Covid-19: Auckland Council revenue slump could hit $1 billion over four years

Wednesday, 11 November 2020

Mayor Phil Goff delivers the Auckland Council's emergency budget (July 2020).

Auckland Council says its $450 million revenue hit from Covid-19 this year could snowball to nearly $1 billion by 2024.

New forecasts show a decline in annual revenue of $260 million in 2021/22, $170 million the following year and $110 million in 2023/24.

The figures have been released as councillors attended a closed-door workshop looking at the proposed 10-year budget, which is due to go out for public consultation in December.

The revenue slumps do not necessarily mean budget deficits, as the council can consider how to reduce costs further.

* Auckland Council budget: 23 staff laid off - cuts of more than 340 ahead

* Auckland Council budget: Rates up 3.5 per cent and more than 500 jobs to go

Mayor Phil Goff said the forecasts are based on continuing economic restrictions due to Covid-19.

“If we assume that borders could be closed for another two years, the latest forecast shows we could lose a further half billion dollars over the next three financial years,” he said.

Auckland Council expects a revenue slump due to Covid-19 to run for three more years

The council has declined to release the full report considered today, describing it as confidential, but the scenario used is the “medium” of three, and includes two more years of closed borders.

Auckland Council’s most stable revenue source is property rates, but they make up only about 40 per cent of the annual budget.

The riskiest 60 per cent is made up of user charges, commercial revenue, and dividends from council-owned Ports of Auckland and its cornerstone shareholding in Auckland International Airport.

The pointer to ongoing financial woes comes after Stuff revealed that the Council was weighing up new ways to boost rate revenues over the next decade.

A targeted rate for climate change initiatives might accelerate the purchase of electric buses, such as six launched on Waiheke Island.

Council officials estimated 15,500 residential properties could see their rates rise at least 35 per cent under a plan to boost rates on vacant or undeveloped urban property, with 1400 business properties facing rises starting at 82 per cent.

The additional rate could raise as much as $28 million a year.

Councillors have also been considering a targeted rate for climate change initiatives, but Goff told Stuff on Tuesday it wasn’t clear whether there was political, let alone public support for that.

A climate change rate of about $50 a year was suggested in a closed door presentation to councillors in October.

The council is also considering expanding the boundary which classed properties as urban, taking in more properties currently outside the rating limit which is based on a now outdated urban boundary.

The council estimates 9900 currently rural residential or business properties would be hit with increases of about 10 per cent, bringing in an extra $2.3 million.

In trying to meet a $120 million cost-cutting programme in this year’s Emergency Budget, the council is working through cutting the equivalent of 500 full-time staff and looking at asset sales.

In a statement to the stock exchange on Wednesday afternoon, the council said its future options to counter an ongoing revenue slump included review the pace of key capital investments and projects.

Higher rating levels, continuing sales of non-strategic assets and “anticipated funding support from central government and other external agencies” was also in the mix.

“In the 10-year Budget our challenge will be to maintain our investment in critical infrastructure and services while keeping debt at a sustainable level and developing a practical long-term plan for the future,” Goff said in his Wednesday statement.