Auckland Council pencils in sky-high rates and water bills for next year

Aucklanders are facing a financial horror show with sky-high rates and water bills pencilled in for next year.

Mayor Wayne Brown said the numbers are going to be nasty for ratepayers if councillors are not prepared to make cuts to services and sell assets.

Heading into a new 10-year budget next year, the starting point for rates is 13 per cent and a senior council source said water bills could rise by more than 20 per cent.

The gloomy outlook comes hard on the heels of a 7.7 per cent rate rise and a 9.5 per cent hike in water bills for residents this year, which took the combined cost for the average household to $4900 during a cost of living crisis.

The projections for next year mean that the financial burden will significantly worsen.

“I’m certainly facing a steep cliff to climb and it will depend whether or not my fellow councillors are prepared to give up on some things they’ve had for years,” said Brown, who oversees the budget process beginning with a draft proposal before Christmas.

He said the costliest challenges are interest on the council’s $12.4 billion debt, depreciation and inflation, leaving the council with no option but to cut costs, cut services or shove up rates when many Aucklanders are yet to come off 2 to 3 per cent mortgages.

A new Government could also make things worse, the mayor said, citing National’s plans to abolish the Regional Fuel Tax and scrap Labour’s Three Waters reforms.

National’s transport spokesman Simeon Brown told the Herald the party would move rapidly to abolish the 11.5 cents a litre Regional Fuel Tax in its first term, and it would probably occur before there is legislation for congestion charging to be implemented.

If Labour’s Three Waters reforms do not proceed, Watercare looks set to remain part of Auckland Council and carry its debt on the council’s books.

National's plans to scrap Labour's Three Waters reforms could lead to higher water bills in Auckland.

This will have two impacts. It will raise the debt-to-revenue ratio closer to the limit where the council potentially gets into credit downgrade territory, and limit how much money Watercare can borrow, forcing it to raise prices steeply to fund its big capital works programme.

Wayne Brown said it was “almost inevitable” that water bills would have to rise more than the 9.5 per cent figure in the existing Long-Term Plan (LTP) unless the balance sheet issues could be dealt with.

“It only requires some form of separation from our balance sheet and/or a Government guarantee of their debt and that problem would disappear.”

The fuel tax issue is equally political, with Simeon Brown saying a significant amount of the money remains unspent, leaving money available to invest in the council’s priorities.

About $330m collected by the tax remains unspent from the $743m collected.

An Auckland Transport spokesman said the tax was forecast to initially build up a surplus with increased spending in later years. Less use of the tax has been applied because of extra money received from the Government’s Covid Response and Recovery Fund, he said.

National Party transport spokesman Simeon Brown plans to scrap the Regional Fuel Tax. Photo / Brett Phibbs

Removing the tax without replacing the revenue will leave a $2b shortfall in the transport budget because the money raised attracts an equal amount of central government subsidies, said Wayne Brown.

Every single option was being discussed to address the LTP challenges, he said.

“We are going through an exercise of prioritising the things that have popular support and those are generally associated with public transport and getting more use of the roads we have got already, rather than launching into new projects.”

One option on the table is to put Ports of Auckland’s operating business on the block while keeping the prime waterfront land in public hands.

The sale of a long-term lease could involve a lump sum payment of about $1b, annual rental and profit share, or a combination of these.

It’s an open secret that Dubai-based DP World made an unsolicited bid to the council in early 2021 to buy the port outright or under a long-term lease to operate the business with the land remaining in public ownership.

Auckland Mayor Wayne Brown is considering a sale of Ports of Auckland's operating business.

“If it delivers additional money and we still have a port there doing what it is doing now… it would be a very bold person to say, ‘I’m not going to take that $1b′ and charge you a whole lot more rates,” he said.

Wayne Brown has also released his ‘Manifesto for Auckland’ for the incoming Government which says the funding mechanisms for the council are unsustainable and calls for a return of GST on rates, rates to be paid on Crown properties and a nationally-funded solution to managed retreat.

Under a $2b cost-sharing flood buyout deal announced between the council and the Government last month for about 700 uninhabitable properties and resilience works, the council has to find nearly $900m.

The big talking point in this year’s budget was the plan by Brown to sell the council’s 18 per cent shareholding in Auckland Airport to pay down debt.

After months of debate, Brown had to settle for selling a 7 per cent share, which raised $836m when the sale went through four weeks ago.

He said the hangover from that decision was a starting point of 13 per cent for rates next year, but it’s unclear if he will put up selling the remainder of the shares in the LTP.

Bernard Orsman is an Auckland-based reporter who has been covering local government and transport since 1998. He joined the Herald in 1990 and worked in the parliamentary press gallery for six years.