Covid-19: Time for courage at Auckland Council's financial crossroads

Friday, 13 November 2020

Waiheke Island has got six new fully electric buses to add to its fleet, with more coming over the next 12 years.(video from October 2020)

OPINION: Auckland Council politicians have some big calls to make on how to lead the city through what could be a prolonged, one billion-dollar Covid-19 hit to the council coffers.

The one-year, $450 million blow to council revenue, has suddenly turned into a forecasted, four-year $1 billion problem, just as the council geared up to get serious on issues such as tackling climate change.

It is a political fiscal nightmare. Does the council cut or delay important work? Does it claw in more through new rates? And more problematic, will spending cuts simply add to the city’s wider economic woes?

Will the mayor and councillors have the courage to propose what they believe must be in the 10-year budget, or play politically safe and pitch to the public only what they think people will readily sign-up to?

* Thousands of Auckland properties face 35 per cent rates rise in council cash-raising plan

* Covid-19, drought, the harbour bridge: Auckland's crises generate plenty of lessons

Transport, mostly cars and light vehicles, make up 44 per cent of Auckland’s carbon footprint.

The 10-year budget, to be proposed by the mayor in early December after canvassing behind closed doors with councillors, could be the biggest test of political character in the council’s 10-year life.

Auckland did well in diversifying away from just property rates, but the 60 per cent of non-rate income has been hit hard, public transport fares, stadium hire for concerts, and dividends from the port and airport.

Here’s just one of the challenges - climate change. The council in July passed its Climate Action Plan, the path to its ambitious goal to halve greenhouse gas emissions by 2030, and be net carbon zero by 2050.

Accelerating the replacement of Auckland’s diesel buses with electric ones could cost $120-150 million.

Transport makes up 44 per cent of Auckland’s carbon footprint, most of that from cars and light vehicles.

One way or another, far fewer trips need to be made, a change that will involve a lot more public transport, cycling or walking. That will involve a higher level of investment than at present.

Mayor Phil Goff wants to accelerate the replacement of the region’s 1,360 diesel public transport buses, a programme Auckland Transport estimates could cost an extra $120-$150 million.

Dozens of shops on Queen Street have been vacated due to a Covid-19-related slump in custom.

Councillors have looked at a targeted rate for climate change, somewhere around $50 a year – but will there be the courage to advocate that, if it’s perceived Covid-19 hardship may create public resistance?

There is a broader challenge that Auckland’s elected representatives need to weigh up.

If the economic climate worsens and unemployment and business failures rise, every dollar that the council doesn’t spend – either in wages or projects – is a dollar less that circulates around the city.

Big cost-cutting would make the council’s finances look better, but at what wider economic and social cost?

The council has self-imposed limits on how much it can borrow, a formula that links the level of debt to its income, and by staying inside that, it retains its top credit rating, which helps it borrow cheaply.

Lower revenue than forecast, will lower the borrowing cap. However, we have yet to hear from the council’s finance experts, whether in the low-interest rate world, higher interest costs are a big deal.

In short, putting aside pride in the current strong credit rating, how strong is the case to curb new borrowing and slow much-needed capital work?

Also in the mix of ideas is ways to lift revenue from rates, which pre-Covid-19 made up only about 40 per cent of the council’s total income.

Targeted rates for climate change, changing the boundary used to define “urban” and bring in more properties, could reap an extra $28 million, but again, how much rates-raising will the politicians risk?

Younger Aucklanders have made strong calls for genuine climate action, but will enough people give the thumbs up to an extra dollar a week, or even two dollars, for an agreed programme of counter-measures.

In the final weeks to the release of the proposed 10-year budget, councillors need to back what they believe the city needs, in both the short and the long term, not second-guess public opinion.

That is what next year’s consultation is for.