Recover stronger - Emergency Budget 2020/2021 Te Tahua Pūtea Mate Ohotata 2020/2021
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EMERGENCY BUD GET CONSULTATION D O CUMENT
CONSULTAT I ON D O CUME NT
PART ONE: ANNUAL BUD GET
Te Tahua Pūtea Mate Ohotata 2020/2021
Emergency Budget 2020/2021
Further consultation on the Annual Budget due to COVID-19.
akhaveyoursay.nz/emergency-budget
To g et h e r w e c an
ro n ge r.
recover st
1 | TE P UKA KŌWHIT IW H IT I KŌ RE RO
EMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
Parts of this document
Introducing the
Emergency Budget This is your chance to have a say on the Emergency Budget about what
3
How to have Auckland Council is planning over 2020/2021 in response to the impacts of
your say
4 COVID-19 pandemic.
Message from
the Mayor
5 In Part One we’ll give you an overview of our challenges due to the COVID-19
Key
considerations
pandemic, and how we plan to respond to this next year.
6
COVID-19’s impact
In Part Two we’ll let you know what we are proposing and what we want
on our Budget
7 specific feedback on.
Part One
2020/2021
Budget at a
glance
In Part Three, we’ll let you know how you can give us your ideas and feedback.
11
Transport
12
Water,
Wastewater and
Stormwater
14
Parks and
Community Rates
16 Part Two postponement
Economic
and Cultural Council What we want your
for ratepayers
impacted by Other Part Three Glossary of
Development Support feedback on COVID-19 Changes Give us your views terms
19 21 24 26 27 29 31
City Centre Environmental Impacts of rates Rates increase Suspending the Minor changes Next steps Feedback
and Local Management and increases on 24 Accommodation to rates and 30 Form
Development Regulation Emergency Budget Provider fees following 32
18 20 23 Targeted Rate your feedback in
27 February/March
28
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EMERGENCY BUD GET CONSULTATION D O CUMENT
Introducing the Emergency Budget
The COVID-19 pandemic has significantly impacted We consulted on the Annual Budget 2020/2021 in
Auckland. Our people, communities and businesses have February/March 2020, but with COVID-19 we are facing a
all been affected by the health-related restrictions, very different financial picture. There is no business as
border closure and knock-on economic impacts. usual scenario for next year’s budget and Auckland
Council has had to respond quickly, therefore we are
Auckland Council is no different. Because over half of the
calling this our Emergency Budget. We need your input
money we collect to pay for the services Auckland needs
on some bold decisions to address the revenue gap and
come from sources other than rates, we are facing a
help support Auckland’s recovery.
severe revenue challenge over the coming year.
Toge t h e r w e ca n
r s ro n ge r.
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3 | TE PUKA KŌWHITIWHITI KŌREROEMERGENCY BUD GET CONSULTATION D O CUMENT
We want your input to help us
develop our Emergency Budget
for 2020/2021.
You can give us your feedback until 19 June 2020. Please refer to
page 29 for ways to get in touch or complete the Feedback Form
included in this Consultation Document.
For more information, including the Supporting Information for
this Consultation Document, you can visit akhaveyoursay.nz/
emergency-budget, phone 09 301 0101 or visit your service
centre or library.
Final decisions will be made in July 2020 and will be available on
aucklandcouncil.govt.nz in August.
Toget her we can
e r s ro n ge r.
recov t
4 | TE PUKA KŌWHITIWHITI KŌREROEMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
Message from the Mayor
However, in the post-COVID environment, further—and larger—cuts in spending are necessary
COVID-19 has had a dramatic impact on the world, including our
and will inevitably reduce what Auckland Council and its organisations are able to do.
nation and city. While strong management of the infection has In all of this, we are working hard to ensure that important services needed and valued by
saved lives in our country, the lockdown and the international Aucklanders continue to be delivered.
recession caused by coronavirus is severely impacting our job We are also striving to retain as high a level of investment in infrastructure as possible.
Aucklanders need this investment to tackle long-standing problems such as housing
market and the revenue Auckland Council needs to provide shortages, traffic congestion and to improve the quality of our environment. The investment
services for Aucklanders and invest in our city. is also important to create jobs at a time of growing unemployment and to stimulate
economic recovery.
We estimate that the fall in revenue will be more than half a billion dollars in the coming
We are proposing an average general rate increase of either 2.5 per cent or 3.5 per cent for
financial year. The dividends from council-owned shares in assets like Auckland Airport have
2020/2021. The scale of the financial challenge that we face for next year with a revenue loss
been slashed; revenue from our venues, pools and facilities such as the zoo was reduced
of over half a billion dollars due to COVID-19 means that spending on some council services
during lockdown, and considerable reductions have been projected from the loss of public
will need to be reduced and many capital projects will be delayed even with the 3.5 per cent
transport fares and parking.
increase we had previously planned.
With the slowdown in the economy, council revenue will also suffer from reduced
With a lower rate increase of 2.5 per cent, we would need to further reduce spending on
development contributions and council regulatory fees. On top of this, we have budgeted $65
council services and further delay investment in transport, parks and community and town
million to help people who need rates postponements because they are suffering financial
centre projects. We looked at but did not propose rates increases below 2.5 per cent because
hardship due to COVID-19.
of the severe impacts that would have on council services, new infrastructure, our debt levels
The loss of revenue, the largest in our city’s history, puts at risk the services that the and employment and business activity in Auckland.
council provides to Aucklanders, and our ability to invest in much-needed infrastructure for
The challenge we face is great. However, we are determined to continue our progress
transport, housing and the environment.
towards a better and more inclusive community and to deal with long-term challenges such
With loss of revenue, we also need to reduce our spending. The Local Government Act 2002 as climate change.
requires that we balance our budget, unless it is prudent not to do so having considered
During the health crisis caused by COVID-19, we showed what this city and our country could
the current and future interest of the community. We are conscious of our responsibility
achieve by working together. Just as we were successful in breaking the chain of COVID-19
to manage our finances prudently and not just increase debt that could jeopardise our
transmission during the lockdown, by working together we can recover
credit rating, raise the cost of borrowing and burdening future generations with larger debt
from the recession and achieve a stronger and better Auckland.
repayments. Debt should mainly be constrained to finance infrastructure and not to cover
operational expenses.
This means we will have to make tough decisions. Services that are less important will need
to be reduced and some investment in infrastructure will need to be deferred. Staff salaries
Kind regards,
will be affected, and the council will have to reduce staff numbers.
Phil Goff
Over the last three years, council has already made efficiency and value for money savings. Mayor of Auckland
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Key considerations
In developing the draft Emergency Budget, we have identified
some key considerations to guide us when we make decisions.
“He waka eke noa”
We’re all in this together.
The changes we make will impact these to varying degrees.
Impacts Impacts on
on our community
community programmes
Honouring facilities and grants Climate
our
change
commitment
impacts
to Māori
Ensuring long- Minimising
Impacts on Impacts
term financial impacts on
the most on
prudence and jobs and
vulnerable transport
sustainability employment
6 | TE P UKA KŌWHIT IW H IT I KŌ RE ROEMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
COVID-19’s impact on our Budget – Overview
Our challenge: less Our response: four levers
money in the door We have four key levers to respond to this challenge:
We face a significant financial challenge next year:
1. Increased council borrowing
• revenue is projected to be over $500 • under either rates increase option we will temporarily exceed our debt limits
million less than previously budgeted • further borrowing would lead to increased borrowing costs, reduced access to debt markets
and greater exposure to further shocks
• high fixed costs mean our budget will not balance,
• additional debt would also need to be serviced and repaid by future ratepayers.
even after making considerable savings
2. Reduced capital investment
• we will have hundreds of millions of dollars of less cash to
• we have already decided to slow down some of our building and construction projects
pay for services and investments for Auckland
• to avoid over-reliance on the use of debt, we need to look at delaying more projects, with
• we will have to rely on borrowings to help make up the more delays needed under the 2.5 per cent rates increase option.
difference, but unlike central government we were already 3. Reductions in operating expenditure
very close to the limit of what we can sensibly borrow • we are already planning substantial cuts to our back-office functions. Further savings will
• not increasing rates would have severe impacts on council impact the services we deliver to Aucklanders
services, new infrastructure, our debt levels and employment • under the 3.5 per cent rates increase option a package of $54 million of further operational
and business activity in Auckland expenditure reductions is needed, temporarily impacting some services we provide
• under the 2.5 per cent rates increase scenario, this will increase to $75 million with further
• we are proposing rates increases of either the currently
impacts on our community.
planned 3.5 per cent or a lower 2.5 per cent ($1.82 or
$1.35 per week for the average value residential property), 4. Asset recycling
each with different impacts for Auckland, and a new rates • the council owns over $50 billion of assets
postponement scheme to help the hardest hit households • we are proposing to let go of some more of our less well used assets to help pay
and businesses. for new ones that will help us deliver better services to the community.
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COVID-19’s impact on our Budget
The impacts of the COVID-19 pandemic on Auckland will be
• changes to overall travel patterns are projected to reduce revenue
substantial over the 2020/2021 year. from parking and enforcement by $40 million and Regional Fuel
Tax receipts by $20 million. Debt
We expect borders to be closed for a significant period. This will halt international tourism
Revenue
and severely impact migration. Many businesses will struggle and unemployment will be at • the lack of international travel means we can’t rely on the $60
levels we have not experienced in recent memory. Many people million annual dividend from our investment in Auckland Airport,
will be facing financial hardship. while lower economic activity will see Ports of Auckland’s revenue
also drop by around $65 million.
As a community we have banded together and fought the health
• greater economic uncertainty leading to a slowdown of Managing our debt
impacts of COVID-19. Now it’s also time to come together to manage to revenue ratio
the financial impacts. We need to do this in ways that are sustainable, Auckland Council
development projects is expected to result in around $50 million
help us recover quickly, and which uphold key principles which are group expects a sizeable less in building and resource consent fee revenue.
drop in revenue
important for Auckland. • this slowdown in development projects along with reduced water usage from lower
These financial impacts and our options to respond through this Emergency Budget are business activity and the current drought situation will reduce Watercare’s revenue by
outlined in this section. These are key things to keep in mind when considering the key about $75 million.
choice between the options of the currently planned 3.5 per cent or a lower 2.5 per cent • finally, our rates postponement initiative to support ratepayers facing hardship is expected
average general rates increase for next year. For more information please refer to Section to also reduce the amount of rates collected in the year by $65 million.
Two of the Supporting Information. Our current assumption is that the country will be at alert levels 2 and then 1 for all of the
next financial year. At these alert levels there is a general expectation that most council
Less money in the door services will be back up and running, even though the associated revenue may have
We are expecting a sizable drop in revenue next year. Operating cash income across the
dropped significantly.
council group is now projected to be $525 million less than previously budgeted. This is
The combination of lower revenue and high fixed costs for many council services will
caused by:
result in an operating budget that is a long way from being balanced. This will be the case
• border closures and restrictions on gatherings resulting in around $40 million less revenue
even after making significant additional savings across the council group from staff costs,
from conventions, concerts and visitors to Auckland Zoo.
consultants and other discretionary costs.
• a public hesitancy to gather in busy places will reduce the use of our pools, leisure centres,
An unbalanced operating budget means hundreds of millions of dollars of less cash to
holiday parks and community facilities resulting in about $30 million less revenue.
spend on delivering services and activities to Aucklanders and to invest in infrastructure for
• this hesitancy along with the need to space people out on public transport services will see the region. Without further spending reductions all of this would have to be borrowed. Doing
around $40 million less transport fares collected. so puts pressure on our borrowing capacity. It also means paying for services delivered in
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confidence in the council’s commitment to long-term financial prudence. This would likely
change how our investors and credit rating agencies view our creditworthiness, potentially
leading to increased borrowing costs and reduced access to debt markets. When we take
on additional debt we also need to remember that it will need to be
Increased Less Savings and Asset serviced and eventually paid back. We need to make sure we don’t
borrowing investment service reductions recycling burden future generations with an unwieldy level of debt.
Our levers enable us to balance service delivery The more debt we carry, the less flexibility we have to respond to any
and financial prudence further shocks. A current example is the drought situation, for which
Watercare may need to soon invest $50 million to $180 million in Leaving capacity
to deal with
2020/2021 for years to come. This might be necessary to some extent, given the emergency critical water supply infrastructure to make sure Auckland doesn’t run unexpected events
situation, but it should be kept to a minimum. out of safe, reliable drinking water.
We think that the highest we can responsibly go with using additional borrowings is to allow
Addressing the challenge
our debt to revenue ratio to temporarily increase to 290 per cent for 2020/2021 before
Auckland Council is committed to ensuring it can maintain essential and critical services
reducing back to our 270 per cent policy limit the following year.
and deliver infrastructure investment while maintaining a strong commitment to financial
prudence. We have four key levers available to achieve this but are constrained in the 2. Reduced capital investment
amount we can use of each. The second lever we have is to delay the start of new capital projects and slow down or
“stretch out” some programmes of work. We have already made decisions to slow down
1. Increased council borrowing
some investments, but to avoid over-reliance on the use of debt, we need to look at delaying
Central government is planning substantial increased spending to support economic
more of the capital programme.
recovery with this spending funded by large increases in government debt. This is possible
because in recent years central government has been maintaining low debt levels with There are some important constraints that the council considers when looking at this. A
substantial unused borrowing capacity. However, we have been steadily increasing our large portion of the capital programme is already contracted and to make changes could
level of borrowing over recent years to invest in critical infrastructure to support our rapidly be costly in terms of breaking or amending contracts. We also need to ensure any works
growing city. We have now reached our debt limits. necessary to meet statutory requirements or critical renewals are prioritised.
Our long-term financial strategy sets a limit on the ratio of our debt to our revenue of 270 Additionally, we need to consider overall value for ratepayers and excessive delays to
per cent. This means that our debt should not exceed $2.70 for each $1.00 of revenue. renewals work could result in higher costs over the long-term.
The severe revenue reduction means that we will undoubtedly exceed this limit next year. As a council we are also required to look wider than our assets and consider our
Financial modelling indicates that without any further mitigating actions, the actual ratio actions in terms of community, economic, cultural and environmental wellbeing. Our capital
is likely to be well over 300 per cent next year and stay above the 270 investment lever has the most impact on jobs and business activity in Auckland.
per cent limit for at least four years. Additionally, analysis that looked Under the 3.5 per cent general rates increase option the council proposes a $2.3 billion
at better or worse case scenarios indicates that different underlying investment programme that we consider represents a significant lift on the investment level
assumptions could see the ratio 20 per cent higher or 10 per cent lower delivered over recent years, but does see many projects delayed or stretched out over a
than our base estimate for next year. longer timeframe. At this level, most existing contractual arrangements would still be able
Increases above our policy limits of this size and duration would erode to be honoured but there would be noticeable impacts on service levels and the timeframes
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for achieving key council objectives. Some major projects that are not yet committed Primarily these are things like roads, libraries, pipe networks and parks that deliver core
would be delayed and there would necessarily be less investment in renewal and safety services highly valued by Aucklanders.
programmes than previously planned. We also, however, have assets that are not delivering council services. These include
In order to achieve a lower 2.5 per cent general rates increase around $65 million in further property assets that may be left over from previous projects (such as a roading upgrade),
delays to capital projects would also be required. Significant delays beyond this would commercial property we may have used for staff in the past, or investments we have in
likely not be possible without breaking contracts and accepting long-term risk to commercial enterprises.
some of our critical assets and services One lever available to us is to sell these assets and use the money to invest in new
3. Reductions in operating expenditure assets that the region needs. We refer to this as asset recycling as it means replacing
As discussed above, significant savings have already been found, but we one underutilised asset with a new one that will help us deliver better services to the
are still a long way from being able to balance next year’s budget and using community.
debt to fund some operating costs will be unavoidable in the short-term. The extent to which our capital is invested in the most strategically important activities
Additional operating cost reductions could help reduce this need to borrow. is something that parties like credit rating agencies and central government look at when
Service reductions
We have already planned to make substantial cuts to our back-office may be temporary assessing our financial position. Changing asset ownership also has minimal impact on jobs
functions. Further savings will impact the services we deliver to and employment compared to spending reductions.
Aucklanders. However, given the expected temporary nature of the revenue pressures these Given the ability of this lever to directly reduce our debt burden without any impact on core
service reductions may only need to be temporary. service delivery, we propose setting an additional target of $200
Under the 3.5 per cent general rates increase option we are proposing a package of million for asset recycling in 2020/2021.
additional operating expenditure reductions for 2020/2021 totalling $54 million. To enable
Government support
a reduction in the level of general rates increase to 2.5 per cent we propose a further $21
Central government announced its Rebuilding Together Budget
million of savings and temporary cuts to services.
in May 2020 which includes significant additional provision for Government may help us
Both packages will result in noticeable changes to what we are providing to the community reduce the pull on some
government spending and infrastructure investment.
and to the level of staff we employ. of our levers
We are talking with central government about how this might
As we move through the year and learn more about our post-COVID recovery challenges
benefit Auckland. If the government decides to invest in some of the projects we have
we may need to make further operational adjustments and temporary changes to service
identified or support us some other way, then this might enable us to provide more services
levels. As we deal with service interruptions and make
and investments next year than set out in this document. This means we could play a bigger
operational decisions and changes, we will keep our
role in helping central government to support jobs and business activity in Auckland as part
communities and local boards as informed as possible.
of the recovery and rebuilding effort.
Any significant and permanent reductions in council
However, there is not yet enough certainty or clarity about this and so we can’t plan for
services will only be made via the upcoming 10-year
it yet. Hopefully this will become clearer before we adopt our final Emergency Budget in
Budget process following further public consultation.
July 2020.
4. Asset recycling
Asset recycling as a To read more about the financial impacts of COVID-19, please read Section 2 of the
Auckland Council has over $50 billion worth of assets. lever to pay down debt Supporting Information document.
10 | TE P UKA KŌW HIT IW H IT I KŌ RE ROEMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
Wāhanga Tuatahi: 2020/2021 He aronga poto i Te Tahua Pūte
Part One: 2020/2021 budget at a glance
CAPEX (CAPITAL PROJECTS) OPEX (OPERATING COSTS)
ORIGINAL 3.5% 2.5% 3.5% 2.5%
AC T I V I T Y BUDGET RATES INCREASE RATES INCREASE RATES INCREASE RATES INCREASE
*
$ 1,300m *
$ 1,095m $ 1,055m* $ 1,616m $ 1,615m
Transport Refer page 12
Water, wastewater $ 670m $ 603m $ 603m $ 754m $ 754m Refer page 14
and stormwater
Parks and $ 342m $ 168m $ 158m $ 768m $ 752m Refer page 16
community
City centre and $ 252m $ 191m $ 186m $ 101m $ 101m Refer page 18
local development
Economic and $ 42m $ 50m $ 40m $ 213m $ 213m Refer page 19
cultural development
Environmental management $ 26m $ 14 m $ 14m $ 436m $ 436m Refer page 20
and regulation
$ 178m $ 163m $ 163m $ 558m $ 558m
Council support Refer page 21
CAPITAL UNDERDELIVERY ASSUMPTION ($160)
TOTA L $ 2.65b $ 2.28b $ 2.22b $ 4.44b $ 4.42b
11 | TE P UKA KŌW HIT IW H IT I KŌ RE ROEMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
Transport
We keep Auckland moving with well-planned transport networks, good quality 3.5% 2.5%
local roads and convenient, frequent public transport that more people use. We
deliver a comprehensive programme of safety improvements to reduce harm
across the transport network.
CAPEX
Public transport services will be impacted by COVID-19 social distancing rules. More people working from home and
concerns about COVID-19 will see fewer people using public transport, but it is important that this essential service 3.5% 2.5%
be maintained. Under all options there will be a noticeable drop in capital investment next year compared to current RATES
INCREASE
$ 1,095m* RATES
INCREASE
$ 1,055m*
plans, with work focusing on projects that are already in progress.
Revenue OPEX
The impact of COVID-19 restrictions, more people working from home and the resulting economic slow-down will
have significant impacts on transport revenue. In 2020/2021, we expect that public transport revenue will be $40 3.5% 2.5%
million lower than planned (assuming that NZTA top up 51 per cent of the gross revenue shortfall and there is a 4 per
RATES $ 1,616m RATES $ 1,615m
INCREASE INCREASE
cent fare increase in February). Parking and enforcement revenue is expected to be down by $33 million, even with
greater levels of enforcement to keep bus and transit lanes clear so that the network flows as efficiently as possible.
We expect a reduction in fuel usage meaning that the Regional Fuel Tax revenue will drop by $20 million. This is *Construction of the City Rail Link will continue, capital investment
additional to a $20 million drop in other Auckland Transport revenue lines. in transport includes Auckland Council’s share of $395 million of
funding for 2020/2021.
Savings
Under the currently planned 3.5 per cent rates increase, a number of operational and capital investment savings will
need to be made in the transport activities in 2020/2021.
Planned operational savings include:
• reduced staff costs, professional costs and contract staff, resulting in $20 million saving
• setting an additional savings target for Auckland Transport, resulting in $7 million saving
• some reductions in the number and frequency of public transport services, resulting in $10 million saving.
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Under a 2.5 per cent rates increase, a further $40 million of capital
Capital investment expenditure would need to be deferred as follows:
$700 million of capital investment will be delivered in 2020/2021 compared with $905 million previously • Additional $28 million deferral of transport growth and
planned. This level of investment will not allow us to support capital programmes undertaken by other improvement programmes with delayed planning work for
agencies or developments in Auckland. If more money was available we would prioritise the originally planned future walking and cycling projects and deferring delivery of any
remaining local road sealing and local board programmes. This
safety and public transport projects. In addition, around $100 million of capital investment that did not
would also include deferring investment in the Airport to Botany
proceed in 2019/2020 will now fall into 2020/2021 further reducing the level of investment in new projects. Mass Rapid Transport investigation works and slowing down
The reductions in capital investment in 2020/2021 include: work on the Mangere cycle route.
• pausing or cancelling of safety improvements include any further rollout of red-light cameras in urban areas, • $12 million of further reductions in Auckland Transport’s planned
the rural road delineation programme, and improvements to high risk intersection and pedestrian crossing renewals leading to further implications for asset conditions,
improvements future maintenance requirements and deaths and serious injury
reduction targets.
• pausing or deferring work on all walking and cycling projects not in construction including Glen Innes to
Tamaki Stage 4, Point Chevalier to Herne Bay, Waitematā Safe Routes programme, Links to Glen Innes, and To achieve a 2.5 per cent average general rates increase we
the Great North Road project. propose reviewing public transport fare structures and concession
fares for next year. This could mean temporarily removing some
• no further investment in electric buses and charging infrastructure is likely to be made in 2020/2021 other
fare concessions and charging more for peak services compared to
than three electric buses already on order
off-peak services. Some users may pay more on some services (in
• deferrals to multi-modal projects such as Glenvar Road, East Coast Road, Lake Road, Esmonde Road addition to currently planned fare changes) and total fare revenue
and Lincoln Road will increase.
• delays in the ferry strategy development and implementation We also propose to increase revenue by introducing charges for
• increased roading maintenance costs in medium term as a result of deferred renewals. some park and ride facilities. This will be done in conjunction with
work on Auckland Transport’s parking strategy. It might result in
some reduction in the use of public transport.
If an average general rates increase less than 2.5 per cent is
decided, then we would need to make a temporary reduction in
road and footpath maintenance, adversely affecting road and
pedestrian safety.
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Water, wastewater and stormwater
About our water expenditure 3.5% 2.5%
Our water functions include:
• supplying safe drinking water and treating wastewater every day
• managing stormwater to minimise flooding and protecting waterways
CAPEX
• providing infrastructure that keeps pace with the growth of Auckland.
These are core services that we will always provide, but over the next year we will be deferring some 3.5% 2.5%
capital investment.
RATES $ 603m RATES $ 603m
INCREASE INCREASE
Important projects, such as the Central Interceptor and the Huia 1 and Hunua 4 watermains, will continue to provide
important infrastructure for Auckland’s future.
OPEX
Auckland’s drought
Alongside COVID-19, Auckland is facing one of the worst droughts in its history. If it continues, new sources of water, 3.5% 2.5%
such as extracting and treating more water from the Waikato River and a new treatment plant, might need to be
RATES $ 754m RATES $ 754m
INCREASE INCREASE
brought forward, at a potential cost of $50 million to $180 million.
Revenue
Watercare (who supply Auckland’s water and manage the wastewater network) expect that water charges revenue If a 2.5 per cent or lower general rates increase is decided, no
will be $50 million lower than previously planned. This is because of COVID-19 and water restrictions to manage further reductions in service or capital investment in addition
through the drought. those shown above would be made.
They are also expecting Infrastructure Growth Charges will be $20 million lower than previously planned as the rate
of development falls.
Savings
Under the currently planned 3.5 per cent rates increase, we plan to make a number of operational and capital
investment savings in the water, wastewater and stormwater activities in 2020/2021.
Planned operational savings include:
• less preventative maintenance including reductions in small projects, and less outsourcing of services in the
Healthy Waters department. This would mean a $2.25 million saving Learn more about the impact of the drought
and our planned response online at
• Water Protection Fund grants, which help rural landowners with riparian planting and fencing, will stop for one year.
www.watercare.co.nz/Water-and-wastewater/
This would mean a $170,000 saving.
Drought-response
14 | TE P UKA KŌWHIT IW H IT I KŌ RE ROEMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET Capital investment $162 million of capital investment will be deferred. This includes: • deferrals across Watercare’s planned capital programme with a number of projects to support growth being rephased, this would mean a $23 million timing change. • deferrals across Healthy Water’s capital programme. This includes: - almost all externally contracted design work - all network growth projects - almost all renewal work and capacity upgrades (except for emergency works) - deferring and/or re-staging of the Hurstmere Road water quality upgrade – to be carried out in conjunction with further streetscape works - almost all small drinking water upgrades - some Water Quality Targeted Rate projects, this would mean a $39 million timing change. 15 | TE P UKA KŌW HIT IW H IT I KŌ RE RO
EMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
Parks and Community
We provide parks, libraries, pools, recreation centres, community halls and events 3.5% 2.5%
that support strong and diverse Auckland communities.
We will continue to provide these services, but there will need to be savings that will affect some service levels,
facility opening hours, maintenance levels and programmes delivered. These savings will have a low overall impact
on the community but there will be some noticeable impacts on the parks, recreation, community, arts and culture CAPEX
activities available to Aucklanders. Changes to services will be determined through consultation with local boards
3.5% 2.5%
and any significant and permanent reductions in council services will only be made via the upcoming 10-year Budget RATES $ 168m RATES $ 158m
process following further public consultation. INCREASE INCREASE
Revenue
OPEX
The impact of COVID-19 restrictions is expected to reduce the public usage of:
• libraries 3.5% 2.5%
• venues for hire RATES $ 768m RATES $ 752m
INCREASE INCREASE
• recreation centres
• pools.
Revenue for Parks and Community is expected to be $30 million lower than originally planned.
If a 2.5 per cent general rates increase is decided, then some
Savings community facilities with low utilisation will need to be
Under the currently planned 3.5 per cent rates increase, a number of operational and capital investment savings will permanently closed. Regional grants provided to the community
need to be made in the Parks and Community activities in 2020/2021. would be reduced by $5 million. Local Board funding would be
further reduced by the equivalent of 20 per cent of discretionary
Planned operational savings include: local funding rather than 10 per cent. There would be a further
• efficiencies, including staff and organisational changes, reduced outsourcing, reduced catering – $10 million reduction in capital investment. This would include
$6.49 million saving reduced regional park renewals, such as deferring track upgrades,
renewal of toilet facilities and accommodation. It would also include
• fewer and smaller events, including regional parks events (such as cancellation of Ambury Farm Day and Sculpture reduced community asset renewals, such as community halls and
at the Botanic Gardens) and other regional events such as Matariki, Waitangi Ki Manukau, Movies in Parks, Music in playgrounds, meaning more possible closures of some facilities.
Parks, Heritage Festival, citizen ceremonies, this would mean $610,000 saving If no general rates increase is decided, then more community
• reduced parks and recreation programmes, including using in-house fitness programmes, reducing park activations facilities would need to be closed to save operational expenditure
and the Arataki Visitors Centre programme, this would mean $420,000 saving and because of health and safety concerns from reduced renewals
and maintenance of facilities. There would be a significant
• direct facility costs savings achievable by reducing opening hours, based on utilisation information and with local reduction in events. Funding to sports and community groups
board consultation - $800,000 saving would drop significantly.
• reduced park track maintenance, this would mean a $260,000 saving
16 | TE P UKA KŌW HIT IW H IT I KŌ RE ROEMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET • deferral of unallocated grant funding from the Sport and Recreation Facilities Investment Fund, this would mean a $3 million saving • scaled back programmes in community centres, arts facilities and libraries, this would mean a $1.07 million saving • fewer arts, culture and events grants due to a reduction in activity, including reduced Q Theatre grant and reduced contestable grants overall, this would mean a $670,000 saving • operational expenditure not required due to delayed community centre build - $300,000 saving • reduction of local board funding by the equivalent of 10 per cent of local discretionary funding- $3 million saving. Capital investment $162 million of planned capital investment as well as the value of incomplete projects from the current year will be deferred. In addition, capital investment deferred from the current year will not be caught up next year. These timing changes include: • fewer land acquisitions, with only land purchases that have already been signed being acquired, as well as land at Manukau Cemetery • delays in the One Local Initiative and growth programmes unless works are already contractually committed, this means no design, planning or new construction being started for projects like new sports fields, toilets, playgrounds, walkways, pools and community centres or parks that do not already exist • deferral of all unallocated and uncommitted Locally Delivered Initiatives projects • most planned renewals for buildings, playgrounds and open space being deferred (80-90 per cent of renewals deferred) with potential closures of community assets if they become a health and safety risk – this means very few replacement of old playgrounds, old library or community halls, cracked walkways and old pools where that was planned for next year • no seismic remediation of community facilities, meaning possible closure of some facilities if deemed a risk to continue operating • reduction of investment in library collections by one third and no new on-line library services or technology • reduction in public art spending (70 per cent reduction). 17 | TE P UKA KŌW HIT IW H IT I KŌ RE RO
EMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
City centre and local development
We help deliver vibrant town centres and a thriving economy that supports 3.5% 2.5%
strong communities and accommodates growth. The city centre development
programme prepares us to host major events such as the 36th Americas Cup
and APEC 2021.
CAPEX
Development of town centres is an important way to stimulate local economies and jobs. Preparations also
need to continue for major events in the city. These activities will continue but will be scaled back wherever 3.5% 2.5%
possible to achieve savings. RATES $ 191m RATES $ 186m
INCREASE INCREASE
Revenue
There will be some reduction in rental revenue from properties owned and managed by the council group.
OPEX
Savings
Under the currently planned 3.5 per cent rates increase, then a number of operational and capital investment 3.5% 2.5%
savings will need to be made in the Centres Development activities in 2020/2021.
RATES $ 101m RATES $ 101m
INCREASE INCREASE
Planned operational savings include:
• a $20 million budget provision of new funding across the group for supporting large events in 2021. This
would be instead of $30 million and would mean $10 million saving.
There would need to be a further $10 million of investment in town
• reduced staff costs and operating efficiencies at Panuku Development Auckland - $3 million centre upgrades deferred if we decide on a 2.5 per cent general
• reduced project planning and placemaking and activation, this would mean a $2.4 million saving rates increase. There would also be a temporary reduction in
cleaning and maintenance standards in Wynyard Quarter. At a
• reduction in professional services for Council planning - $380,000 saving
general rates increase below 2.5 per cent, the continuation of any
• suspension of the Regional Historic Heritage grant for one year - $100,000 centre development work would be put at risk.
Capital investment
$73 million of capital investment by Panuku Development Auckland will be deferred. Panuku’s work will focus
on the completion of projects under construction and property acquisitions for the Northcote Town Centre.
Deferrals include:
- fewer asset renewals
- delaying waterfront projects
- removing the contingency for cost overruns or delays.
The Wynyard Edge Alliance needs to complete capital works for the 36th Americas Cup event in 2021, with capital investment proceeding as previously planned.
Capital investment by the Development Programme office in town centres will be $19 million higher than previously planned as projects underway in 2020 are carried forward to 2021.
Projects that will be deferred include Hobson Street, Myers Park, Nelson Street slip lane and stage 4 of the Ōtāhuhu Town Centre upgrade. Hurstmere Road upgrade will be restaged.
18 | TE P UKA KŌW HIT IW H IT I KŌ RE ROEMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
Economic and cultural development
We provide arts, natural environment, sport and live performance events that enrich 3.5% 2.5%
the lives of Aucklanders and visitors. We promote Auckland as a place to work,
invest, study and visit. We support the creation of quality jobs for all Aucklanders.
The COVID-19 pandemic restrictions mean that international visitors and migration to Auckland will be much lower, and
CAPEX
restrictions on groups will make events much harder to run. Economic growth will be slower over the next few years.
Revenue 3.5% 2.5%
The size and number of events will be much lower as a result of COVID-19 and this will reduce the revenue of Regional
RATES $ 50m RATES $ 40m
INCREASE INCREASE
Facility Auckland (RFA) by $40 million. With border restrictions very few international visitors will come to Auckland.
This means that we will not be spending money on promoting Auckland as a destination (which is partially funded by
OPEX
the Accommodation Provider Targeted Rate). If we decide to suspend the Accommodation Provider Targeted Rate
until March 2021 there will be a $10 million drop in revenue. To read more about this proposal please read page 27 of 3.5% 2.5%
this Consultation Document. RATES $ 213m RATES $ 213m
INCREASE INCREASE
Savings
Under the currently planned 3.5 per cent rates increase, we will need to make a number of operational and capital
investment savings in the economic and cultural development activities in 2020/2021.
Under a 2.5 per cent general rates increase $5 million of critical
Planned operational savings include: renewals for our regional facilities would be delayed, with a risk that
• reduction in RFA’s cost of sales as a result of reduced performances and events, and reduced shop and café sales - one or more may temporarily close. If the rates increase is lower
than 2.5 per cent, then further cuts would be made to Auckland
$16 million saving
Tourism, Events and Economic Development’s (ATEED) economic
• RFA identified further operational savings through reduced operating expenditure and holding vacant positions and development activities, and this would put economic recovery of
deferring salary increases - $6 million saving the region at risk.
• lower staff costs (including factoring in $4 million received for the WINZ Wage Subsidy) and discretionary spending
reductions in RFA - $5.8 million saving
• further cuts to Auckland Live’s public programme and to Auckland Art Gallery exhibitions - $1.1 million
• reduction in major events funding and promoting Auckland as an international destination, funded by the
Accommodation Provider Targeted Rate - $10 million saving.
Capital investment
Uncompleted capital work at Auckland Zoo and on the Aotea Centre mean that capital expenditure by RFA will be $9
million higher than previously planned in 2020/2021 when these projects are completed. The increase in budget is the
unspent portion of the current year budget reflecting the timing change for completion due to COVID-19.
19 | TE P UKA KŌW HIT IW H IT I KŌ RE ROEMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
Environmental Management
and Regulation 3.5% 2.5%
We nurture, look after and monitor Auckland’s natural environment, and protect
it from a variety of natural and human generated threats. We collect and dispose
of Auckland’s rubbish and waste. We keep Aucklanders safe and well through CAPEX
building compliance, animal control, alcohol licensing, resource consenting and
3.5% 2.5%
environmental health activities. RATES $ 14m RATES $ 14m
INCREASE INCREASE
We expect to see less economic activity as a result of COVID-19. This will slow the pace of development over the city
and will see the number of resource and building consents drop.
OPEX
Revenue
We are expecting a 25 per cent - 35 per cent reduction in the number of building and resource consents we issue, 3.5% 2.5%
resulting in a $50 million drop in revenue.
RATES $ 436m RATES $ 436m
INCREASE INCREASE
Savings
Under the currently planned 3.5 per cent rates increase, we will need to make a number of operational and capital
investment savings in the environmental management and regulation activities in 2020/2021. No additional savings are proposed under a 2.5 per cent average
general rates increase.
Planned operational savings include:
• reductions in pest eradication, including delaying the rat eradication component of Te Koro o Waiheke project and
pest eradication on Kawau Island, and reduction in Kauri Dieback research - $1.17 million saving
• reduction in the Natural Environment Heritage Grant for community-led conservation and low carbon living
projects, and the programme to support rural landowners restore high ecological value sites – $530,000 saving
• reduction in the number of animal shelters from three to two, as well as the closure of the Waiheke animal shelter -
$300,000 saving
• optimisation and automation of consenting processes - $5 million saving
• reduction in staff and staff costs and internal efficiencies in the Environmental Services, Waste Services and
Regulatory Services departments - $3.43 million.
2 0 | TE P UKA KŌWHIT IW H IT I KŌ RE ROEMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
Council Support
We support Auckland Council to deliver services and elected representatives 3.5% 2.5%
to make decisions. We provide emergency management for the city. We provide
grants for large regional amenities. Council Support includes the operations of
the Ports of Auckland.
CAPEX
Our focus is on striving to keep as many front-line council services operating as possible. Therefore, a wide range of
operational savings have been identified across the council support activity.
3.5% 2.5%
Revenue RATES $ 163m RATES $ 163m
INCREASE INCREASE
The impact of COVID-19 and the expected economic slow-down will have a significant adverse impact on revenue.
We are expecting no dividend from Auckland International Airport Ltd, which will see revenue drop by $60 million. OPEX
Revenue from the Ports of Auckland is also expected to be $65 million less than previously planned.
Savings 3.5% 2.5%
Under the currently planned 3.5 per cent rates increase, we will need to make a number of operational and capital
RATES $ 558m RATES $ 558m
INCREASE INCREASE
investment savings in the council support activities in 2020/2021.
Planned operational savings include:
• voluntary salary reductions for six months for staff earning over $100,000 (assuming a 75 per cent take-up) - If we decide on an even lower rates increase, the implementation of
$3.71 million saving a living wage for contracted cleaners, climate change initiatives and
Māori outcomes initiatives (such as marae development) would be
• discussion with the Public Service Association (union) on options relating to this year’s annual remuneration review
delayed. We estimate that, if the rates increase was 0 per cent, the
for staff, and whether it should be limited or cancelled - $8.6 million saving council workforce may reduce by around 900 staff members.
• reduction of the Independent Māori Statutory Board budget - $200,000 saving
• reduction in spending against the Mayoral Office budget - $2 million saving
• reductions in governance staff - $650,000 saving
• interest cost savings due to lower interest rates - $15 million saving
• deferral of triennial property valuation process - $4.5 million saving
• reduction of discretionary spend, including travel, training, professional services, marketing, and people function
efficiencies - $12.05 million saving
• reduction in insurance claim costs - $1 million saving
• reduction in corporate property maintenance and utilities costs – $1.5 million saving
• reduction in printing costs from digitisation of documents - $450,000 saving
• optimising business support functions - $1.3 million saving
• vehicle fleet savings, including fewer vehicles and reduced usage - $200,000 saving
2 1 | TE P UKA KŌW HIT IW H IT I KŌ RE ROEMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET • setting a formal target for savings from removing duplication across council-controlled organisations – $5 million • additional savings targets across Finance, Planning and Governance Divisions - $16.65 million. Capital investment $32 million of capital investment deferrals will include: • delay of non-critical information and communication technology initiatives • slow down of the WorkSmart programme, pausing the Manukau Hub project, and deferring some local board office refits • reduction of the response fund for major storm events from $20 million to $5 million. 2 2 | TE P UKA KŌWHIT IW H IT I KŌ RE RO
EMERGENCY BUD GET CONSULTATION D O CUMENT PART ONE: ANNUAL BUD GET
Impacts of rates increases on Emergency Budget
Impact at 3.5% average rates increase Further impacts at 2.5% Further impacts at 1.5 - 0%
Service level reductions including facility Some facilities with low utilisation will be
Impacts on our opening hours and maintenance levels. Most permanently closed. Further deferral of investment More facilities closed.
community facilities capital works, including renewals will be delayed. meaning more possible closures of facilities.
Impacts on community Less programmes delivered in our facilities. Further reductions to grants Funding to sports groups, volunteers and other
programmes and Reductions to community grants and events. and local programmes. community groups would drop significantly.
grants
Reductions to public transport services. Temporary reductions in road and footpath
Impacts on our Deferrals of investment in safety programmes,
Further deferral of capital investment. Review of fares and
maintenance adversely affecting road and
transport network walking and cycling and key corridors.
concessions could result in higher user costs.
pedestrian safety.
Further reductions in grants and Significant reductions in services will further impact the
Impacts on the Reduced support to vulnerable
programmes may further impact most vulnerable, including the homeless and cleaners
most vulnerable groups in our community.
vulnerable communities. contracted to the council paid less than a living wage.
Some key initiatives such as marae development will be
Honouring our Māori outcomes will be progressed as Māori outcomes will be progressed
delayed. Reduced staff capacity and capability will mean
commitment to Māori a key priority area. as a key priority area.
slower progress with achieving key outcomes.
Lower capital and operational spending
Further spending reductions will lead
Impacts on jobs compared to previous plans will result in
to further reductions in jobs and
Further reduction in economic development
and employment lower levels of employment within the council
employment for Auckland.
spending will slow down regional economic recovery.
group and across the wider Auckland economy.
Reduced local activity budgets will temporarily reduce
Further reductions in the council’s ability to
our ability to progress climate change response actions. Higher transport fares and
adequately respond to the climate emergency.
Climate change Temporary reductions in some public transport services further delays to transport investment
Further delays to transport investment will
impacts and delayed investment in public transport and active will adversely affect Auckland’s carbon
further adversely affect Auckland’s carbon
transport modes will delay progress with addressing emissions in the near-term.
emissions in the near-term.
Auckland’s carbon emissions.
Debt limits may be exceeded over the medium
Financial prudence Debt limits are exceeded temporarily but Debt limits are exceeded temporarily but term leading to higher borrowing cost, less
measures drop within prudent limits by 2021/2022. drop within prudent limits by 2021/2022. access to funding, reduced ability to handle shocks
and a higher debt burden for future ratepayers.
2 3 | TE P UKA KŌW HIT IW H IT I KŌ RE ROEMERGENCY BUD GET CONSULTATION D O CUMENT PART TWO: ANNUAL BUD GET
Wāhanga Tuarua: Ngā kaupapa e hiahia whakahoki kōrero ana mātou
Part Two: What we want your feedback on
Rates increase General rates increase for 2020/2021 Question 1
Rates normally make up about 40 per cent of our revenue. Fees We are proposing an average general rates increase of either 2.5 per cent or 3.5
and charges for our services, dividends, government funding, and per cent for 2020/2021. We looked at, but could not responsibly propose rates
revenue from commercial activities are examples of other ways increases below 2.5 per cent because of the severe impacts that would have
council earns revenue. on council services, new infrastructure, our debt levels and employment and
The huge reduction in our other sources of revenue mean that in 2020/2021 we will rely even business activity in Auckland. The scale of the financial challenge that we face for
more on income from rates to fund essential services. General rates are currently planned to next year with a revenue loss of over half a billion dollars due to COVID-19 means
increase by an average of 3.5 per cent next year. that spending on some council services will need to be reduced and many capital
projects will be delayed even with the 3.5 per cent increase we had previously
We understand that many households are struggling financially. We need to balance the
planned. With a lower rate increase of 2.5 per cent, we would need to further
need to keep rates affordable with protecting the core services that provide community
reduce spending on council services and further delay investment in transport,
infrastructure, keep us safe, help stimulate the economy and employment, and support those
who are the most vulnerable in the community. As discussed in the next feedback topic, we parks and community and town centre projects.
are also proposing to provide some targeted support
3.5% 2.5%
to those households and businesses that are most sell some assets and borrow more money. But we
affected by the current situation. will be able to work together with Aucklanders to
secure our core services, support the community
What we are proposing
Unfortunately, we do need to increase rates.
An increase An increase to recover and stay on the path to achieving the
of $1.82 per week of $1.35 per week long-term outcomes for future generations.
If we don’t, we risk our debt levels becoming
or $94.85 or $70.23 We are proposing to increase average
unsustainable and we will need to make service per year on per year on
cuts that compromise some of our core principles. average average general rates by either the currently
planned 3.5 per cent, or by a lower
Community support, community facilities, climate change,
increase of 2.5 per cent.
roading maintenance, and economic development are all areas where significant
cuts and permanent closures would be made. Without an increase to rates, we
Both options require reduced spending, increased debt and asset sales.
Both options would see a reduction in permanent council staff numbers,
also would not be able to extend our living wage policy to contracted cleaners or
disruption to some council services, lower employment across the
continue to provide additional funding to support the homeless. This means we
wider Auckland economy and delays with achieving the council’s key
would not be sufficiently supporting Auckland at the time of its greatest need.
strategic outcomes.
Even at the rates increases we are proposing we still need to make large savings,
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