First a press announcement from the Office of the Mayor on the the upcoming 2015-2025 Long Term Plan – the master Council budget document.
From the Office of the Mayor:
Mayor kicks off review of Auckland’s Long-term plan
11/03/2014
Mayor Len Brown will today set the direction for a full review of the budgets and work plan of Auckland Council and its CCOs over the next 12 months, saying tough choices are ahead as Auckland plans for significant growth over the next decade.
Auckland’s Long-term Plan (LTP) 2012-2022 is reviewed by the Council every three years. The process kicks off at today’s Council Budget Committee.
“With Auckland continuing to experience strong growth, we will need to work hard to strike a balance between investing in vital infrastructure, and keeping our rates and debt low and sustainable,” Len Brown said.
“Auckland’s AA credit rating is testament to the careful and responsible approach we have applied to financial management. But we don’t have a blank cheque to fund Auckland’s growth, and so we need to be clear about the priorities in the Auckland Plan, and prepared to make tough choices in some cases.
“We also need to take advantage of the scale that has been achieved through amalgamation. That’s why I want us to take a thorough look at the opportunities presented by PPPs, alternative funding and commercial partnerships. The focus needs to be on providing higher quality services to Aucklanders, while transferring direct costs from ratepayers.”
Penny Webster, Chair of the Finance and Performance Committee said: “This review is an opportunity for all Councillors and local boards to have an in-depth examination of the budgets and ensure our investments are aligned to the Auckland Plan. I am confident we can continue to find savings and efficiencies, while making the investments we need to.”
The Mayor said that as part of the review he would be asking the Council to look at three areas to more actively manage the growth of debt while providing for important investments in infrastructure, including:
Investigating alternative funding for transport projects such as tolls or a congestion charge
Continuing to make efficiency savings and reducing operating expenditure. The Council has already identified $1.7bn in savings across the 10 year plan, but it is believed further savings can be found
Delaying lower priority capital projects to create room for more significant infrastructure projects to go ahead – which is likely to require some tough decisions from Council.
And speaking of the AA credit rating Bernard Orsman from the Herald (he does have good moments) has this on consequences if the credit rating drops under Mayor Brown’s watch.
Accidentally leaked email reveals Auckland Council at risk of downgrade as debt balloons under Brown’s watch.
Len Brown’s principal policy adviser James Bews-Hair says the Auckland Mayor will be “political toast” if the council’s credit rating is lowered.
In an email accidentally sent to the Herald, Mr Bews-Hair said the mayor’s office has been advised there is a risk the council’s credit rating will be downgraded.
The email was circulated to senior mayoral staff on Sunday following Herald inquiries about council debt, which has soared from $3.9 billion to a projected $7.4 billion in the first four years of Mr Brown’s mayoralty.
In a candid email to Mr Brown’s chief of staff Phil Wilson, head of communications Dan Lambert and chief press secretary Glyn Jones – and copied to the Herald – Mr Bews-Hair outlined the mayoral position on maintaining the council’s AA credit rating.
“We need to keep on using the KPI [key performance indicator] for debt that we set for ourselves in election policy – retaining our rating.
“If we do that right, that can become the basis on which we are judged.
“We are advised that there is a risk that we will be downgraded … frankly, though, if we get downgraded in an improving economic environment then we are political toast anyway,” said Mr Bews-Hair.
Yesterday, the mayor’s office refused to give details about the advice it had received on the risk of a credit-rating downgrade.
Robin Clements, a senior economist with UBS Investment Bank, said credit ratings were a risk instrument for investors and a downgrade would raise the cost of borrowing money.
The timing of the email could not be worse for Mr Brown, who today will outline a new 10-year budget with low rate increases, a revised debt programme and tightening the screws on capital works, albeit with the addition of a funding package for the $2.86 billion city rail link.
Yesterday, he called on the Government to conduct a nationwide review of the way councils are funded, saying property rates were complex and unfair.
Labour’s finance spokesman, David Parker, said the party had no plans to change the way councils were funded. Finance Minister Bill English did not respond on the issue.
Mayor Brown, who doubles as treasurer of the Super City, has borrowed $875 million on average in his first four budgets. This is nearly three times the average annual borrowings of $355 million by the former eight councils between 1989 and 2010. Debt repayment in the current financial year is $367 million.
Mr Brown has refused to talk to the Herald on debt issues.
—-ends—-
First of it is quite interesting to note that both National and Labour have no appetite in even looking at the way Councils are funded although there is a Bill before the Select Committees to limit what Development Contributions on urban development can be used for. That is a separate debate I will raise another day.
For the rest of it if our credit rating does drop under the Mayor’s watch I am hate to say it but it will be burnt toast coming out of Level One of Town Hall.
I have made it very clear since submissions to the 2012-2022 Long Term Plan that I consider the 275% Debt Level for Council to be intolerable. I still find it intolerable today three years on. I have always held the belief that the debt level should never go above 175% (which it was until recently). To make it just that more challenging but viable, just like Pokies have a sinking lid policy I believe we should have a sinking lid on Council debt. 100% would be a nice level for me to lower the debt limit to. If debt falls below the 100% level that is fine but the limit is there in case a new large debt instrument is needed for whatever reason such as new rail line or water source. But 275% means someone can not balance a budget and serious redress needs to happen.
My support on the Mayor is neutral on all things considered at the moment. If the rating drops then my supports drops to negative from neutral. Consequence of Democracy I suppose.
Talking Southern Auckland 