The recent devastating floods in the Auckland region have tragically cost lives and left thousands of families facing material hardship.
This is the latest problem facing Auckland that we need to fix. My budget proposal is setting the groundwork for overhauling Auckland Council group finances to make Auckland a resilient and prosperous city.
Soon after the election, I learned I had inherited a $295 million budget hole.
It was not of my making but a structural problem 12 years in the making.
It was not helped by council taking $127 million of central government money for Three Waters in this financial year to plug previous budget holes. There is a high chance this hole could get worse in light of recent events.
The law requires us to fill the current budget hole with a balanced budget.
In my proposal, we have used a combination of levers to do just that. These include cutting unnecessary and inefficient spending, demanding better performance from ratepayer-owned organisations, reducing our debt servicing costs by selling non-essential assets that aren’t covering their cost of capital, increasing rates, and budgeting for some limited extra borrowing, just in case it is needed.
Therefore, this budget proposal is primarily about cutting excess spending and getting our debt under control so that we have the financial ability to fix Auckland’s infrastructure.
We have worked hard to resist the temptation of adding excessive rates costs to your household at a time when you are already under severe cost-of living strain, interest-rates pressures and for a large number of Aucklanders, financial impacts from our devastating floods.
We have aimed to keep our proposed average rates rise to just 4.66%, below forecast inflation.
We have made clear to Auckland Council’s management that they must reduce management cost and spending on nice to have services, and prioritise projects that will make Auckland a resilient city. The same goes for CCO’s.
Auckland Transport has been told to stop wasting money on projects that Auckland ratepayers don’t want and speed up Auckland’s transport system, while making it more resilient.
Similarly, Ports of Auckland Ltd is a very poor financial performer, offering among the lowest returns of any port company in the world. It has been told to do better and to deliver lower debt and higher dividends to ratepayers.
I am also putting pressure on City Rail Link Ltd to get the City Rail Link finished with only limited cost overruns, given ratepayers and taxpayers are expected to share costs 50/50. The final cost of the project is a big unknown for future years.
We also need to make flood risk mitigation a priority.
We may have no choice but to borrow in future years to meet these costs so we need to get debt down now.
With this in mind, my budget proposal also recommends we sell Auckland Council’s residual 18% minority stake in Auckland International Airport Ltd (AIAL).
In my view, the AIAL shares should really have been sold at least three years ago. Over that time, ratepayers have paid $300 million in interest that they would not have paid had the shares been sold to repay debt, while receiving nothing in dividends.
If we do not sell the shares now, we project that over the next eight years ratepayers could pay another $187 million more in interest than is received in dividends. We don’t even own enough shares to have a director on the board to influence the company’s future direction. I don’t think anyone in our position could regard it as a genuinely strategic asset.
We can only speculate what we might have done for Auckland had we not wasted that $300 million in interest over the last three years, but we should not make it $487 million.
I believe this is a responsive budget proposal.
We have now reflected following the devastating floods recently and all agreed to some changes in this consultation document. We now need to hear from you before we make our final decisions on the budget.
Wayne Brown
Mayor of Auckland
See the Annual Budget 2023/2024 consultation document (PDF 12.8MB) for more information.
