· We feel acutely the struggle many Auckland households and businesses are facing.
· Councillors were unanimous yesterday that the council needs to take decisive steps to reduce the pressure on residents and businesses facing economic hardship, while ensuring we can protect and maintain the essential services Aucklanders rely on
· Many of the sources of revenue council relies on to fund our services have reduced substantially because of COVID-19, and this will have an impact on what we can provide in the future.
· In the coming weeks we will be asking Aucklanders for feedback on the council’s proposed emergency budget for the coming financial year- 1 July 2020 to 30 June 2021.
· With the challenges we are facing, this will not be a business as usual budget.
· Spending on some activities will need to be reduced in the future, as we work to manage the financial impact of the COVID-19 crisis.
· As part of the public consultation on the emergency budget, Aucklanders will be asked if they support options for:
o Either a 2.5 per cent or 3.5 per cent rate rises, including information on the potential impact of both those options on our services and finances; we will also explain the impact that no rates rise would be likely to have
o More help for businesses experiencing financial hardship and struggling to pay rates
o Suspending the Accommodation Provider Targeted Rate, and the activities it would fund, until 31 March 2021.
· Today we also announced some steps to offer more help to ratepayers and business who may be struggling to pay their rates in the financial year to 30 June – anyone who is facing difficulty can contact council on 09 3010101.
Council is still making people pay rates. Why?
Council is still open for business providing essential and key services across the region – and there are costs attached to that.
Around 40 per cent of our income comes from rates while the other 60 per cent comes from non-rates revenue like dividends, public transport fares, parking revenue, processing consents, income from running events and facilities and development contributions. These incomes are, and will continue to be for some time, impacted by COVID-19.
But people are saying they can’t pay?
We are very aware of the financial hardship that many people are facing and for those people, we have assistance schemes in place and we will do everything we can to help them get through this financial year. Rates notices will be sent out at the start of May giving details of how people can defer payment until the end of August. In addition, Council will explore relief options for the next financial year, starting 1 July 2020, to see how we can best target relief to those truly in need.
Why are decisions about rates being made behind closed doors?
Auckland Council’s bonds are listed on the New Zealand Exchange (NZX) as well as other overseas exchanges. This means that when we are discussing or making decisions that are likely to have a significant financial impact, or differ materially from previously published financial information, listing regulations require complete confidentiality until details have been disclosed openly and consistently to all interested parties via the NZX. Rates were part of these discussions so details could not be made public until after NZX disclosure.
Now that has been done, proposals on how we approach rates in the next financial year will be going out for public consultation in the next few weeks so we urge people to have their say and help shape our future at that time.
Why can’t council cut rates and just borrow more money?
The council has entered this situation from a strong financial position for the first half of the year. However, we are already facing a big drop in revenue. Like any borrower, our income determines how much we can borrow and the interest rates we are charged.
Auckland Council ‘s credit rating is second only to the Government which in very basic terms means that we are seen as an attractive borrower who carries less risk. At a time of uncertainty in global financial markets, it is imperative we do everything we can to keep ourselves in that position. We also need to maintain a debt to revenue ratio that allows us to invest in capital projects and infrastructure that the city needs, and which will be vital for our economic recovery. In very simple terms we are already reaching the limits of what we can borrow and cutting rates and instead borrowing more will negatively affect both sides of this ratio – i.e. it will both reduce revenue and increase debt.
Why is COVID affecting the council’s finances?
The money we get from a number of different sources has reduced due to COVID, for example public transport fares, parking revenue, processing consents, income from running events, etc. While we are working to offset this by reducing the amount we spend in areas that aren’t essential services we will face some new costs as we work to support the government’s response. For example, helping to deliver welfare services or supporting repatriation and quarantine processes.
What is council doing to cut costs?
As part of plans to cautiously and prudently manage the financial impact, we are already taking steps to:
o reduce spending on external contracts and contract staff in non-essential services
o suspend non-essential work such as non-essential asset maintenance, fleet servicing, and internal business improvement projects
o suspend recruitment of permanent staff until further notice
o redeploy under-utilised permanent staff into roles currently filled by contingent workers.
In addition, the council already has a Value for Money programme and an efficiency savings target built into each year of the long-term plan.
What is happening with the Annual Budget that has already been consulted on?
The Annual Budget consultation process took place before the current Covid-19 situation and a huge amount has changed in the few short weeks since then. The financial landscape has changed, almost beyond comprehension, and as a result, we have asked council officers to present a budget that reflects the world we now live in. The new budget proposals will be going out for consultation in the coming weeks. Any feedback submitted as part of the previous consultation will also be considered and reported to councillors.