Key issue 1: Proposed investment package

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Investment over the next 10 years

For the 10-year period 2021-2031 we are proposing a capital investment programme of around $31 billion.

This compares to around $26 billion included in the previous 10-year budget.

Activity10-year Budget 2018-202810-year Budget 2021-2031
Transport$12 billion$12.3 billion
Water supply, wastewater and stormwater$7.1 billion$11.2 billion
Parks and community$3.7 billion$4.5 billion
City centre and local development$1.3 billion$1.1 billion
Environmental management and regulation$0.1 billion$0.2 billion
Economic and cultural development$0.4 billion$0.3 billion
Council support$1.6 billion$1.5 billion
Total$26.2 billion$31.2 billion


This proposal will require higher rates and debt, and will enable service levels to be improved over time. This proposed level of investment is necessary to renew ageing infrastructure, and to continue to invest in new infrastructure to meet population growth.

While we face the impact of losing revenue from COVID-19, it is important that we keep investing in infrastructure to help the city recover from recession. This stimulates the economy and creates valuable long-term assets for future generations.

This proposed capital programme reflects some key trade-offs in terms of our asset and service levels over time.

The implications of this are discussed on page 29 of the 10-year Budget 2021-2031 Consultation Document. This proposed programme is further detailed in section 7.1 of the 10-year Budget 2021-2031 Supporting Information.

Investment over the next three years

The timing of this investment is important given the urgency of the challenges we face. We are proposing a package of financial responses that will enable capital investment averaging $2.9 billion for the next three years.

Without these measures, much of this investment would be delayed due to the impact of COVID-19, leading to unacceptable risks to our key assets and services. It would also delay the achievement of our important strategic objectives.

Illustration of a dollar sign and an upward arrow.


The proposed budget will see us deliver up to $900 million more investment in the next three years enabled by higher rates and debt. This would enable us to make greater progress with delivering priority transport investment and renewals of community facilities.

It will also create jobs and enable us to start to tackle the challenges of climate change, which will pose serious economic and environmental problems for the city long after COVID-19 ceases to be a problem.

Our financial response

The proposed financial response to enable this level of investment:

  • Continue and intensify our search for savings and value for money – we propose locking in at least $90 million as permanent ongoing annual savings.
  • Continue to sell or lease surplus properties and reinvest the proceeds to meet Auckland’s critical infrastructure needs - we propose to increase our budget for this to $70 million a year over the next three years.
  • Increase our borrowing to a temporarily higher debt-to-revenue ratio of up to 290 per cent for the first three years, gradually returning to 270 per cent thereafter. This would be prudent and appropriate under the circumstances and because of high uncertainty around the impact of COVID-19. Advice from our credit rating agencies indicates that this is unlikely to have a negative impact on our credit rating.
  • Retain our long-term commitment to a 3.5 per cent general rate increase each year, but increase the average general rates for 2021/2022 by 5 per cent before returning to 3.5 per cent from the following year onwards. This one-off increase would help us meet the crisis caused by COVID-19.
Chart shows proposed general rates increases of 5 per cent for the 2021/22 financial year, and 3.5 per cent for the following nine financial years.

Chart shows three lines for the next 10 years. One line represents our debt limit which has been set at 290% of revenue each year. Another line shows that our long-term target remains debt being below 270% of revenue each year. The last line shows our 10-year budget projection, which shows: - Our projection for the 2021/22 and 2022/23 financial years is for debt to be 285% of revenue, below our set debt limit. - A fall in the ratio after this, falling to 275% in 2023/24 financial year, and then being a fraction above our long-term target of 270% in the 2024/25 and 2025/26 financial years. - Dropping below our long-term limit of 270% in the years following, with debt being at around 246% in the 2030/31 financial year.

If the targets for cost savings and asset recycling are not achieved, we would look to reduce or defer investment rather than further increase rates or debt.

The cost of the proposed one-off increase represents approximately $38.50 a year on a residential property valued at $1.08 million, in addition to the currently planned increase of 3.5 per cent.

As outlined earlier, the revenue impacts of COVID-19 could be up to $200 million higher than we have projected under our assumptions. In this case our debt-to-revenue projections would be higher reaching a maximum of 289 per cent in 2023 and would be projected to be 248 per cent at the end of 2031.

Alternatively, we could choose to mitigate the impact of further revenue changes by deferring or reducing investment.

Alternative options

With even greater use of rates and debt we could achieve a 10-year investment programme higher than the proposed $31 billion and achieve further improvements to service levels sooner.

We have considered investment scenarios of up to $35 billion. This would enable more provision for Auckland’s growth and greater ability to achieve the strategic outcomes of the Auckland Plan 2050 sooner. However, we consider that the higher rates and debt required would not be prudent or affordable.

Without higher rates and debt, the capital programme would need to be reduced to a highly constrained level averaging $2.6 billion over the next three years. This would mean 3.5 per cent average rates increases in all years and the debt-to-revenue ratio returning to 270 per cent within three years.

However, up to $900 million could not be accelerated to the first three years and this would result in severe consequences for council services and service levels from delaying that investment.

This chart compares the capital investment of the highly constrained and proposed scenarios.


The graph shows our total group capital investment for each year under the proposed scenario compared to the scenario without additional funding. This shows how the $900 million has been brought forward 2021/22 Without additional funding $2.6 billion Proposed capital investment $3.0 billion 2022/23 Without additional funding $2,6 billion Proposed capital investment $2.9 billion 2023/24 Without additional funding $2.7 billion Proposed capital investment $2.8 billion 2024/25 Without additional funding $2.9 billion Proposed capital investment $2.9 billion 2025/26 Without additional funding $3.0 billion Proposed capital investment $3,1 billion 2026/2027 Without additional funding $3.5 billion Proposed capital investment $3.3 billion 2027/2028 Without additional funding $3.3 billion Proposed capital investment $3.2 billion 2028/2029 Without additional funding $3.5 billion Proposed capital investment $3.4 billion 2029/2030 Without additional funding $3.4 billion Proposed capital investment $3.3 billion 2030/2031 Without additional funding $3.6 billion Proposed capital investment $3.5 billion.

Implications for our activity areas

To provide an indication of the difference the proposed additional $900 million of investment over the next three years could achieve, see examples for each of our seven council activity areas of:

  • what would be delivered over three years without the proposed increase in rates and debt
  • what the risks and implications of this would be
  • what more could be delivered over the next three years with the proposed greater use of rates and debt.

Transport

Water supply, wastewater and stormwater

Parks and community

City centre and local development

Environmental management and regulation

Economic and cultural development

Council support

Implications for our assets and service levels over time

The proposed capital investment programme of $31 billion over 10 years includes over $12 billion of asset renewal expenditure. This represents an increase of about $4 billion (or 50 per cent) compared to our previous 10-year Budget.

This level of asset renewal expenditure will be adequate to keep the condition of our assets within acceptable parameters and support our planned levels of service over the next 10 years, with one key exception.

Investment in our community

In the case of our community assets, we are proposing to change how we deliver the associated services and are therefore not proposing to invest in all the asset renewals that would be required if we continued to operate the full existing portfolio in the current manner.

More information on our proposed approach to community investment is included in Key issue 4: Investment in our community.

Why this is important

Asset renewal requirements tends to be lumpy in nature and it is normal practice to smooth out this investment over time. However, some assets are critical to delivering important services and even relatively short delays can create some unacceptable risks or impacts.

With the additional $900 million of capital investment over the next three years, we are highly confident that no critical asset renewals will be materially delayed because of our proposed investment plan.

Prioritising critical asset renewals

This does not mean that all asset renewals will be undertaken as early as we would like. Because our funding is not unlimited, non-critical asset renewals need to be prioritised against other important investment requirements.

This prioritisation is supported by good information about the condition of our assets and sound asset management practise to ensure that asset-related risks are well managed and actively monitored.

A proactive approach to renewals

In the case of our water supply and wastewater assets, we have reviewed our approach to renewing non-critical assets (local network pipes as opposed to key transmission assets and treatment plants). This review suggested that an optimum approach would be to proactively replace these network pipes rather than wait until they fail.

The cost of an optimum renewal investment approach average around $300 million per year. Our proposed investment plan would see us transition to this new approach over the period of this plan, but over the first three years we would only be able to proactively replace about half of the network pipes that the new modelling suggests we should replace.

Our financial challenge

Our proposed investment plan will significantly improve the reliability and performance of our network of water supply and wastewater pipes over time, but financing constraints mean we won’t be able to make as much improvement over the next few years as we would ideally like.

Aside from financial constraints, there is also some uncertainty about the capacity of the construction market to immediately deliver the optimal rate of pipe renewals.

You should know

This is a highlight of the key topics in the 10-year Budget 2021-2031. See pages 17-29 of the 10-year Budget 2021-2031 Consultation Document for complete information and financial details.

Investment over the next 10 years

For the 10-year period 2021-2031 we are proposing a capital investment programme of around $31 billion.

This compares to around $26 billion included in the previous 10-year budget.

Activity10-year Budget 2018-202810-year Budget 2021-2031
Transport$12 billion$12.3 billion
Water supply, wastewater and stormwater$7.1 billion$11.2 billion
Parks and community$3.7 billion$4.5 billion
City centre and local development$1.3 billion$1.1 billion
Environmental management and regulation$0.1 billion$0.2 billion
Economic and cultural development$0.4 billion$0.3 billion
Council support$1.6 billion$1.5 billion
Total$26.2 billion$31.2 billion


This proposal will require higher rates and debt, and will enable service levels to be improved over time. This proposed level of investment is necessary to renew ageing infrastructure, and to continue to invest in new infrastructure to meet population growth.

While we face the impact of losing revenue from COVID-19, it is important that we keep investing in infrastructure to help the city recover from recession. This stimulates the economy and creates valuable long-term assets for future generations.

This proposed capital programme reflects some key trade-offs in terms of our asset and service levels over time.

The implications of this are discussed on page 29 of the 10-year Budget 2021-2031 Consultation Document. This proposed programme is further detailed in section 7.1 of the 10-year Budget 2021-2031 Supporting Information.

Investment over the next three years

The timing of this investment is important given the urgency of the challenges we face. We are proposing a package of financial responses that will enable capital investment averaging $2.9 billion for the next three years.

Without these measures, much of this investment would be delayed due to the impact of COVID-19, leading to unacceptable risks to our key assets and services. It would also delay the achievement of our important strategic objectives.

Illustration of a dollar sign and an upward arrow.


The proposed budget will see us deliver up to $900 million more investment in the next three years enabled by higher rates and debt. This would enable us to make greater progress with delivering priority transport investment and renewals of community facilities.

It will also create jobs and enable us to start to tackle the challenges of climate change, which will pose serious economic and environmental problems for the city long after COVID-19 ceases to be a problem.

Our financial response

The proposed financial response to enable this level of investment:

  • Continue and intensify our search for savings and value for money – we propose locking in at least $90 million as permanent ongoing annual savings.
  • Continue to sell or lease surplus properties and reinvest the proceeds to meet Auckland’s critical infrastructure needs - we propose to increase our budget for this to $70 million a year over the next three years.
  • Increase our borrowing to a temporarily higher debt-to-revenue ratio of up to 290 per cent for the first three years, gradually returning to 270 per cent thereafter. This would be prudent and appropriate under the circumstances and because of high uncertainty around the impact of COVID-19. Advice from our credit rating agencies indicates that this is unlikely to have a negative impact on our credit rating.
  • Retain our long-term commitment to a 3.5 per cent general rate increase each year, but increase the average general rates for 2021/2022 by 5 per cent before returning to 3.5 per cent from the following year onwards. This one-off increase would help us meet the crisis caused by COVID-19.
Chart shows proposed general rates increases of 5 per cent for the 2021/22 financial year, and 3.5 per cent for the following nine financial years.

Chart shows three lines for the next 10 years. One line represents our debt limit which has been set at 290% of revenue each year. Another line shows that our long-term target remains debt being below 270% of revenue each year. The last line shows our 10-year budget projection, which shows: - Our projection for the 2021/22 and 2022/23 financial years is for debt to be 285% of revenue, below our set debt limit. - A fall in the ratio after this, falling to 275% in 2023/24 financial year, and then being a fraction above our long-term target of 270% in the 2024/25 and 2025/26 financial years. - Dropping below our long-term limit of 270% in the years following, with debt being at around 246% in the 2030/31 financial year.

If the targets for cost savings and asset recycling are not achieved, we would look to reduce or defer investment rather than further increase rates or debt.

The cost of the proposed one-off increase represents approximately $38.50 a year on a residential property valued at $1.08 million, in addition to the currently planned increase of 3.5 per cent.

As outlined earlier, the revenue impacts of COVID-19 could be up to $200 million higher than we have projected under our assumptions. In this case our debt-to-revenue projections would be higher reaching a maximum of 289 per cent in 2023 and would be projected to be 248 per cent at the end of 2031.

Alternatively, we could choose to mitigate the impact of further revenue changes by deferring or reducing investment.

Alternative options

With even greater use of rates and debt we could achieve a 10-year investment programme higher than the proposed $31 billion and achieve further improvements to service levels sooner.

We have considered investment scenarios of up to $35 billion. This would enable more provision for Auckland’s growth and greater ability to achieve the strategic outcomes of the Auckland Plan 2050 sooner. However, we consider that the higher rates and debt required would not be prudent or affordable.

Without higher rates and debt, the capital programme would need to be reduced to a highly constrained level averaging $2.6 billion over the next three years. This would mean 3.5 per cent average rates increases in all years and the debt-to-revenue ratio returning to 270 per cent within three years.

However, up to $900 million could not be accelerated to the first three years and this would result in severe consequences for council services and service levels from delaying that investment.

This chart compares the capital investment of the highly constrained and proposed scenarios.


The graph shows our total group capital investment for each year under the proposed scenario compared to the scenario without additional funding. This shows how the $900 million has been brought forward 2021/22 Without additional funding $2.6 billion Proposed capital investment $3.0 billion 2022/23 Without additional funding $2,6 billion Proposed capital investment $2.9 billion 2023/24 Without additional funding $2.7 billion Proposed capital investment $2.8 billion 2024/25 Without additional funding $2.9 billion Proposed capital investment $2.9 billion 2025/26 Without additional funding $3.0 billion Proposed capital investment $3,1 billion 2026/2027 Without additional funding $3.5 billion Proposed capital investment $3.3 billion 2027/2028 Without additional funding $3.3 billion Proposed capital investment $3.2 billion 2028/2029 Without additional funding $3.5 billion Proposed capital investment $3.4 billion 2029/2030 Without additional funding $3.4 billion Proposed capital investment $3.3 billion 2030/2031 Without additional funding $3.6 billion Proposed capital investment $3.5 billion.

Implications for our activity areas

To provide an indication of the difference the proposed additional $900 million of investment over the next three years could achieve, see examples for each of our seven council activity areas of:

  • what would be delivered over three years without the proposed increase in rates and debt
  • what the risks and implications of this would be
  • what more could be delivered over the next three years with the proposed greater use of rates and debt.

Transport

Water supply, wastewater and stormwater

Parks and community

City centre and local development

Environmental management and regulation

Economic and cultural development

Council support

Implications for our assets and service levels over time

The proposed capital investment programme of $31 billion over 10 years includes over $12 billion of asset renewal expenditure. This represents an increase of about $4 billion (or 50 per cent) compared to our previous 10-year Budget.

This level of asset renewal expenditure will be adequate to keep the condition of our assets within acceptable parameters and support our planned levels of service over the next 10 years, with one key exception.

Investment in our community

In the case of our community assets, we are proposing to change how we deliver the associated services and are therefore not proposing to invest in all the asset renewals that would be required if we continued to operate the full existing portfolio in the current manner.

More information on our proposed approach to community investment is included in Key issue 4: Investment in our community.

Why this is important

Asset renewal requirements tends to be lumpy in nature and it is normal practice to smooth out this investment over time. However, some assets are critical to delivering important services and even relatively short delays can create some unacceptable risks or impacts.

With the additional $900 million of capital investment over the next three years, we are highly confident that no critical asset renewals will be materially delayed because of our proposed investment plan.

Prioritising critical asset renewals

This does not mean that all asset renewals will be undertaken as early as we would like. Because our funding is not unlimited, non-critical asset renewals need to be prioritised against other important investment requirements.

This prioritisation is supported by good information about the condition of our assets and sound asset management practise to ensure that asset-related risks are well managed and actively monitored.

A proactive approach to renewals

In the case of our water supply and wastewater assets, we have reviewed our approach to renewing non-critical assets (local network pipes as opposed to key transmission assets and treatment plants). This review suggested that an optimum approach would be to proactively replace these network pipes rather than wait until they fail.

The cost of an optimum renewal investment approach average around $300 million per year. Our proposed investment plan would see us transition to this new approach over the period of this plan, but over the first three years we would only be able to proactively replace about half of the network pipes that the new modelling suggests we should replace.

Our financial challenge

Our proposed investment plan will significantly improve the reliability and performance of our network of water supply and wastewater pipes over time, but financing constraints mean we won’t be able to make as much improvement over the next few years as we would ideally like.

Aside from financial constraints, there is also some uncertainty about the capacity of the construction market to immediately deliver the optimal rate of pipe renewals.

You should know

This is a highlight of the key topics in the 10-year Budget 2021-2031. See pages 17-29 of the 10-year Budget 2021-2031 Consultation Document for complete information and financial details.