26 July, 2013

Rates rise insufficient to meet escalating Council spending

Auckland Mayoral candidate John Palino says the Mayor is no longer in control of the council and Auckland residents are heading towards large future rates increases.

“The Auckland Council has recently published its Annual Plan for the coming year and it provides a window into just how poorly our region’s finances have been managed.

Rates were set at 2.9 per cent this year – four times the official inflation rate – but even this is not enough to cover the Council’s day-to-day spending for the next 12 months. In fact, to cover the $60 million shortfall, rates would have needed to rise by 7 per cent.

The purpose of setting rates each year is precisely to enable operational spending to be balanced with operational income, so that costs aren’t deferred and ratepayers held liable into the future.

But the huge promises of the Mayor and his lack of control over wider Council activities prevent either project rationalisation or efficiencies. So instead he’s loaded up the credit card.

‘Non-current’ Council borrowing jumped $1 billion in the last year – up a staggering 17 per cent. The largely prudent management of local government finances in Auckland for generations has been all but squandered in just the first term of the Auckland Council alone.

We are all going to have to pay for this in coming years. Already our region’s debt repayments exceed $1 million each and every day, having increased $40 million from last year. That’s equivalent to this year’s rates rise – we increased rates just to service debt.

And what’s driving the spending? Negative labour productivity over the past three years.

At $700 million per annum, the amalgamated Auckland Council now spends 9 percent more on staff than the previous eight councils combined. Between 2011 and 2012, staff numbers increased by a whopping 800 full time equivalents, or over ten per cent.

The Annual Plan’s operating deficit of $60 million could have been almost wiped out if the Council had simply kept to the Long Term Plan projections for employee spending. But lack of leadership has caused staff costs to blow out by $47 million in the space of a year.

With the Mayor already talking new taxes, the region simply cannot afford this. This is people’s money we’re talking about. Money that could be spent elsewhere in the economy. Future jobs are being lost because we will have to pay this money back instead of it moving around the economy.

A sinking lid has to be applied to Council employment policy and a new approach taken to financial management or not only Auckland residents but the New Zealand taxpayer is going to have to cough up more to meet the Mayor’s vision,” says Palino.

www.palinoformayor.co.nz

ENDS

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