ōrākei ward was well above ‘average’, I looked at the average annual increase for the two local board areas my ward spans. Waitematā Local Board average increase at 3.5 per cent was $125.48 up on last year. The Ōrākei Local Board average increase at 3.5 per cent was $187.50 extra. These were inclusive of all the extra add-ons such as the increased costs for recycling and rubbish collection.
So, after poring over your feedback; comparing multiple scenarios with our finance team; and considering the short and long-term impacts of this decision, I reluctantly accepted that only under 3.5 per cent (or for ‘us’ less than $190 extra a year), would we be able to keep beloved services open such as libraries, leisure centres and community halls; continue to maintain our parks and public spaces; retain the public transport concessions people rely on like our seniors’ SuperGold card; continue to invest in transport and stormwater infrastructure across the region and solve our water crisis. In short, keep our city running but still invest in infrastructure to help rebuild our economy.
There is a saying you shouldn’t ‘waste a crisis’. We have shaved tens of millions and in some cases hundreds of millions of dollars from our CCO budgets. Our acting chief executive is restructuring our organisation, promising it will be much leaner as a result. We are saving a record $200m, actively looking at other ways to increase our revenue, and while temporarily raising our debt level we are confident we will maintain our credit rating, avoiding a downgrade which would cost us tens of millions more in interest payments. We also have three rates assistance options for those who need it.
Covid-19 hasn’t just impacted Auckland. Other councils have confirmed their rates increases for this year. Wellington has gone for a 5.1 per cent increase, Tauranga 4.7, Dunedin 4.1 and Christchurch 3.8. All higher than Auckland.
But regardless, it will be a tough year for us all. I’m not at all convinced the Covid-19 impact will be a short one.