Auckland households are facing a double whammy of a 4.4 per cent rates rise and higher water bills due to the impacts of Covid-19 and the drought crisis.

Auckland councillors are almost certain to approve an overall rates increase of 3.5 per cent when they meet today to finalise an "emergency budget".

A second option for a 2.5 per cent overall rates rise has been discounted and a zero rates increase was never on the table due to the severe impact it would have on council services and investment in the city.

Rising waste management costs in different parts of the city and a plan to lower business rates by gradually increasing household rates means household rates will increase by between 4.3 per cent and 4.45 per cent under the 3.5 per cent rates option.

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In dollar terms, the average household rates bill in the old Auckland City and Manukau City areas will rise by about $130 and $110 in other parts of the city.

Mayor Phil Goff said extra costs to reduce the risk of severe water restrictions will lead to higher water charges.

Auckland Mayor Phil Goff. Photo / Jason Oxenham
Auckland Mayor Phil Goff. Photo / Jason Oxenham

The Watercare board, which raised water prices by 2.5 per cent on July 1, will probably hike water prices within the next two months.

"At the time we consulted with Aucklanders we didn't know about the extra $224 million we needed to find for the city's water infrastructure," Goff said.

The higher rates option is the opposite of what most Aucklanders wanted during public consultation on the emergency budget, which attracted nearly 35,000 submissions.

Two out of three of the submitters called for a rates increase of 2.5 per cent or less. One-in-four wanted a rates freeze and 9 per cent a rates cut, many citing financial hardship and the impact of Covid.

Just 28 per cent backed the option for a 3.5 per cent rise.

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Goff defended the decision to dismiss the public feedback, saying it was one input into the decision-making process.

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"Far from being a waste of time and money, it informed us that a majority of Aucklanders back a rates increase to protect the key services and facilities that they value - things like libraries, community services and environmental protection," he said.

Goff said the 21 Local Boards supported a 3.5 per cent rates increase, as have most councillors, and that is why the proposal this year is for a 3.5 per cent rates rise.

Mana whenua and key stakeholders like the Employers and Manufacturers Association also strongly support the 3.5 per cent rates option, he said.

"As well as these considerations, we took into account the need to maintain services essential for the running of the city, the updated financial position, and the expenditure necessary to make up for decades of underinvestment in our roads, public transport infrastructure and environment," the mayor said.

Auckland Chamber of Commerce chief executive Michael Barnett told the Herald in April that more than 80 per cent of businesses responding to a survey gave the thumbs down to a planned 3.5 per cent rates rise.

Goff said councillors have tried to come to a consensus on where to prioritise spending and make cuts from a $750m hole in the budget.

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"None of these have been easy decisions, but as governors of this city, we have to make the hard calls.

"I appreciate that some people will be suffering as a result of Covid-19; that is why we are setting aside $50 million for rates relief and also suspending the targeted rate on visitor accommodation," the mayor said.

Auckland's drought crisis is making things worse for this year's budget. Photo / Simon Runting
Auckland's drought crisis is making things worse for this year's budget. Photo / Simon Runting

In April, council officers estimated between 50,000 and 150,000 households and 4000 to 12,000 businesses will struggle to pay rates and need help.

Budget papers released yesterday show the council has plugged some of the $750m hole that started at $525m and grew by $224m to $750m when Watercare came up with solutions to tackle the drought crisis.

Officers have found an extra $40m for the budget due to a slightly improved economic outlook and Watercare have committed to finding $121m of their costs without burdening the council.

The Government has also provided help at the 11th hour in the form of $98m from its "shovel-ready" programme towards transport projects. It's unclear if the money is for this year's budget or will be spread over several years.

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Goff said the council needs to match its spending to the reduced income.

"Council has become a leaner and more adaptable organisation. With a reduction already of over 600 temporary and contract workers, there will be a further reduction of over 500 permanent jobs.

"Staff and elected members have taken salary cuts. Cuts have been made in service and investment in some infrastructure projects have been deferred, reducing spending by hundreds of millions of dollars," he said.

Finance committee chairwoman Desley Simpson. Photo / Jason Oxenham
Finance committee chairwoman Desley Simpson. Photo / Jason Oxenham

Finance committee chairwoman Desley Simpson said the council will land a budget "which doesn't cripple our future but assists Auckland's rebuild post Covid-19".

Writing in the Herald in May, Simpson said the council was standing with Aucklanders in the new financial reality and listening.

"We are acutely aware of the financial stress that bills such as rates payments will have on you, your family and your business," she said.

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The 'Emergency Budget' by the numbers

• 3.5 per cent - overall rates increase.

• 4.3 per cent & 4.45 per cent - household rates increase.

• $130 & $110 - average dollar increase for households.

• 50,000-150,000 - number of households who could struggle to pay rates.

• 4000-12,000 - number of businesses who could struggle to pay rates.

• $525m - Council budget hole.

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• $224m - Watercare budget hole.

• $40m - savings found to reduce council hole.

• $98m - 'Shovel Ready' money for Auckland Council.