City budget hole soars to $750 million

Ratepayers could face shock as drought crisis adds to Covid’s effects on finances

Ratepayers could be in for a shock as the drought crisis blows out the hole in Auckland Council’s “emergency budget” to $750 million. “Our budget has just gone from an emergency to a critical situation,” finance committee chair Desley Simpson told the Herald yesterday.

She said the $224m cost to boost the city’s water supply was on the top of the $525m hole in the budget from the impact of Covid-19, which prompted savage cuts to transport and the loss of community services.

The gaping hole comes nine days before councillors have to decide on the final budget and strike a 3.5 per cent or 2.5 per cent rates increase.

Councillors learned yesterday that 64 per cent of submitters to the budget want a rates rise of 2.5 per cent or less. One-in-four submitters want a rates freeze and 9 per cent a rates cut, with many citing financial hardship and the impact of Covid.

Only 28 per cent backed the option for a 3.5 per cent rise, saying it makes sense to invest in infrastructure and keep council services running.

The feedback places councillors in the difficult position of being mindful of the concerns of ratepayers and plugging a bigger budget hole that did not exist when Aucklanders were giving feedback.

“Councillors now have less than two weeks to frame a decision that responds to this critical situation in a way so Aucklanders are not severely compromised in council services,” Simpson said.

Watercare sprang the $224m cost of bringing back old water supplies, upgrading others and taking more water from the Waikato River at a council workshop last Thursday.

The cost is $44m higher than the top estimate of $50m to $180m flagged in the “emergency budget” but not provided for. It is understood Watercare was given until last night to come up with solutions to cover the $224m cost, but has not done so.

Mayor Phil Goff said options for Watercare included increasing water charges, selling surplus assets and deferring non-essential projects.

He said the record number of 34,915 submissions to the budget show how seriously Aucklanders are taking matters.

“The Covid-19 crisis means that this is not a business as usual budget for Aucklanders or for the council.”

Goff said the 28 per cent support for a 3.5 per cent rates rise and 29 per cent support for a 2.5 per cent rise shows Aucklanders’ support for raising rates to provide essential services.

Separate to the public feedback, the council commissioned a Colmar Brunton survey which found 51 per cent support for a 2.5 per cent rates rise and 38 per cent support for a 3.5 per cent increase in council rates.

The draft emergency budget and the Colmar Brunton survey only included options for a 3.5 per cent or 2.5 per cent rates increase, but this did not stop a lot of people expressing a preference for lower rates.

In the draft budget material, Goff said rate rises below 2.5 per cent were not proposed because of the severe impacts that would have.