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Council Budget Documents

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.

Making Choices

Current Plan

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.

Prioritisation

The main new information is the ten “Spatial Priorities” which are on this map below.

Spatial Priorities

The Spatial Priorities seem to be:

  • City and City Fringe
  • Takapuna
  • Avondale/New Lynn
  • Westgate/Hobsonville
  • Tamaki
  • Otahuhu/Middlemore
  • Manukau
  • Manurewa – Papakura
  • Flat Bush
  • Pukekohe

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”.

Where we start from

This slide shows where rates money is accounted for, divided between Depreciation (red), Interest (green) and Other (blue).

Rates perspective

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.

Current Position

Efficiency savings targets

So what does it mean

How to resize

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.

5 comments to Council Budget Documents

  • Nice work Luke with the LGOMIA. I did notice the Council’s LTP page is saying “published 25th August 2014″ so we are getting stuff from the future here ;-)

    It shows though what Orsman is doing is crap (and we wonder why he gets piled on at the media table) and with some clear basic information as seen above I am sure the City can have a civilised debate on finances.

    The Spatial Priorities piece is rather interesting as I am reading through some other Committee papers around the South Auckland Industrial Complexes which is being discussed today. All in all it shows to me a couple of things:
    1) Not easy running and building a City (yeah stating the obvious here)
    2) There is both a level of absolute ignorance and (to be very fair) naiveness around how the City works. However, as I have noticed the good blogs have been doing rather well peeling back one layer at a time the shroud around how Auckland works. That said it will be the long game but take your hats off for the work done so far.

  • Fred

    The list of spatial priorities make good sense actually. The New Lynn / Avondale one could be particularly important.

    Edit : hurrah an edit comment feature.

    I meant particularly important to take advantage of CRL.

  • TedF

    As an old dumb joker I wonder if anyone could explain the difference between the Consumer Price index and the Construction Price Index and how that affects the Local Government rates arguments as put forward by Rodney Hide, John Banks and others?

    I feel that the Consumer Index understates the true position as inflation is really biting me and my income and how far it goes. However I’m not building anything only maintaining our home, but the council expenditure is mostly on labour and construction type items.. I don’t need to replace my CRT TV as the little box enables it to give me what I need and most other stuff I can do without. I digress, sorry, let the question stand.

    • Nik

      My understanding is that the index relates to the basket of goods you are comparing against. As different sectors of the economy grow are affected by price pressure at different rates, consumer price index (CPI) is an overall measure that most people are comfortable with, however the affect of the Christchurch rebuild and the Roads of National Significance programs will push and pull in different ways on construction costs.

      I guess that the question comes down to what are you trying to compare against.

      • TedF

        I didn’t make my question clear. The CPI includes items such as electronic goods, airfares, cars etc which are not really factors that feature in my life and I believe in the lives of many other low income people. CPI is the measure against which ACT has set up the limits for Local Body Rate increases, but there expenditure is governed more by the Construction Price Index which moves independent to the Consumer Index based on successful tenders (or it used to be) which set it a bit low as well.
        When Local Bodies prepare their budgets they are gaining income from areas whose income is primarily governed by Consumer Index and their expenditure (estimates and actual) are governed by the Construction Index.
        This can make their difficulties greater when the Consumer index is understating the situation and the Construction industry is moved by an overheated building industry in Auckland and Christchurch.

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