Auckland Council Grapples With Billion-dollar Revenue Challenge
The $450 million hole that COVID-19 has punched in Auckland Council’s finances this year could grow by a further $540 million by 2024 according to a new forecast.
Auckland Mayor Phil Goff says that while New Zealand’s economic picture is currently looking better than was anticipated back in March and April, the COVID-19 situation will continue to impact heavily on council income for at least the next three years.
“About 60 per cent of Auckland Council’s income comes from sources other than rates like concerts and visitor attractions, operations at Ports of Auckland and dividends from Auckland Airport shares.
“These sources have all taken a big hit with both the lockdowns and border closures. If we assume that borders could be closed for another two years, the latest forecast shows we could lose a further half billion dollars over the next three financial years, on top of the $450 million revenue hit in the 2020/2021 financial year.
“Many Aucklanders and Auckland businesses are doing it tough with reduced income. Council is in the same situation of having to do what we need to do with less money than we had planned to have,” Phil Goff says.
“The key to our 10-year Budget will be a clear focus on prioritising the essentials that Aucklanders need and value.
“Councillors made some really tough calls in the Emergency Budget this year because of the city’s reduced income. There was no money to throw around, but we did ensure that we continued to invest strongly in major infrastructure projects and to keep core services running.
“In this 10-year Budget, there will similarly be things that we want to do that won’t be possible in the current financial environment. We will need to prioritise those things that are the most important to do.”
Finance and Performance Committee chair, Councillor Desley Simpson, says, “We now understand the COVID-induced financial emergency that we are currently experiencing will last much longer than the current financial year. We must retain our sharp focus on savings and efficiencies while making difficult choices about what we are able to provide, given this $1 billion economic hit.
“In the 10-year Budget our challenge will be to maintain our investment in critical infrastructure and services while keeping debt at a sustainable level and developing a practical long-term plan for the future.”
NOTES FOR EDITORS
In July 2020, the council adopted an Emergency Budget for 2020/2021 with a projected reduction in cash operating revenue for the group of around $450 million. At that stage, revenue was projected to recover to close to pre-COVID-19 levels by the following financial year.
The Council’s monthly and quarterly results show that actual revenue is tracking well against those lower revenue projections for 2020/2021 included in the Emergency Budget.
However, the latest projections are that the COVID-19 and other impacts on the council’s revenue will persist for longer than previously anticipated. While the outlook remains uncertain, the indicative magnitude of these impacts on the likely reductions in Council’s cash operating revenue relative to pre-COVID-19 budget projections are as follows:
|Financial year||Cash revenue impact|