Auckland rates reaching crisis point

Yesterday, the Auckland Council budget committee voted for an additional targeted rate of 4.4 per cent to top up spending on transport, leading to an overall rate increase of 9.9 per cent.

What is the inflation rate in New Zealand? Effectively nil. Just 0.1% in the past year.

This huge increase in rates can’t be blamed on inflation. It is driven by spending. And this is just the first of many instalments. Auckland ratepayers are being set up for a beating through the next decade.

There are various features of the council rating plan that result in a wide range of rate increases across greater Auckland, from negligible to massive.

The lack of a transitional period for the move to set rates on a standard region-wide property value basis is causing a shock to many ratepayers, with rate rises of over 20% for about 30,000 ratepayers. Fairness would mandate that these changes be phased in.

That would not help in reducing overall costs of course, they would just show up elsewhere. There was an attempt in the committee to cap rate increases at 20%, which would have resulted an additional 0.6% in the general rate increase to offset it. That shows how large the additional costs are for these 30,000 ratepayers.

You either pay now or, via debt funding, in the future.

Grandiose capital spending plans are driving projected rate rises of 4-5% a year through to 2022. The draft annual plan has capital expenditure running at over 10% a year from 2017 to 2020. Operating expenditure is projected at 4-5% a year.

The Council’s debt level is set to nearly triple in just ten years, rising from $4.8 billion to $12.5 billion by 2022. This mountain of debt will still exist in 20 and 30 years’ time. What happens when global interest rates start rising, as they have been in recent weeks?

And who could possibly believe there won’t be cost-overruns pushing this even higher? Every few months the demands on ratepayers seem to be increasing.

When facing a gargantuan blowout in debt you should slow down the spending, scale back the plans, and focus on just the most important issues.

The most important problems in Auckland are affordable housing and near-term transport issues, not the longer-term major project wish lists.

In April the Auckland Council reported results of a poll asking residents whether they supported just a ‘basic transport network’, or a more ‘comprehensive transport network’. To ensure they got the result they wanted, the poll question line kept the sketchy and optimistic details of what that might cost for a later question. We all know what the Mayor was wanting.

The track record around the world for local government infrastructure plans, such as inner city rail loops, is massive cost over-runs.

All the more so when they become posturing legacy projects for politicians. You think the Auckland Council plans seem a little expensive? You ain’t seen nothing yet.

Growing cities do need more infrastructure. But the issue is whether Auckland has the right plan, whether the investments are being delivered in the right sequence, and whether they are funding this appropriately.

It’s hard to argue in the affirmative on any of these points.

And how did we end up with unaffordable housing? Auckland’s population is not large for a major city, and the land area is vast. We have lots of land available. We can build both up and out.

There is simply no excuse for unaffordable housing in Auckland.

This is entirely self-inflicted harm. It is caused by council decisions. It is a burden to middle income earners. But it is devastating for lower income earners.

Unaffordable housing is a major cause of child poverty in Auckland.

The Mayor and council planners should be held to account for the appalling consequences of their decisions – extreme financial stress on the most vulnerable in our communities, and the major factor behind child poverty.

Auckland’s problems are entirely manageable. We just need some common sense, fairness, and a degree of realism about our options.

The infrastructure costs of new housing developments need to be fairly reflected in the price of the houses. Longer term, funding should become more user pays.

Councils are service organisations that exist to provide a limited range of core services. This Council’s diverse objectives indicate it is straying far beyond these core functions, to ratepayers’ cost.

David Seymour
ACT Party Leader

ENDS

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