Auckland Council faces massive drop in revenue due to the lockdown and the expected recession, proposes to broaden its rates deferral scheme for businesses and residents facing hardship

Auckland Council faces massive drop in revenue due to the lockdown and the expected recession, proposes to broaden its rates deferral scheme for businesses and residents facing hardship
Auckland Mayor Phil Goff

Auckland Council is embarking on a significant cost cutting programme as it faces a potential loss of hundreds of millions of dollars in revenue over the next financial year from the effects of the COVID-19 lockdown and the recession which is expected to follow.

Auckland Mayor Phil Goff says the biggest drop in revenue is likely to be from people and businesses who will be unable to pay their rates because of financial hardship.

The Council would broaden its ability to defer or postpone the payment of rates for both residential and commercial ratepayers, but the move was expected to reduce the Council's rating revenue by about $125 million in the next financial year.

Goff told interest.co.nz he also expected the increase in rates for the coming year to be reduced to 2.5% rather than the 3.5% increase he campaigned for.

"We've got to be cognisant of the fact that generally, incomes in the community will be less and we've got to make some acknowledgement of that," he said.

On top of that the Council is expected to suffer a net $250 million decline in non-rating revenue.

That includes the reduction in dividend revenue from the Ports of Auckland and Auckland Airport.

Goff said the Auckland Airport dividend was worth about $60 million a year to the Council but the company "won't be paying a dividend for quite some time to come."

And with construction activity in the city expected to decline there would be a reduction in income from fees for things like providing building and resource consents and from development contributions.

There would also be a reduction in income from events held at council-owned stadiums and other venues and a reduction in gate sales at venues such as the zoo, and from regional fuel tax receipts and their matching Government contribution.

"We are going to have to reduce our expenditure, and significantly," Goff said.

To help cover the loss of revenue he was proposing some major costs savings in a number of areas.

These included:

  • Giving notice to what he described as "1100 contingency workers," mostly external contractors such as consultants or people filling temporary positions at the Council.
  • A hiring freeze for new staff.
  • Cancelling the expected increases in contributions to community groups, which ranged from surf lifesaving to the rescue helicopter and Auckland Theatre Company. Their Council funding would be held at current levels.
  • Services at some Council facilities such as libraries and swimming pools might need to be reduced, possibly by a reduction in their opening hours.
  • Goff and the Council's Deputy Mayor and Chief Executive, and the chairs of all Council Controlled Organisations and the chief executives and top executive teams of those organisations have all agreed to take a 20% pay cut.
  • Although the pay of most Council staff was subject to negotiation, it was likely that pay rates would not increase for a year. "I'm not expecting our people to take the cut that I'm taking but they might have to consider that we are not in a position to increase their wages this year," Goff said.

Goff acknowledged that the cuts in expenditure will result in a reduction in services in some areas.

Things that are nice to have but are not core services to Council might have to be deferred or in the worst case, cut," he said.

" Areas of discretionary expenditure will clearly be reduced.

"That may mean it may take us longer to do things that we would rather do more quickly."

However the Council would try to maintain its investment in major infrastructure projects.

"It's imperative to try and maintain our capital expenditure with [central] government to ensure we can continue to build the infrastructure the city badly needs and to stimulate and promote jobs and growth," he said.

However that could be affected by its ability to borrow.

Goff said the Council was required to by its ratings agencies to maintain its debt to income ratio below 270%.

"As our revenue drops, our ability to borrow is damaged.," he said.

"And it's likely that in the next 18 months we may exceed our debt-to-revenue ratio."

The Council would negotiate with the credit ratings agencies over the issue, he said.

Auckland Council is required to have its budget for the next financial year finalised by June 30, but the changes Goff is proposing are so extensive that they will need to go out for public consultation.

Goff said that could delay the budget being finalised and approved until the end of July.

The comment stream on this story is now closed.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

45 Comments

Any chance they will sell some of the AT fleet of cars? Sell small packages of shares in POA and Auckland Airport to Auckland ratepayers?

Selling the cars should be just in time to match the massive dump into the market from car rental companies. Price crash coming?

Contract workers are losing their earning be it Auckland Council or Auckland University....number will be high if add all government departments.

They would just be moving 1100 people into the unemployment queue as important, productive work (e.g. infrastructure) is deferred. Can we not come up with a more intelligent way to allocate human resources? Local government are doing the very thing they need to avoid.

How many consultants will be left? One would.hope.none.

I always thought it was a top down savings and a waste of space we could employ to get the economy rolling on and on and in the interest of those who had saved their dollars, not wasted them. Debt funded doubling down on billions donated to Councillors and Awklands executives has not, repeat not provided the infrastructure to build and sustain a well contained, any port in a storm, debt free, sensible import and export of Fly by nighters and and a City to contain em indefinitely. Awkland is certainly not a Capital City, it is one built on lowered interest and leverage and debt. Mostly given to Consultants, wastrels and theoretical non-productive enterprises. Rates are way less than where I live, so debt is their mantra. What could possibly go wrong??? in a time of need.
Oh! I know...blame a Virus and dump the layers....and layers of non-productive City of Sales workers and consultants galore....Better late than never.....But I would have started at the Top and worked down....Would that not be more sensible....?? pray tell. A long time ago and a lot cheaper...DUH!.

ACC CE Stephen Town has a track record of ruining the organisations balance sheet where he has worked (Whanganui DHB, Tauranga City Council & now Auckland City). He is part of the yes culture, deferring hard decisions and pampering to the elite. He's nothing but a fair weather sailor, leaving several train wrecks behind.

Local and Central government are littered with these people, and by design. Politicians and Councillors are nothing more than puppets to big business, and its time tax and ratepayers undertook mass demonstrations demanding better than crony capitalism. We have reached a point now where socialising losses and privatising profits cant go on.

The biggest problem now is we have the wrong people in charge, that have no idea or will to fix the problems.

11
up

About time. The obscene waste machine may be forced to lean out just enough to provide much needed relief for property owners.
Why is there any discretionary spend at all?
Costs cutting/optimisation should be a continuous priority for councils.
I can guarantee every rate payer won’t notice anything different after these measures have happened.

He wanted to coin a new definition of the derogatory acronym "Jafa" to become "Just Another Fabulous Aucklander", in the hope many Aucklanders would come to Queenstown to holiday. Good luck with that..

17
up

Then how about all the permanent staff on more than $100k taking a haircut as well, that would be just about everyone else in the building

12
up

How is it possible to prepare for a huge drop in rates revenue, while at the same time putting up rates by 2.5%?
Phil Goff is a very nice guy, and I have met with him on more than one occasion, but he is totally naive when it comes to economics.
Like all Socialists who have had a regular public salary all their lives, who have never risked all on a dream, or worked for themselves, Phil thinks that money grows on Government provided trees. He will learn the hard way. When people can’t pay their rates, trying to sell them all up is impossible. All of Phil’s pet projects will grind to a halt. Roads, footpaths, cycle lanes, and the City Rail monster that nobody really wants, will be moth balled for a long time if not forever. At least the accursed orange cones may finally disappear. That alone may be worth the pain.

I think this lovely parody might just apply equally to our Auckland leader, maybe someone has the talent to make a similar one.

https://www.youtube.com/watch?v=TkU1ob_lHCw

All those constructing large buildings around the planned CRL path disagree with you. Every international city has proper public transport. Get with the times.

Tell that to the people whose businesses were ruined while this folly ground through their livelihoods.

Nationalise all councils, its a great opportunity to standardise all policies and proceedures. Savings on procurement could increase also...

They would find a way to balls that up as well.

After all that would be the supercoty to end them all.

It's 2020 and there are regional councils still specifying their own flavour of Fire Hydrant/Valve Cast Iron Lids. A supplier must carry 10x as much inventory just to cater for the fact that certain regional councils know better than the rest of the world.

Consolidation is a bad idea. Politicians and consultants making decisions for towns that they are a thousand miles away from and may have never visited is a bad idea. Plus the cost of travel would skyrocket.

Yes Wellington bus network redesign was a classic example of that. Complete balls up and yet the consultants still got paid.

Have a National measurable (no well-being feelings that can be individually interpreted) policies and procedures standards, and then localized councils.

13
up

A hiring freeze for new staff.

Holy sh*t. Things must be serious! How about they now fire some of the 'communications' people? Got about 150 I think.

You are surely shi^^ing me !

Are there really 150 people in "communications " in the city ?

WTF are they communicating ?

And to whom ?

Each other. About the best way to avoid communicating information to the public.

12
up

Local govt have had debt thrust down their balance sheets since 2008, when someone in govt decided local govt balances sheets were "too light"(I won't mention his name). A total debt of more than $25bln, in a decade. It's hard to get figures on council spending these days, I guess they had a rather large group of "consultants "(or is that, "insultus")
work out how to bury over 20% of nz gdp in the local govt. Always made me sick this one, I hope they get rid of the lot of them, nationwide. And hopefully, the same will happen with central govt consultants.

Government should act to stop massive job losses from local government. It might seem lean and mean to small state lovers, but it is all part of the deflationary spiral that will see your tenants default and no one coming through your business doors. Low rates are no compensation for depression. Paradox of thrift people. Laying off thousands of local gov workers over the country is a giant mistake. Central government can sure up budgets if it wants to.

12
up

That might sound all well and good cs but there is so much fat floating around in that organisation it's not funny.

In my previous job we had 4 consultants at the council on $1500/day (we were up there because companies like Deloitte would bill at nearly double that rate). That is 'fine' while they were working but for 3 months they sat around doing nothing.

The council wouldn't let them go because they were scared those people would get busy on other projects while they (the council) got their shit together and organised some work. So $30k/week straight down the gurgler and that and that was just our little company.

Add to that the project managers that were in charge of these consultants (there were literally dozens of contractors on this project) were also contractors and it became clear to see that the contractor gravy train was all too happy to sit around dragging matters out for as long as they could.

And no doubt some of those contractors had been there for years and years.

The place is a shambles, definitely some good people up there but some of those consultants need to go find a job elsewhere.

The lack of accountability of consultants working for Local Government is disgusting.

10
up

I have had a few consents processed with add on consultant costs from planners and surveyors and the like for $180 an hour. They have basically read the applications and ticked the boxes. Surely the council should use their own staff to do this at $35 an hour. There seems to be a bit of a gravy train for these consultants.

That is because the right wing always get in eventually and make ‘cost savings’ by firing everyone only to find out you do need those employees and then hire consultants instead.
I have never seen anywhere a mayor was able to make reasonable rates decreases while still maintaining a reasonable level of service and a nice city. Most cost saving mayors turn places into holes and destroy good cities.

sad but true.

Saved x million on OPEX and moved triple that on to CAPEX, yet somehow that's a win.

Indeed. When National were turfed out and departments were allowed to hire staff they needed again we had a bunch of folk who'd been on the contracting gravy train in Wellington contacting our company for lower-paid full time roles.

Yep people live to complain about rates bills, but realistically they aren’t that much considering all the rubbish / recycling / water / footpaths / roads / public transport / libraries / events / and more that we get for it. We pay more for power and that is just some water falling down a hill and turning a generator!

The local buses are still running full steam. All empty of course.
The council quickly stopped the unfavourable services they dont like, like ferries, and kept the ones the like running.
Local track refurb has just been announced and will fly in materials using a helicopter too. This is a track in the middle of the city and isnt very long.

How about we start with stopping the obscene taxi services (AT Local) in devenport. And also since there will be less economic activity , we should continue the infrastructure build including public transport so that we don't back in the same mess in 5 years when the economic activity will catch up and our motorways become car parks.
And another suggestion, please start charging all the people who is parking their cars in public spaces which is called roads , I am sure we will be able to cover most of the shortfall in the revenue.

15/09/19. A new report shows the Auckland Council. Will receive projected dividends of just $8.7 million in 2020 and $9.4 million in 2021 before increasing again to $64.3 million in 2022.
Can't blame that on Corona.

Hmmm, smells like austerity.

I agree they're getting smashed on the income front , are already near debt ceiling, and need to do something.

I dont think reduced hours for swimming pools and libraries is the way out of this recession. Not arguing with some of the consulting costs though. Some.

I think the central govt needs to print money from its magic money tree and disburse to councils for infrastructure spending. And/or debt relief. The infrastructure will require consultants though.

keep the people who empty our household bins each week and those keeping our streets neat and tidy. Not sure about the rest.... would we even notice if they were there or not?

I'd notice if my poos didn't reach the sewerage works, water didn't come out of my taps.

Im already noticing in lockdown the grass getting long at the park I take my kids, the cancelled swimming lessons, had the kids library books for 6 weeks and counting now, and am abstaining from using the playgrounds, wish I could use them as our backyard swing rope broke during lockdown. I'm using the council tennis court at our park during lockdown for my eldest, but unfortunately it's hard to get my youngest to leave the house. She's still only at the playgrounds age. Getting good use of the bike tracks.

Our council still collect rubbish but aren't collecting the recycling during lockdown. Our neighbourhood is organising a trailer trip for when lockdown ends.

But for sanity during lockdown i take long walks on the well cut tracks through the town belt. Cut by pixies I believe.

With laying off up to 1100 contingency workers, maybe they could cut back on the Admin side,due to projects being cancelled or put on hold, that will save $100,000 plus per employee, big savings to be made across the board,start at the top

With laying off up to 1100 contingency workers, maybe they could cut back on the Admin side,due to projects being cancelled or put on hold, that will save $100,000 plus per employee, big savings to be made across the board,start at the top

I have been banging on for years about the waste at Local Government level since the days of Len cant -keep- his- fly- closed - Brown .

The city was on the verge of becoming dysfunctional , we had the head of the water system ( Watercare ) earning $900,000 .00 a year , not to mention other examples of fruitless and wasteful expenditure with zero accountability , and absolutely no consequence .

10,000 Staff ? for such as small city , and thousands on salaries of over $200,000 per annum

I find it astonishing that anyone other than High Court Judges , medical specialists , Ministers in Parliament , Ministerial Chief executives , and the Governor of the Reserve Bank, are on Public Service salaries that are so high .

All these overpaid staffers in Auckland Council should get bounced unless they are adding value to the city in excess of half a million Dollars a year , to justify their salary .

I for one am very thankful Rodney Hide blessed us with a super city with its efficiencies of scale. So much better than having smaller councils who could have instead been encouraged and allowed to compete for ratepayers. Nice work, Rod.

If only the Super City council had some sort of oversight or ability to influence their spending or priorities and could have done something about this for themselves. Oh wait, they do. But if you want to consider that then you notice a bit of a trend when it comes to Mayors and Council majorities that gets a bit uncomfortable, so we instead assume every councillor was held at gunpoint to vote for pro-waste policies and everything is Rodney Hide's fault.

Or could it be that the political party that struggles with delivery and financial discipline at a National level produces councillors who think spending is a measure of success and just resort to 'rates bills go brrrrr'?

Last year I sat next to a group of 4 IT self-employed consultants commuting form the gold Coast to Auckland on weekly basis, they are working at Auckland Council. They are doing basic BA and IT Support works, AC was paying for their flights and accommodation while they are in Auckland. Now, what's wrong with the local workforce?

Also the Auckland bridge walkway that was to be made in the near future should be put on hold, or in my opinion should be scrapped, a nice idea but original budget of $67 million, has now been estimated at $349 million, something is off there, maybe just a few to may back handers there, $67 million to $349 million and I hasten to add that they can add what they like to that figure of $349 million,, should be scrapped for good ,