I am sure you will now be aware of the significant impact COVID-19 has had on the economy —globally and in New Zealand. In Auckland, the lockdowns, border closures, and restrictions on gatherings have had a devastating effect on local business and jobs.
Like others, Auckland Council has been severely affected, with the pandemic punching a half-billion-dollar hole in our annual revenue for next year.
Unlike many councils, Auckland Council gets most of its income (60 per cent) from sources other than rates. As a result of COVID-19, much of the money we would normally receive from facilities like the zoo, pools and recreation centres, public transport fares, Ports of Auckland revenue, dividends from the Airport, consenting fees and charges, and revenue from Watercare—has all but dried up.
We have prioritised support to individuals and businesses facing hardship in the wake of COVID-19. However, by proposing to extend our rates postponement scheme, we will see a further reduction in income for the upcoming year.
In response to this dire situation, we face the immense challenge of agreeing an Emergency Budget that allows us to maintain the essential services Aucklanders need, and build for the future.
This is not a situation of our own making, nor is it one of financial mismanagement. In fact, had we not been in such a strong financial position prior to this pandemic, things would be a lot worse.
So, what we are doing to help ourselves? Staff costs are large and as a result we are making cuts to address that. Around 1100 temporary and fixed term roles are being reviewed with more than 600 already let go, consultancy fees have been slashed and the mayor, councillors, executives, board members and senior staff have accepted voluntary pay reductions of up to 20 per cent.
Many have also asked me about cutting the high salaries within our CCO’s. Currently, the mayor and councillors cannot force CCO Boards to cut remuneration of CEO’s and top executives. Legally binding employment agreements are between each CCO Board and their CEOs or between the CEO and their staff.
That said, CCO’s are contributing a combined $50 million of savings for this budget, with more to come.
Council has also committed to a comprehensive review of our operating spend. This will see staff numbers further reduced, training budgets dramatically cut, and all other “nice to haves” effectively eliminated. We are targeting a record breaking $120 million dollars of savings next year. To put this in context, that’s twice as much as the direct costs of running all our libraries for a year.
Further to this, the Value for Money committee which I chair will identify another half a billion dollars of potential efficiencies over this political term.
However, these internal cuts won’t come close to filling the hole COVID-19 has left in our pocket.
This leaves us with a series of trade-offs across four areas: budget to maintain our buildings and employ staff known as operational spend, the money we use to invest in new infrastructure referred to as capital expenditure, the temporary leasing or permanent sale of assets, and temporarily increasing our reliance on borrowing money.
To find a balance, we propose to use all of these levers to ease our immediate financial burden. As a result, you may see a change in the opening hours of local facilities. We might need to delay infrastructure projects, like improving roading or stormwater assets, or suspend plans to upgrade town centres. We will also need to look at how we manage our assets and consider selling buildings we can’t afford to keep. But we will protect the essential services Aucklanders rely on.
I want to stress that no matter how effectively we use these four levers, we will struggle to get cash in the door. For those of you operating businesses, you will understand that without revenue, your ability to operate becomes difficult.
Essentially, the less cash we receive, the more cuts we will need to make. This is important when you consider the options in front of us.
Further details of these trade-offs are laid out in our Emergency Budget consultation document. Some of these options will seem drastic, but such measures are required to help us work our way out of this.
Getting through this won’t be easy but if we work together and make some of the tough calls now, we can recover stronger as a city. This is why it is so important you take part in the budget consultation. We want to hear from you; your ideas and suggestions, and we want to know what is most important to you and your community.
Consultation on Auckland Council’s Emergency Budget is open now and closes at midnight on Friday 19 June.
Please make your voice heard—visit akhaveyoursay.nz/emergency-budget to have your say.