Council plots grim scenarios for Auckland ratepayers

Up to 150,000 Auckland households and 12,000 businesses could struggle to pay rates for the rest of the year and need help under one Auckland Council scenario.

Work by finance staff and chief economist David Norman says if disruption from Covid-19 stretches out to March next year, rates income could fall between 10 and 30 per cent.

Council officers looked at the likely impact on different business sectors, including retail, hospitality, accommodation and communications.

This was overlaid with estimates of the numbers of ratepayers likely to take up payment or postponement opportunities.

They also based their assumptions on market commentary about business stress and projected levels of unemployment, which Treasury has said could reach double digits.

Auckland has more than 500,000 residential ratepayers and about 40,000 business ratepayers.

Using two scenarios of Covid-19 lasting six months or 12 months, officers believe between 10 per cent and 30 per cent of Aucklanders will struggle to pay rates and need help.

In the worst-case scenario, about 150,000 households and 12,000 businesses may not pay rates to council for the next three quarterly instalments in 2020.

The grim outlook for many ratepayers is contained in confidential papers on the financial impact of Covid-19 the council has released publicly.

Mayor Phil Goff said a key priority is to help people postpone their rate payments and look at broadening it to businesses.

Rates due on May 28 for the final quarter of this financial year could be deferred penalty-free until August 31, he said.

The council is also looking at payment plans for ratepayers facing hardship and help for the hotel and accommodation sector, devastated by the loss of tourism.

It is considering a rates remission on the “bed tax” for hotels and the accommodation sector in the final quarter this year, and suspending it for the first three-quarters of the new financial year.

The release of the finance papers follows a marathon meeting of the emergency committee on April 16 where Goff and councillors agreed to go out for public consultation on either a 2.5 per cent rates increase or the planned increase of 3.5 per cent.

Goff is strongly defending the plan to increase rates, saying it amounts to an extra $1.35 a week at 2.5 per cent and $1.83 for 3.5 per cent for ratepayers, saying the money is needed to continue to borrow for capital projects and to stimulate employment.

Officers are considering the impacts of a zero rates rise on things such as services, staff numbers, and the council’s AA credit rating, which, if breached, could lead to higher interest rates for debt, forecast to be $9.6 billion by the end of June. Lower rates this year, say officers, would need to be “caught up” next year.