Auckland Council has released its latest financial update, revealing a massive $270 million budget blowout that it will be seeking to address in the coming months.
Auckland Council Group Chief Financial Officer, Peter Gudsell, says that like many other organisations, the council is experiencing an ongoing impact from rising inflation and interest rates, which is leading to costs rising faster than revenues.
“In our published Annual Budget 2022/2023, the council estimated an ongoing operating gap between $90 and $150 million per year. However, as inflation and interest rates have risen higher and more rapidly than economic forecasters had projected at the time, our latest estimate of the total ongoing operating budget impact for 2023/2024 is around $270 million.
“This means around $180 million of additional operating budget mitigations, over and above the $90 million previously signalled, will be needed for the next financial year, beginning 1 July 2023,” Gudsell said.
Mayor Wayne Brown and his councillors are set to meet on Thursday in a scene-setting exercise that will start conversations around how to address budget concerns.
The meeting agenda touted “tough decisions” would need to be a key part of the annual budget process.
Public consultation goes out in February with a final budget being adopted in late June 2023.
Council foresees a planned 3.5% general rates increase for next year but says this “may change if there are further inflation and interest rate movements”.
Inflation is forecast to have peaked at 7.3% in the year to the end of June 2022, and to remain relatively high throughout 2024, according to the council.
“The council has some financial flexibility to respond to the budget situation and is continuing to prepare and use several options to mitigate the operating gap, but choices and trade-offs will need to be made given the scale of the challenge,” Gudsell said.
It comes as three Auckland cultural organisations were paid $67.8m for the 2022-2023 financial year – representing 3.4% of Aucklanders’ annual rates payments.
For the 2022-2023 financial year, MOTAT (Museum of Transport and Technology) was paid $18.6m, the Auckland War Memorial Museum $32.2m and The Auckland Regional Amenities Funding Board (ARAFB) was paid $16.9 million.
A spokesperson for the Mayor's office said this afternoon that, "Auckland Council is required to fund these institutions under legislation, Auckland War Memorial Museum Act 1996, Museum of Transport and Technology Act 2000 and the Auckland Regional Amenities Funding Act 2008.
"Any changes to the funding of cultural institutions would be consulted on during the Annual Budget process."
In a statement this morning, Brown ruled out speculation from a New Zealand Herald article suggesting rates would rise to double digits.
“Twelve percent rates rises are not acceptable and will not happen," Brown said.
“The new Governing Body needs to find the $270 million for 2023/24 through a combination of head office savings, operational efficiencies, relentless scrutiny of the expenditure and commercial performance of CCOs and the port, and limited rates rises.
“We must also protect the essential services Aucklanders value and keep Auckland Council’s waterfront land in public ownership in perpetuity.”
Auckland Council Chief Executive, Jim Stabback, said in a statement: “As agreed in the current year’s Annual Budget, the council will prepare information to allow informed consideration by the Governing Body and local boards about options for the services we provide, how they are delivered and the role of the council in delivering the services. This work will help inform advice to elected members and management decisions that are focused on financial sustainability and improved outcomes for Aucklanders.
“As an organisation and across the council group (ourselves and our council-controlled organisations), we will continue work to deliver the best value for money and services as we can for all Aucklanders."
SHARE ME