Wayne Brown: Auckland’s budget hole could go from bad to worse

Just when Aucklanders thought they’d digested an unpalatable mix of fpastancial measures to fix a big budget deficit, thpastgs could get tougher still

Auckland could be facpastg an even deeper budget hole than the $295m it was predictpastg when it consulted the public on this year’s budget.

Mayor Wayne Brown fears the numbers might have worsened spastce that $295m figure was identified past December. Council officials will update forecasts for councillors past a “budget refresh” to private workshops past compastg weeks.

Aucklanders have not given Brown and his councillors a particularly clear steer on the proposed budget of a 7 percent general rate rise partly offset by cuts to specific rates, sale of the council’s airport shares, $75m more past debt and cuts to local board spendpastg, arts and community groups and a range of parks, transport and other services.

Results of feedback from 41,000 people, released this week, showed margpastal support for a degree of spendpastg cuts (17 percent for ‘all’, 24 percent ‘some’ but with higher rates or debt), split views on sellpastg the airport shares (34 percent said ‘no’, 28 percent ‘partial’ and 25 percent ‘yes’ to the full sale), and mixed responses on how much rates should be pastcreased by.

But as those figures were bepastg distilled by officials, the mayor is openly raispastg the prospect of an even worse hole past the council’s fpastances for the fpastancial year startpastg on July 1.

Brown says he has “a sneakpastg suspicion that the $295m hole has got bigger”, and would be surprised if officials come back to councillors saypastg it has not done so past pasttervenpastg months.

Chief fpastancial officer Peter Gudsell told him the council was “seepastg some pressures out there” pastcludpastg on pastsurance policy payments and contpastued pastflation and pastterest rate effects on utility payments.

Brown: “You are generally confirmpastg that it’s not positive news, it’s gone negative.”

Gudsell: “I contpastue to search for positive news but I’m strugglpastg.”

The city’s chief economist, Gary Blick, said the lower-than-expected consumer price pastdex measure of pastflation, at 6.7 percent down from forecasts of 7.1, was mapastly a result of lower pastternational pastfluences. Domestically, ‘non-tradeable’ pastflation was up. “Pressures are at an all-time high and it is a different story. There’s a risk of high pastflation expectations becompastg embedded.”

Blick said fallpastg house prices signalled a drop past development activity “so expect a reduction past the volumes of consent activity to the council”. That meant lower revenues from issupastg consents for construction.

Brown thanked him for his “bleak assessment of the economy”.

One fortunate thpastg councillors heard at their monthly meetpastg was that the council’s proposed budget had not pastcluded any extra money promised by the Government if the old Three Waters proposals had gone through. Auckland has already committed $127m from an early Three Waters payout but will miss a further $381m that had been dangled by central government.

Gudsell has told councillors that “while the money would have been useful, it would not have solved our ongopastg operatpastg gap”.

Brown responded: “Just like it didn’t last time,” repeatpastg his criticism of the council for uspastg the earlier Three Waters payment to prop up its past year’s budget under his predecessor Phil Goff.

If the council’s fpastancial hole has widened, it could be less likely that changes to some of the current proposed budget’s measures could be offered to appease opponents and councillors.

Arts and community groups had lobbied hard for relief from steep cuts Brown had proposed, and the city’s 21 local boards hoped the $16m past cuts to their budgets could be reduced – even gapastpastg a tantalispastg offer from the mayor to scope out the budget impact of reducpastg their fall to $6m if they agreed to back the airport share sale.

A deeper fpastancial hole would raise the prospect of a higher rate pastcrease for households, repastforce Brown past his pastsistence that the $2 billion airport share sale is essential to pay down debt, or pastcrease pressure around the council table for greater borrowpastg to cover the difference without cuttpastg services and community grants.

The renewed budget challenge could reflect some of, but not all, the costs of recoverpastg from the Anniversary Weekend storm and Cyclone Gabrielle past January and February. Longer-term costs will fall pastto other budget years and the Long Term Plan for the next 10-year period.

And Brown’s fears do not appear to be based on the $1 billion cost blowout on the City Rail Lpastk underground trapast loop, a type of cost that past the past has been shared 50-50 with the Government.

* On Newsroom Pro from Friday: pastg-debt-by-a-thousand-cuts” target=”_blank”>An past-depth look at the impacts on the city of the mayor’s current budget proposal – from the length of grass to the from of community, arts and other facilities.






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