Coronavirus: Auckland Council predicts half billion-dollar hit to finances

Friday, 22 May 2020

Auckland Mayor Phil Goff and chief executive officer Stephen Town at a council meeting earlier in 2020.

Auckland Council is expecting a more than a half a billion dollar shortfall as a result of the coronavirus crisis.

Sixty per cent of the council's revenue comes from sources such as concerts and visitor attractions, pools and leisure centres, operations at Ports of Auckland, dividends from Auckland Airport shares, parking, development contributions and public transport fares.

Auckland Mayor Phil Goff announces Auckland Council facilities will close (video first published in March).

All of these dried up as a result of Covid-19, with new financial analysis revealing there is likely to be $550 million less cash coming in over the next financial year, the council said on Friday.

Auckland Mayor Phil Goff said that means 'we have less money that we can spend on the city and less money to deliver the essential services that Aucklanders rely on'.

**READ MORE:

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Last week, council staff heard about 1500 workers earning more than $100,000 a year will be asked to take a voluntary six-month pay cut of up to 10 per cent.

The council is forecasting a shortfall of $30m in revenue from community facilities, pools and leisure centres alone over the next year.

Goff said it had already seen a shortfall of $1.1m in revenue from the zoo's closure in April, and expected another $5m loss over the next year.

Revenue from rates could also fall next year, as the council is proposing to allow people in hardship as a result of the pandemic to postpone or defer rates payments, the mayor said.

While 'that's the right thing to do' it may mean a shortfall of about $65m of rates income that would normally be available to support the funding of other council services and facilities.

'All of this adds up to a huge challenge for Auckland,' Goff said.

'As a city and a council, we will have to make difficult decisions to reduce costs while ensuring we can continue to deliver key services and invest in critical infrastructure the city needs and which boosts jobs and economic recovery.'

Goff said council was looking at 'every way possible' to save money and reduce expenditure.

This included asking staff to take voluntary pay cuts, and a review 'that will result in fewer jobs in our organisation in the coming months'.

Last week, council staff heard about 1500 workers who earn more than $100,000 a year will be asked to take a voluntary six-month pay cut of between five and 10 per cent.

Finance and Performance Committee Chair Desley Simpson said council would inevitably look to reduce capital spending and operational spending next year to address the 'big revenue hole'.

'These are difficult decisions to make, but absolutely necessary if we want our city to recover as quickly as possible from this crisis.'

While the council's latest statement to the stock exchange NZX, gives more detail about the previously forecast hit, it is not yet clear what will happen to rates revenue next year.

Goff has not taken a position on whether he favours sticking with the previously proposed 3.5 per cent rise in average rates, or a lower 2.5 per cent level being sent out for a second round of public consultation at the end of May.

'I'm not going to go out and tell people what they should vote for, we'll provide all the information that enables those who make submissions, to decide,' Goff told Stuff.

If consultation and then the council, switches to the 2.5 per cent rise, revenue will fall a further $17 million, and the council's ability to borrow will fall by $61m.

Council officers recommended against the lower rate rise, favouring targeted support for the ratepayers who would struggle with the additional 48 cents a week.

OTHER COUNCIL REVENUE SHORTFALLS (ESTIMATES)

Rates postponement - $65m

Auckland International Airport Limited dividends - $60m

Ports of Auckland revenue - $60m

Drop in consenting and licence volumes - $50m

Reduced parking and enforcement fees - $40m

Revenue from leisure centres, holiday parks, pools and other community facilities - $30m

Conventions and concerts - $14.2m

Zoo revenue - $4.8m.