Currently the Auckland Council is going through the process of setting their Long Term Plan, which sets out the councils budget for the next 10 years. This is the timeline from the council’s website.
Long-term Plan timeline
- August 2014 – Mayor’s LTP proposal
- December 2014 – Auckland Council adopts draft LTP
- January and February 2015 – Public consultation on the draft LTP
- April 2015 – Public hearings
- June 2015 – Local boards adopt local board agreements and governing body adopts final LTP.
The first step is when the mayor presents his budget proposal on August 28, which is then discussed and amended by the councillors before a draft is released for public consultation.
Back in June some information about the Auckland Council’s budget was released to the media, and of course the Herald’s Bernard Orsman used this is say the world was going to end with threats to parks, libraries and a variety of projects. However their was no actual numbers released by the Herald or the council at the time. So I thought it would be great to get the information into the wider public domain. Therefore I decided to send a LGOIMA request into the Auckland Council to request the documents that were presented to the council and media.
The Auckland Council media team were happy to supply the details, and there is a wealth of fascinating information in these documents. Today I will focus on the wider issues around funding, and tomorrow the specifics about transport.
The following slides all come from a workshop held on June 7 where information was presented by council staff and CEO’s to councillors and local board chairs.
Firstly attendees were given a document that gave a number of key figures.
The document also included some useful background on the challenges faced, which was expanded up on later.
Opportunity to Create Capacity
The current LTP assumes an average 4.9% rates increase from 2015/16 onwards. In order to reduce this average to the 2.5% to 3.5% range – significant reductions in operating costs will be required. A 2.5% rates increase would require $90 million to be taken out of 2015/16 rising to $630 million by 2024/25. At 3.5 % the reduction is $75 million in 2015/16 and by 2024/25 rises to $430 million. To achieve reductions of this magnitude a range of options will need to be considered. Below are some indicative opportunities which could be considered and developed further.
This suggests the council is rather flexible on the 2.5% target, that was announced by Len Brown during his reelection campaign. This is good news, and not sure enough analysis was done around the effect of that target at the time.
The first presentation was the council CEO speaking on on the topic “Transforming Auckland”.
This largely focussed on how to implement the Auckland Plan, and how to prioritise projects within this.
The main new information is the ten “Spatial Priorities” which are on this map below.
The Spatial Priorities seem to be:
- City and City Fringe
- Avondale/New Lynn
- Manurewa – Papakura
- Flat Bush
However this now means the council has a number of competing priorities, and the announcement of Special Housing Areas has confused this even further. They seem to have so many priorities that too few areas are not priorities.
Next there was a presentation by the Chief Financial Officer titled “Opportunities to create capacity and deliver better value”.
This slide shows where rates money is accounted for, divided between Depreciation (red), Interest (green) and Other (blue).
This slide is one of the most interesting as shows the scale of savings or efficiencies that need to be achieved by 2024/2025. Which is up to $630 million if rates are kept to 2.5% and still $430 million with 3.5%. However this also does show that the issues are not urgent (as in this years budget) but are cummulative over the next decade.
This highlights that while savings can be made from services and efficiencies, a large portion of the spending reduction requires cuts in capital projects.
Defer or reduce capital programme
The capital programme is a major driver of the operating costs in the current LTP. Each new asset adds costs for depreciation, operation of the asset and, when funded by debt, interest. One way to reduce the operating costs is to defer or reduce the capital expenditure programme.
The capital programme based on the current LTP assumptions is $21 billion. Of this 50% is transport, 23% is water supply and wastewater. The next largest group is Parks, Community and Lifestyle. Water and wastewater are funded by user charges so do not impact on the rates.
In order to get a rates reduction of $350 million per annum by year 10, the capital programme would need to reduce by approximately $3.7 billion.In order to get a rates reduction of $250 million per annum by year 10, the capital programme would need to reduce by approximately $2.7 billion.
As the two biggest rates funded areas this would have the most impact on Transport and Parks, Community and Lifestyle.
Significant savings can be achieved through standardised design and a regional approach to managing renewal priorities and budgets.
The cuts suggested for transport could either be a disaster for public transport, or a great way to get rid of those useless and oversized roading projects we have been arguing against (like Penlink and Mill Road). Tomorrow I will look at transport and especially Auckland Transport’s presentation that was given to the workshop which sheds some light on the discussions surrounding this.