Auckland Council's budget shortfall has grown to a "staggering" $325 million, which would result in a 22.5% rates hike if covered by rates alone, Wayne Brown says.
The council's chief financial officer, Peter Gudsell, said many of the costs had increased for the organisation alongside pressure from the January floods and Cyclone Gabrielle.
"We’ve seen cost increases reflect inflation levels in a number of areas.
"These increases are particularly affecting the price of utilities such as electricity, and impacting the cost of asset renewals, meaning a rise in the amount of money we need to set aside for depreciation.
"As well as these pressures, the council’s budget has been impacted by the storm events earlier this year," he said in a statement.
Gudsell said the council had to increase spending to manage the ongoing impact, such as higher insurance premiums and additional costs to prepare for future weather events
An additional $50 million is also required for storm response next year, bringing the council's total "budget hole" to $375 million, Brown said. The council originally projected a $295 million shortfall in December amid initial budget debate.
In a media release today, the mayor said that "the ongoing projected shortfall is $225 million more than the previous council planned".
"I did not create this hole, but I am determined that the council fix it, so it doesn’t just keep growing," Brown said in a statement.
"Unless we can set Auckland Council on a path of financial sustainability and reduce our debt, then this gaping hole will only get bigger in the years to come.
The Auckland Central MP said it would rip the heart out of the city. (Source: Supplied)
"The shortfall has been driven by our huge debt, increasing interest rates and inflation, and the fact that the last council took one-off funding to cover the last year’s shortfall."
Brown has just returned from Sydney following a meeting to see the city's transport system and after the city weather severe rainfall yesterday.
He said councillors would meet over the next couple of weeks to "solve this problem".
"We need to get this done so we can focus on the things I promised to fix," Brown said, referring to his electioneering slogan.
"Councillors need to be part of a balanced solution that doesn’t involve just hiking rates or adding to our debt mountain."
The mayor said covering the budget shortfall with rates alone would "require an average rate increase of 22.5%" and would only cover already planned-for services.
Brown's budget proposal has come under a storm of criticism after sweeping cuts were proposed to services that the council provides.
The council is proposing a $36 million cut to arts in their next budget, which aims to fill a $259 million dollar hole. (Source: Breakfast)
His proposal includes spending cuts, a below-inflation rates increase, a "modest use of debt", and a sale of the council's shares in Auckland Airport.
"All of these have their place as just relying on rates rises that would be around 22.5%, without providing anything extra, is unrealistic in this time of tight financial pressure on ratepayers, and using debt is what got us into this place," he said today.
Rates could rise in line with inflation - mayor
The proposed cuts stretch to most services Auckland Council provides — with buses, parks, libraries, recreational facilities, clubs, events, and more in the firing line.
Only around one in four Aucklanders supported all of the proposed cuts in a council-commissioned survey made public last month, but 80% supported the notion of cuts.
Speaking to Q+A last month, Brown said he was open to potentially increasing rates more than what he had proposed in order to cover the shortfall. The mayor had originally proposed increasing rates by an average of 4.66% — below forecast inflation.
Wayne Brown spoke to Q+A's Jack Tame in his first long-form TV interview since taking office. (Source: 1News)
"It may well be what comes out of this. I have come up with a suggestion to be discussed, and it will come back to all of the council," Brown said when asked if rates should rise with inflation instead.
"We've had the last six years, everyone got richer in Auckland as their houses went up and up and up, and we had 3% rate rises.
"And now, when the houses are going back down again, and the mortgages have gone up by a hell of a lot. People are saying spend more on rates? I don't think that's fair on those people."
He said borrowing more was no longer an option and that airport shares had to be sold, or that budget cuts would become even more severe.
Final decisions will be made following an updated mayoral budget proposal, which will be released at the end of May.
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