On Wednesday, the mayor and councillors agreed to our Annual Budget for the 2022/23 financial year. Our budgets this political term have all been challenging, and sadly this one is no different. Our finance staff have repeatedly talked about ‘financial head winds’ but what we are facing now is more like a financial cyclone. This budget will allow us to put our sandbags in place and move to higher ground, and make sure we are as resilient as possible, for there are still many unknowns. Some of the pressures we are facing will be temporary, but some may stick around for a while yet. The ongoing budget gap Auckland Council faces could be between $90 million and $150 million, depending on how this financial storm develops. That is a big gap, and a lot of unknowns.
The draft Mayoral Proposal went out for consultation in March and has now been refined as a result of updated financial projections and the feedback we received from Aucklanders.
I wanted to share my thoughts on where we’ve landed. This is a long update, so maybe save it for when you have a moment to read through to the end.
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 prioritization of projects association with that spend are the best they could be. However, we asked Aucklanders what they thought, noted how it was to be funded, and the feedback was pretty clear. It had support across the region, both through our consultation process and the independent Kantar poll. It had support from the majority of our local boards, including the Waitemata and Orakei local boards. I was glad to see some flexibility around budget allocation and the option for reprioritization as required. 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 was 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 here in Orakei and around the region.
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 Reform proposal, because they told us in no uncertain terms. 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 also want to state that this grant (which we applied for) is NOT payment for our $10 BILLION worth of water assets. They are being taken as a result of central government legislation.
The savings and efficiencies Auckland Council has achieved this political term have been the largest of any term to date. They currently total almost $230 million. However, my personal belief is there are always more savings and efficiencies to be found. To that end, as chair of the Value for Money Committee, I will lead the work to look at further savings opportunities across the group and further scoping of strategic opportunities for cost reductions. The Value for Money work programme is critical and to date this term has delivered $447.7 million worth of efficiencies.
On debt… whilst eye wateringly large, Auckland Council’s debt is just under 18% of its assets. I’m sure many wouldn’t mind their mortgage being 18%! This is supported in part by an average general rate increase of 3.5%. I think it’s important to 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 10-year budget, and our credit rating agencies Standard & Poors and Moody’s have supported us with AA and A2 ratings, respectively.
I am 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 alongside the other targeted rates, waste charges, the whole lot, we remain focused 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. In every single local board area, there will be a number of residential ratepayers whose rates go down next year by over $1,000.
That said, we are all in very challenging financial 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. 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.
I want to highlight some of the regional investment this budget will enable in our Orakei Ward, (noting the Orakei Local Board will have other projects, too), as we are very lucky to be getting significant investment in our area. In terms of transport, we can look forward to a new southern link (the Gowing Drive connection) to the fantastic new section 2 of the shared path which goes from St Heliers Bay Rd through to the Orakei Basin. Along with this we will see continued works on the last final link to Tamaki Drive (section 4). This budget also completes the Mission Bay works supported by the Mission Bay/Kohimarama Residents Association and the Orakei Local Board. The Tamaki Drive footpath will be upgraded between Solent St and Ngapipi Rd and include upgrades to the railing along Tamaki Drive. Having been delayed for a few years, we will finally see the raising of lower Portland Road, which has been prone to flooding well before I was even born!
In the environment and water quality space, the Portland Road Reserve project is certainly worth noting. I recently did a site visit and they are making some great progress. By using the silt to create land features within the reserve, instead of loading it all onto trucks to go to landfill, the environmental impact of the project has been significantly reduced, and we’ve saved $1 million in transport and dumping fees. You can also expect to see investment at Waiatarua Wetland, Tahuna Torea, and Pourewa Valley. There are ongoing water quality improvements in Hobson Bay and the team are currently focused on Newmarket’s Khyber separation project. It’s worth noting that much of our water quality issues arise from old non-separated pipes. That investment is critical and for too long has been left out of budgets and workstreams. Wave barrier gates are in the works for Kohimarama, as well as seawall improvements at Cliff Road in St Heliers. There is ongoing Kauri Dieback prevention work taking place at Dingle Dell.
In terms of our community facilities, there are new sports fields and upgrades being completed at Shore Road Reserve in Remuera, two sand-carpeted fields and lighting for five fields at Colin Maiden Park in St Johns. The wintergardens at the Domain in Parnell are currently getting a significant upgrade, and our two heritage libraries, St Heliers and Remuera, are getting seismic upgrades.
So what will all this cost us? Knowing we have both $2 million homes and $20 plus million homes in our ward, on average, the Orakei Ward residential rates rise will be $198 (inclusive of everything). Interestingly, over 670 residential ratepayers will have their rates go down by more than $1000. In fact over 11,000 residential ratepayers will see a decrease in their rates with another 7,000 plus seeing an increase between $0 and $200. So, approximately 60% of our residential ratepayers have a decrease or an increase of less than $200. Business rates for the Orakei Ward go down by an average of 3.47%, or $561, which I’m sure will be welcome relief for our local business owners.
In conclusion, like most Council budgets, it’s not perfect, but my vote was based on your feedback (always has been) and I’m more than happy to answer any questions you may have.