Are the city’s days of low rates rises over?
OPINION: On the growing list of ‘‘new normals’’ we can ponder as the Omicron wave subsides, is the size of future rates bills facing Aucklanders.
The latest glimpse into the future doesn’t provide much cheer.
The upswing in 2021 from a 3.5% average rate rise, to a ‘‘oneoff’’ 5%, has been followed by a likely 6% in July – a signal there may be no return to 3.5%.
‘‘Considering the future path of general rates increases’’ is one measures Auckland Council flagged in an update of its worsening finances, due to Covid19 and rising inflation.
That Covid-19 hit city coffers hard is no surprise. Its impact has been building in the past two budgets, partly due to the council’s success in widening its revenue from being primarily rates.
Rates income is largely guaranteed, whereas marketsensitive revenue from admission charges, public transport fares, and investment returns – such as the once-juicy $60 million dividend from airport shares – is not.
Mayor Phil Goff has been at pains to point out the hit won’t really show up in this year’s budget, the final one under his two-term watch before he retires to unspecified pastures new. Goff’s last budget will be shored up by the fortuitous $127m down payment from the government, under its Three Waters reform, which will see the council’s Watercare company become stateowned.
But with that oncer spent, a politically neutral statement by the council to the stock exchange outlined a possible cocktail of project delays, service cuts or ‘‘changes’’, higher rates and (for only the second time in 12 years) borrowing to prop-up operational budgets – once an absolute no-no.
All of this is despite a nearrecord target of cost-cutting – to the tune of $90m – being worked on for next year.
The glass-half-full view is that investment in public infrastructure will continue at a level unseen elsewhere – in the form of the City Rail Link project, Eastern Busway and the giant Central Interceptor stormwater project.
Environmental projects should continue unaffected, funded by committed targeted rates – with rising inflation being the only question mark over what those dollars can deliver.
Goff saw upside in the ‘‘challenge but not a crisis’’, in that it might force the council to apply more rigour to flushing out dispensable spending.
Dispensable or not, most spending cuts will mean less work for someone – jobs might go or shrink, either within the council or among thosewho might have worked on council projects.
Any part of Auckland’s economy that shrinks, whether it is ratepayer or private money, is not all good news. The pain that might shift off the rates burden will be felt somewhere else.
Another possibility is that the same money might be spent better – something hinted at by Auckland Transport (AT) recently as the Regional Transport Committee heard the agency’s own fiscal plight.
Facing a potential triple whammy of lower council, government and customer funding, committee members reflect on the scenario that too much pressure might force reprioritising – a notion that could hearten thosewho feel too much is spent on roads, and not enough on the alternatives.
The big picture is that Auckland Council’s finances and debt are sound, with international agencies rating them higher than any in Aotearoa, other than the Government’s.
But change, of the type unimagined two years ago, seems certain in Aucklanders’ relationships with their council and the services it provides.