New Auckland mayor Wayne Brown called a $270 million deficit in council budgets a “wake-up call” that suggested his term won’t be “business as usual”
The new governing body of Auckland Council met this morning to start putting together an action plan to address a $270 million hole in the budget which could see 12 percent rises in rates next year if not addressed.
The council’s CEO and finance officers addressed the ward councillors and mayor for the Super City’s fifth term, saying they would provide a “broad range of proposals” for the governing body to examine.
Auckland Council chief executive Jim Stabback said it was neither “standard nor usual to be faced with the economic conditions we are in”.
He said although Auckland is neither the cause nor the solution to the cost of living crisis, the city must be ready to do something about it.
“We need to make sure that we don't just focus on solving the immediate short-term problem but that we make changes that will be enduring, and not create more challenging circumstances later on,” he said.
Council chief financial officer Peter Gudsell gave what new mayor Wayne Brown called a “sobering report” and a “wake-up call” as the group struggles to match pace with inflation and interest rates.
He said flexibility and range of levers would need to be in play if the council were able to plug the gap in the books.
These levers include borrowing money, increasing rates, asset sales or delaying and cutting capital expenditure.
Gudsell said a balanced approach to these levers was necessary, saying “If we don’t use one lever, the others have to be pulled harder”.
Brown was clear on his preferences when it comes to the tools in the toolbox, saying while there were pros and cons for each of those approaches, debt and rates increases were less than attractive.
“I think we've been reliant on a bit too much the debt lever in the past,” he said. “It was cheap but it's no longer as cheap so it's not such an appealing lever as it used to be.”
He said rates increases didn’t appeal either, as while the council group might be facing difficult news from their accountants, so were many Auckland households at the same time.
Although he was unable to confirm his intentions prior to receiving advice from the council’s finance team and getting the governing body behind him, these comments do leave asset sales or cuts to services and ongoing expenditures as the more likely options to appear in the forthcoming mayoral proposal.
The governing body retired from public view following around an hour of preliminary discussion to a workshop where they will discuss the remaining options.
Brown said he expected whatever decisions were made by the governing body over the next few months would trigger an audit. This suggests significant changes could be on the docket.
“To me it confirms that forthcoming mayoral process... will not be business as usual,” he said.
The new mayor encouraged his councillors not to rule out any options and remain open-minded as they receive advice on how to proceed.
"The real work starts today and we have a lot to do to meet our statutory time frames,” he said. “The clock is ticking.”
Over the next month, councillors will be advised on the financial ins and outs and strategies on the table for the city. On December 15, they will meet to decide on the approach they will take forward to public consultation.
The final budget itself will be signed off at the end of next June.
Councillor Josephine Bartley wanted to know how confident the finance team was in their forecasts, seeing as the gap between the council’s projected income and expenditure for next year is worse than a worst-case scenario signalled in the budget passed just four months ago.
Gudsell said it was difficult to have a certain forecast in these uncertain times.
"Forecasts have been highly volatile and variable, so the process itself is robust but a number of the factors that make up the outcome of that have moved in quite unprecedented ways, both during Covid and now in the post-Covid era,” he said.
Nevertheless he said the council group had to put a “stake in the ground” using the best information it had.
Returning councillor Mike Lee said there seemed to be something systemic about the budget gap, and criticised some of the language used in council reports to describe these levers.
“I think given we are reporting to the people of Auckland who are going to foot the bill in the end I think it's important we use plain language,” he said.
He said it was important to call them service cuts rather than mitigation, or asset sales rather than recycling.
