Hon Rodney Hide

Minister of Local Government

27 May 2010

Auckland Council transition costs cut below Royal Commission estimate

Minister of Local Government Rodney Hide today announced the cost of funding the Auckland Transition Agency’s (ATA) transition work, a figure significantly less than estimated by the Royal Commission on Auckland Governance.

The Royal Commission estimated the cost of their proposed reforms to be between $120-$240 million, the transition costs are now expected to be $94 million at 1 November 2010.

The Royal Commission had projected the transition to take four years, but the transition to One Mayor, One Council for Auckland will now be completed in well under half that time.

The Cabinet decision to proceed was made on 6 April 2009 and the new council will be up and running on 1 November this year.

The transition funding is a loan from the Government to the ATA, and will be repaid by the Auckland Council by 1 November 2011. The Council may decide to refinance this loan through its borrowing programme, so as to spread the impact over time.

The Minister added that, based on planning to date, the ATA has estimated that a further $66 million will be needed after 1 November to complete the information technology (IT) work programme. This is not a part of the Government’s loan package, and will be funded by the new Council once it’s up and running.

It is expected that the overall transition and IT implementation cost will be around $160 million [$94m plus $66m], which is below the Royal Commission mid-point estimate of $180 million.

To put the ATA expenditure on IT into context, local government in the Auckland region typically spends around $90 million annually on IT and has spent $86 million on IT this year already. Local government in the Auckland region will spend more than $2 billion dollars this year, and has a total asset base of more than $27 billion. The total costs of the transition and IT work before 1 November will amount to just 0.3% of its total assets.

“The new Auckland Council will be able to provide integrated planning and improved service delivery at a reduced cost. The emphasis throughout has been on ensuring no undue burden is placed on the ratepayers of Auckland,” said Mr Hide.

“That has been the aim from the very beginning and I am enormously proud of all those involved in making the complex changes needed for the new Auckland Council, in what is a very tight time-frame.

“I anticipate significant efficiency gains in the coming years from integrated long-term planning and decision making by the new Auckland Council; although the savings from these efficiency gains have not been fully quantified at this stage,” said the Minister.

Of the $94 million in transition funding, $34 million covers the cost of the ATA itself, including $6 million for managing the upcoming elections for the new Council and the Local Boards. The remaining $60 million of transition funding will be to provide operational computer systems for Day 1 of the new Council.

The Minister acknowledged that there are also transition costs being borne by existing Councils and other local government organisations such as Watercare Services that are outside the ATA transition costs.

“This spend is instead of expenditure that would otherwise be needed to run the existing IT systems and services within the Auckland region. To put that in perspective, Watercare Services is spending up to $18 million upgrading its IT systems to provide an integrated service to Aucklanders, partially replacing IT spending that would have been undertaken by Metrowater, Manukau Water and the other local water services provided by the remaining councils,” Mr Hide said.

“This transition is a key part of determining Auckland’s future. The Council needs to be up and running on Day One to ensure its efficiencies can be realised. We are doing this ahead of schedule and under cost, and that has got to be good for Aucklanders.”

CROWN LOAN TO ATA

Date / Amount / Description of main expenditure
10 Dec 2009 / 34.4 million / ATA operational costs, including LG elections
20 May 2010 / 36.9 million / 1st allocation for establishing new IT system for Auckland Council
27 May 2010 / 22.8 million / 2nd allocation for establishing new IT system for Auckland Council
Total / 94. 1 million / To be repaid November 2011

ENDS

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