Rates normally make up about 40 per cent of our revenue. Fees and charges for our services, dividends, government funding, and revenue from commercial activities are examples of other ways council earns revenue.
The huge reduction in our other sources of revenue mean that in 2020/2021 we will rely even more on income from rates to fund essential services. General rates are currently planned to increase by an average of 3.5 per cent next year.
We understand that many households are struggling financially. We need to balance the need to keep rates affordable with protecting the core services that provide community infrastructure, keep us safe, help stimulate the economy and employment, and support those who are the most vulnerable in the community.
As discussed in the next feedback topic, we are also proposing to provide some targeted support to those households and business that are most affected by the current situation.
What we are proposing
Unfortunately, we do need to increase property rates. If we don’t, we risk our debt levels becoming unsustainable and we will need to make service cuts that compromise some of our core principles.
Community support, community facilities, climate change, roading maintenance, and economic development are all areas where significant cuts and permanent closures would be made.
Without an increase to property rates, we also would not be able to extend our living wage policy to contracted cleaners or continue to provide additional funding to support the homeless. This means we would not be sufficiently supporting Auckland at the time of its greatest need.
Even at the property rates increases we are proposing we still need to make large savings, sell some assets and borrow more money. But we will be able to work together with Aucklanders to secure our core services, support the community to recover and stay on the path to achieving the long-term outcomes for future generations.
The two options
We are proposing to increase average general rates by either the currently planned 3.5 per cent, or by a lower increase of 2.5 per cent.
Both options require reduced spending, increased debt and asset sales.
Both options would see a reduction in permanent council staff numbers, disruption to some council services, lower employment across the wider Auckland economy and delays with achieving the council’s key strategic outcomes.
Both of the proposed options will increase our debt to revenue ratio to around 290 per cent in 2020/2021, before dropping back to around 270 per cent in 2021/2022.
Neither option would see us running a balanced budget next year and there will need to be some borrowing to fund operational costs.
We need to carefully manage our debt so we can borrow at this challenging time, but also keep it at a level that is sustainable and fair for future generations.
Both of the proposed options include the sale of non-strategic, non-service assets to raise $200 million that can be reinvested back into the region.
The two options differ in the size of spending reductions required, the impact on the community and their impact on the average rates bill.
The key differences are shown in the following tables: