Average 2.6% increase in your rates
On Thursday the Auckland Council Budget Committee will be working through the motions of passing the Annual Plan 2014/2015 budget document. My Budget Committee Agenda Out pointed out some highlights from the Budget Committee paper including:
- 1,967 submissions (Unitary Plan has 9,000 on last check)
- 2.4 percent average rates increase proposed although this can go up if cost pressures boil over
- Auckland Transport contributes to $15.6m budget shortfall owing to lower public transport revenue and lower parking revenue
- Auckland Transport Statement of Intent has revised rail patronage down 15% while bus patronage is revised down 7.5% (see page 221 of the agenda)
- Auckland Transport has deferred $50 of capital expenditure for the cycle
- Annual Plan reflects the $83m special dividend from Auckland International Airport which has been used to pay down debt
- Local Boards have put in a range of funding requests
- Most submitters not very thrilled with financial strategy of the Council
- Papakura Local Board specifically advocates to Auckland Transport for the Manukau South Rail Line, while Otara/Papatoetoe Local Board advocate or rather imply for the Manukau Super Metropolitan Centre
In this post I am going to look at the rates and finances with tomorrow looking at Auckland Transport. Thursday I will be at the Budget Committee Tweeting and reporting live on the day’s happenings.
Okay not as “exciting” as Minister of Finance Bill English passing a budget but none-the-less the Auckland Council passing its budget via the Annual Plan will have more visible effects that we might not consciously recognise often.
Here is what is said in the Executive Summary from the Annual Plan draft:
Annual Plan 2014/2015 – Budget Update (page 127 of the Agenda Paper (embedded at bottom of post)
File No.: CP2014/08787
- 1. To provide an update on the budget context and related issues to inform the mayoral-led process of deciding on the final budgets for 2014/2015 on 8 May 2014.
- 2. This report is a revised version of a report to 27 March 2014 Budget Committee meeting which provided a preliminary view of the budget context prior to regional hearings on the draft annual plan.
- 3. The current long-term plan sets out a programme of significant capital investment to help achieve the Auckland Plan.
- 4. The long-term plan also identifies the funding streams and efficiency savings necessary to support council’s delivery of core services alongside the capital investment programme in a way which is affordable for current ratepayers and financially sustainable for future ratepayers.
- 5. The Draft Annual Plan 2014/2015 represented an update and refinement of year three of the Long-term Plan 2012-2022 (LTP).
- 6. Since the adoption of the Draft Annual Plan, budgets have been refreshed to better reflect the true cost of delivering the activities and projects planned for 2014/2015. Performance measures and targets, and schedules of user fees and charges have also been reviewed.
- 7. A total of 1,967 public submissions were received on the draft annual plan with a sizeable number commenting on the council’s financial strategy, expenditure levels and proposed rates increases. A number of these submissions were requests for additional funding.
- 8. Projected capital expenditure for the group for 2014/2015 has been revised down by about $80 million to $1.70 billion. Along with the return of capital from Auckland Airport and capex reductions for 2013/2014, this has resulted in the projected net debt for the group at 30 June 2015 being revised down by about $120 million to $7.31 billion.
- 9. Since adoption of the draft plan, council has approved $4.4 million of additional expenditure. In addition, about $20 million of additional cost pressures have been identified including:
- a budget shortfall for Auckland Transport with a rates impact of $15.6 million. This budget shortfall is primarily driven by lower projections of public transport revenue as a result of lower than expected patronage, and lower than anticipated car parking revenue
- additional expenditure requirements relating to the Proposed Auckland Unitary Plan
- budget shortfalls for Auckland Tourism, Events and Economic Development (ATEED), Auckland Council Properties Limited (ACPL) and Regional Facilities Auckland (RFA).
- 10. The 2.4 per cent average rates increase proposed in the draft annual plan can still be achieved after accommodating all of these cost pressures due to a range of favourable budget movements including:
- higher projected dividends for Ports of Auckland
- interest savings associated with the capital return from Auckland Airport
- Auckland Transport deferring $50 million of capital expenditure changing the approach to funding the future replacement of Auckland Transport’s Electric Motor Units to better align this with the approach to replacing other assets
Note The proposed average rates increase of 2.4 per cent refers to the average across all ratepayers. As a result of the council’s longterm
differential strategy, the average increase for business ratepayers is 0 per cent and the average for residential and other ratepayer
groups is 3.6 per cent.
- Waterfront Auckland paying a one-off dividend to return higher than expected after-tax earnings back to the council parent
- proposed increases in parking charges for the Central Business District.
- 11. The final average rates increase for 2014/2015 could range between 2.4 and 2.7 per cent, depending on the decisions council makes on the following discretionary items:
- $2.5 million of cross-council economic development initiatives proposed to be led by Auckland Tourism Events and Economic Development (ATEED)
- $1.8 million of additional funding for The Southern Initiative
- $365,000 of additional democracy services support for the Advisory Panels
- $150,000 for Waitakere Ranges possum control as referred from the February 2014 Regional Strategy and Policy Committee meeting.
- 12. Looking ahead to 2015/2016, we are currently projecting budget pressures of about $30 million which would need to be addressed to achieve the 4.9 per cent average rates increase projected for that year in the current Long-term Plan. This is primarily the result of a lower than anticipated increases in public transport revenue combined with the impact of the electric trains become operational earlier than previously anticipated.
- 13. The lagged impact of changes in the capital programme on operating budgets mean that it would be very challenging to significantly lower the average rates increase for 2015/2016 by cutting capital expenditure in that year.
- 14. One option to mitigate the high projected average rates increase for 2015/2016 would be to reduce or defer capital expenditure during the 2014/2015 financial year. While there is not sufficient time to undertake another full review of capital expenditure budgets in time for the adoption of the Annual Plan 2014/2015, such a review could be undertaken over the next few months as part of the Long-term Plan work programme.
- 15. If council were to target a $300 million reduction or deferral of capital expenditure in 2014/2015, then the rates requirement for 2015/2016 could be reduced by approximately $23 million as a result of lower interest and depreciation costs.
- 16. Auckland Transport has proposed some material changes to their performance targets for public transport patronage and customer satisfaction.
- 17. Once this committee has decided on the final budgets for the Annual Plan 2014/2015 officers will prepare the annual plan document (incorporating 21 Local Boards Agreements) for agreement and adoption by 30 June 2014.
The Local Board Agreements will be derived from what the Local Boards get from their “wish-list” as well as any pre-existing agreements between them and the Governing Body. The wish list is in the chapter previous to the “Budget Update” section of the Budget Committee agenda paper (which I will embed at the bottom of this post).
Looking at particular the Southern Auckland Local Board wish lists (Otara/Papatoetoe, Manurewa, Papakura, and Franklin) I see what they are wishing for while not exactly the same (each LB will has its unique needs for their unique communities) there is an underlying theme as these Local Boards keep an eye on the regional aspect as well as their local aspect.
I have noted the Southern Auckland Local Boards are asking (mainly Auckland Transport) to get their public transport facilities such as stations, park and rides, bus lanes, and that Takanini Interchange up to par. This is especially as these Local Boards and their Ward Councillors know the major urban growth heading down their (and my) way under the Unitary Plan (in fact it has already started). I note the Papakura Local Board are continuing to specifically lobby Auckland Transport in building the Manukau South Rail Link to allow direct train services (18 minutes compared to 30-45mins by bus) from Papakura (and Pukekohe) to Manukau City Centre – our major service hub (that also has MIT and AUT campuses).
I also see the Otara/Papatoetoe Local Board are making a specific request to the Council on Manukau City Centre and wanting the Centre to be a first class Metropolitan Centre that will be a prime destination for “tourists” and locals alike. Of course this lines up with the Manukau Super Metropolitan Centre aspirations from this end.
Submissions on Annual Plan
This from the Budget Committee agenda document:
35. A total of 1,967 public submissions were received on the draft annual plan. These submissions have been analysed and the following key points are noted:
- 81 submissions commented on the council’s financial strategy, with 38 of these specifically commenting that the proposed expenditure was too high and 22 of these specifically commenting on debt being too high
- 53 submissions commented on rates, with 44 specifically commenting that the proposed rates increase was too high
- 51 submissions opposed the proposed 5 per cent increase in charges for social housing on the basis of affordability
- 48 submissions requested annual funding for Massive Theatre Company and funding to assist them with finding a home
- 7 submissions requested additional funding to support Auckland Sport in implementing their priority actions identified in the Sports and Recreation Strategic Action Plan
- a submission was received from Ngati Whatua Orakei Reserves Board for reserve maintenance and development under the new co-governance arrangements
- 25 other submissions requested funding for other various arts, culture, community and sports organisations.
36. Of the 25 general funding request submissions received, 13 of these were for local board consideration as they related to services determined by the local boards. The remaining 12 Item 14 requests plus the requests for the Massive Theatre Company, Auckland Sport and Ngati Whatua Orakei Reserves Board, have been summarised and included in Attachment A, together with staff commentary on any current context around the particular requests.
37. For those submissions requesting specific amounts, the total capital grant funding requested was $1,421,316 and the total operational funding requested was $576,000 in respect of the 2014/15 financial year.
Looking at this I could safely say that apart from funding applications (which always will occur) most of the submissions are in general opposition to the City finances set out in the Unitary Plan. If I did my own submission on the draft Annual Plan (I did not as I was focused on the larger Unitary Plan submission at the time) I would be in continued opposition apart from the wish list from the Southern Local Boards. The opposition is a continuation of my opposition to the 2012-2022 operative Long Term Plan in which the 2014/15 Annual Plan comes from.
I also know the 2015-2025 Long Term Plan will be out for debate and consultation soon in which I will continue advocating a more fiscally conservative approach to City finances than what we see now.
Below is the Budget Committee Agenda for your reading. Please note it is 27MB in size if you wish to download it. Again tomorrow I will be posting on the Budget Committee Agenda again but specifically on Auckland Transport and the lowered public transport patronage targets for bus and rail. Thursday I will be Tweeting live from the Budget Committee itself.
The Budget Committee May 2014 Agenda