Our budgets this term have all been challenging, and sadly this one is no different. In our finance meetings and workshops over the past couple of years our Finance team have repeatedly talked to us about ‘financial head winds’ but we know what we’re facing now is a more like a financial cyclone. This budget is us putting our sandbags in place, moving to higher ground, and making sure we are as resilient as possible for there are still many unknowns. We know that some of the pressures we’re facing are temporary, but some may stick around for a while yet. The ongoing budget gap we face could be between $90 million and $150 million, depending on how the storm develops. That’s a big gap and a lot of unknown!
Following the draft mayoral proposal which went out for consultation in March, the mayor has now refined his original proposal based on feedback and updated financial projections.
My thoughts on that are as follows:
First - the Climate Action Targeted rate. I don’t believe this should be based on the capital value of your home, nor do I personally believe the sequencing and prioritisation ofprojects associated with that spend are the best they could be. But we asked Aucklanders what they thought, noted the projects in that documentation, and the feedback was pretty clear. It had support. It had support across the region throughout our consultation process, it had support from the majority oflocal boards including the two in my ward, and it had support from the independent Kantar poll. I absolutely support the careful monitoring of this rate spend, as we do with all our targeted rates, and I will be talking to every mayoral hopeful as to their thoughts on this going forward.
I am supportive of the grant to Coastguard. We are a region bordered by water and the work they do is critical for the safety of our communities.
As for the government’s Better off Funding grant of $127 million - this grant does not in any way alter my view that the government’s direction on Three Waters is not good for Auckland. We know Aucklanders do not agree with the Three Waters proposal, because they told us. Council’s recommendations on Three Waters are on record as being against, and the mayor has consistently and publicly been opposed to the reforms. But if the government is handing out a grant with no strings attached and we never have to pay it back, I’ll take it, especially in this challenging financial environment.
I think we should all be confident that the savings and efficiencies we have achieved this term have been the largest of any Auckland Council term to date. They currently total almost $230 million. However, my personal belief is there are more to find. So to that end, I fully support looking at further savings opportunities across the group and further scoping of strategic opportunities for cost reductions as part of the Value for Money committee I chair, with Cr Mulholland as my deputy chair. The Value for Money work programme is critical
On debt… whilst eye wateringly large, it is only 18% of our assets… (I’m sure many wouldn’t mind their mortgage being 18%). This is supported in part by an average general rate of 3.5%. I note that this council term we have consistently ensured that our rates take from Aucklanders remains less than 40% of our income and this budget keeps to that figure coming in at 37%. Our debt to revenue will be well below our limit of 290% and the projections in our Recovery Budget, and our credit rating agencies Standard & Poors and Moodyshave supported us with AA and A2 ratings, respectively.
I’m challenged to support some of the deferral of capital expenditure over the next three years but know we have to make some decisions now to support ongoing prudence and also know that the final timing of projects will be reviewed by the next council.
So, looking at the whole package, the new CATR, the other targeted rates, increases to rubbish – the whole lot - we remain focussed on what this means for Aucklanders, especially noting this budget includes the delayed revaluations. Across all of Auckland the total increases on average are at just under $200 for the residential ratepayer. We know that the impacts of rates increases are not uniform across the region. There are some areas that will feel this harder than others and I have looked to my colleagues, especially those in the south and west, for guidance as per their thoughts on affordability. I know that the average increase for the residential ratepayers in the Orakei Ward is $210. I also know that in every single local board area there will be a number of residential ratepayers whose rates go down next year by over $1,000 - OLB has about 540 of those . That said, we are all in very challenging financial times both as a region and as a country. The combined rates rises proposed by the mayor are in line with many other metropolitan councils across the country who are settling on rates increases of 5-6%. I note that Wellington is proposing 8.9% and Tauranga 13.7% But again, we know it’s tough out there for everyone. I’ll be watching carefully to see if there are any increases in ratepayers struggling to pay their rates on time as we start quarter one of the new year next month. Again, this will be something all prospective mayors need to keep an eye on too.
So, is this budget prudent? Whilst this budget was proposed by the mayor and supported by our finance team, it also was independently assessed by our Audit and Risk committee which has three members who are professionals and independent of Council. The committee has advised the Governing Body that an appropriate approach is being taken to manage the key financial risks associated with the Annual Budget 2022/23, provided that the Governing Body is able to reach agreement on a budget that addresses the financial pressures in a sustainable and financially prudent manner – that is, the budget package before us here today. We know that this financial storm we find ourselves in is presenting significant risks to our financial position, but our Finance team, our rating agencies and our Audit and Risk Committee all agree that we are meeting those challenges with a strong commitment to sustainable and prudent financial management.
Finally, to our local boards, IMSB and CCO’s, once again, thank you for being part of the journey, and for your willingness to engage with us on the issues and to be part of the solution. We have a shared governance framework and ithas definitely played out in our budget planning. So, Team Auckland, again, thank you. To my deputy, Cr Henderson,thank you for your support, it’s been a rough year. In concluding my comments today, I wish to thank our Finance staff. Peter, you and your team have had a huge workload over the past few months, and I know I speak on behalf of all around this table when I say we are eternally grateful for your professionalism. Whilst we will land the 22/23 annual budget soon, your work continues, planning for the unknowns ahead, keeping us financially stable and maintaining our high credit ratings. It is a challenge I have every confidence you and your team will help us navigate.