Volume 1: Overview

He Mihi

Tērā tō waka te hoea ake e koe i te moana o te Waitematā kia ū mai rā ki te ākau i Ōkahu.
Ki reira, ka mihi ake ai ki ngā maunga here kōrero,
ki ngā pari whakarongo tai,
ki ngā awa tuku kiri o ōna mana whenua, ōna mana ā-iwi taketake mai, tauiwi atu.
E koro mā, e kui mā i te wāhi ngaro, ko Tāmaki Makaurau tā koutou i whakarere iho ai, ki ngā reanga whakaheke,
ki ngā uri whakatupu - ki tō iti, ki tō rahi.
Tāmaki - makau a te rau, mūrau a te tini, wenerau a te mano. Kāhore tō rite i te ao.
Tō ahureinga titi rawa ki ngā pūmanawa o mātou kua whakakāinga ki roto i a koe.
Kua noho mai koe hei toka herenga i ō mātou manako katoa.
Kua ūhia nei mātou e koe ki te korowai o tō atawhai, ki te āhuru o tō awhi, ki te kuku rawa o tō manawa.
He mea tūturu tonu whakairihia, hei tāhuhu mō te rangi e tū iho nei, hei whāriki mō te papa e takoto ake nei.
Kia kōpakina mātou e koe ki raro i te whakamarumaru o āu manaakitanga.
E te marae whakatūtū puehu o te mano whāioio, e rokohanga nei i ngā muna, te huna tonu i ō whāruarua
i ngā hua e taea te hauhake i ō māra kai, i ngā rawa e āhei te kekerihia i ō pūkoro. Te mihia nei koe e mātou.
Tāmaki Makaurau, ko koe me tō kotahi i te ao nei, nōku te māringanui kia mōhio ki a koe, kia miria e te kakara o
te hau pūangi e kawe nei i ō rongo.
Ka whītiki nei au i taku hope ki ngā pepeha o onamata, ki ōku tūmanako mō āpōpō me ōku whakaritenga kua
tutuki mō te rā nei.
Tāmaki Makaurau, tukuna tō wairua kia rere.

Let your canoe carry you across the waters of the Waitematā until you make landfall at Ōkahu.
There, to greet the mountains, repository of all that has been said of this place,
there to greet the cliffs that have heard the ebb and flow of the tides of time, and the rivers that cleansed the forebears
of all who came,
those born of this land and the newcomers among us all.
To all who have passed into realms unseen, Auckland is the legacy you leave to those who follow,
your descendants - the least, yet, greatest part of you all.
Auckland - beloved of hundreds, famed among the multitude, envy of thousands. You are unique in the world.
Your beauty is infused in the hearts and minds of those of us who call you home.
You remain the rock upon which our dreams are built.
You have cloaked us in your care, taken us into the safety of your embrace, to the very soul of your existence.
It is only right that you are held in high esteem, the solid ground on which all can stand. You bestow your benevolence
on us all.
The hive of industry you have become motivates many to delve the undiscovered secrets of your realm,
the fruits that can still be harvested from your food stores and the resources that lie fallow in your fields.
We thank you.
Auckland you stand alone in the world, it is my privilege to know you, to be brushed by the gentle breeze that carries the fragrance of all that is you.
And so I gird myself with the promises of yesteryear, my hopes for tomorrow and my plans for today.

How this 10-year Budget 2018-2028 is arranged

Finding your way around the three volumes

Volume 1: An overview of our 10-year Budget

Part 1: Provides an introduction to our 10-year Budget including decisions made on the key issues which were consulted on. Our plan for the next 10 years includes a brief overview of the plans, strategies and budget that has been adopted by the Governing Body.
Part 2: Contains our prospective financial statements for 2018-2028 and other key financial information.
Part 3: Report from the Auditor General.
Part 4: Provides Supplementary information on how to contact the council, its structure and people. Glossary of terms and key word index.

Volume 2: Our detailed budgets, strategies and policies

Part 1: Our key strategies - including a Summary of The Auckland Plan 2050, discussion on Māori Identity and Wellbeing and Auckland's 30-year Infrastructure strategy and Financial strategy.
Part 2: Our Activities - key information on what services Auckland Council delivers, performance measures and budget.
Part 3: Our policies - Revenue and Financing policy, Funding impact statement (including the rating mechanism), Financial reporting and prudence benchmarks, Local board funding policy, Allocation of decision making responsibility for non-regulatory activities, Summary of Significance and Engagement policy and CCO Accountability policy.
Part 4: Summary of the Tūpuna Maunga Authority Operational Plan 2018/2019.
Part 5: Our Council-controlled organisations.
Part 6: Supplementary information - Glossary of terms and Key word index.

Volume 3: Local Board information and agreements

Part 1: Provides information on local boards, the development of local board plans and agreements and a summary of planned local board expenditure for 2018-2028.
Part 2: Contains specific information for each of the 21 local boards, including a local board agreement (outlining local activity initiatives and budgets for 2018/2019), and an introductory section that provides context for the agreement.
Part 3: Supplementary information - Glossary of terms and Key word index.

Rārangi kōrero
Contents
Volume 1: Overview

Message from the Mayor
Message from the Chief Executive Officer

Pae tuatahi: Ō mātou mahere
Part 1: Our plan
1.1 Auckland's challenges
1.2 The next 10 years

Pae tuarua: Ō Mātou tahua pūtea
Part 2: Our finances
2.1 Financial overview
2.2 Prospective financial statements and notes
2.3 Prospective consolidated funding impact statement

Pae tuatoru: Tā te kaitātari kaute
Part 3: Auditor's report (not available in the HTML version, available in the PDF or by request)

Pae tuawhā: Pārongo tāpiri

Part 4: Supplementary information
4.1 How the organisation is structured
4.2 How to contact the council
4.3 Glossary of terms

Message from the Mayor

Auckland Council's 2018-2028 10-year Budget delivers $26.2 billion of investment into Auckland's infrastructure. The largest ever in the history of our city.

In striking this budget, we begin a decade of transformational change for Auckland that tackles the critical issues of transport congestion, housing affordability and protecting our environment.

These issues are the result of unprecedented population growth and historic underinvestment in Auckland's infrastructure. To protect our quality of life and to make Auckland a world class city, Council is acting decisively to invest to make Auckland a more exciting, efficient and inclusive place to live, work and play.

The Government and Council are together addressing congestion with a combined package of $28 billion of investment to transform our region's transport network. It will increase the provision of public transport, improve our road network and make it safer, expand cycle and walkways and tackle Auckland's growing congestion. Aucklanders will contribute our fair share in this expenditure through a regional fuel tax (RFT) at 10 cents per litre plus GST.

Building transport infrastructure is critical to supporting the delivery of more houses, unlocking greenfields developments and allowing for intensive housing development around transport hubs.

Many of Auckland's beaches, harbours, streams and aquifers have poor water quality. We had planned to fix the issues causing this problem over the next 30 years - now we're going to do it in 10 years. Some of this work will be funded by water and wastewater charges, and the rest ($452 million) by a water quality targeted rate.

A new natural environment targeted rate will enable us to spend $311 million to tackle the spread of Kauri dieback disease and the predators that are killing our native birds and trees. This work is critical to safeguard our natural heritage for our children and grandchildren.

As a coastal region we must adapt to climate change. An additional $90 million investment in our coastal assets and a further $40 million to address infrastructure repair work will enable us to better anticipate and respond to climate-related events.

Within the constraints of our resources, we also need to promote the innovation, diversity, inclusiveness, and cultural and recreational facilities that make Auckland a great city.

Funding of $120 million is available for the development of sports and recreation facilities. We are also increasing funding to Auckland's Art Gallery and supporting Aucklanders in our poorer communities to gain skills and access job opportunities through the expansion of the Southern Initiative into West Auckland.

This 10-year Budget will help deliver a world class Auckland while keeping rates low and reasonable. It also heralds a new level of transparency and accountability with targeted rates and the Regional Fuel Tax allowing Aucklanders to know exactly where their money is being spent. Ongoing Value for Money reviews are identifying cost savings and service improvements.

Auckland is a vibrant and dynamic region, and the coming decade will be exciting for our city. We are embarking on an investment programme at a level which has not been seen before in New Zealand. It is investment that will make our city a better place to live, that will allow us to grow while protecting our way of life and environment.

Phil Goff

Message from the Chief Executive

Against a backdrop of significant population growth, this budget strikes a balance between investment in critical infrastructure, keeping rate rises low and reasonable, and funding the council services Aucklanders rely on.

The regional fuel tax will support the improvements in transport that Tāmaki Makaurau needs. This means our people will be helping to deliver more public transport, better roads, cycleways and walkways, and better options for Aucklanders to get around.

The water targeted rate will support us to get the right systems in place to stop overflows and keep our waters clean. This is a big and complex job, but our people are up for the challenge so that Aucklanders can enjoy our beaches.

We also have a strong team who care about and are working hard to protect our native birds and trees, including kauri. The targeted natural environment rate will put the work programmes in place that we need to tackle the impacts of Kauri dieback, the management of pests and look after our natural heritage.

At the same time, we'll be continuing our efforts to ensure that we deliver our council services as efficiently and effectively as possible.

Last year we began a series of Value for Money reviews, looking at cost effectiveness and efficiency across the council whānau. So far we have completed reviews for four services. Departments from the council and council-controlled organisations are busy working together to put the recommended actions in place, ensuring that we are offering good value for ratepayers and residents.

We will continue to drive efficiency by becoming a more digital council. We're now halfway to our target of making 70 per cent of our most common transactions available online by 2019. Customers can go online to pay for rates, register dogs, apply for licenses and consents, and make bookings at our many regional parks. We have more services in the pipeline to digitise and make things smarter for our customers.

Our corporate property strategy has benefits of $117 million. This money will help us fund better locations for the public to interact with the council. Better workplaces, coupled with our efforts to improve culture and engagement in the council, will drive better working conditions for staff and boost productivity. Ultimately this will help us attract and keep the talented, passionate people we need to be a great council for Tāmaki Makaurau.

We are committed to building a high performing organisation that will deliver the 10-year Budget and essential council services to all Aucklanders and visitors alike.

Stephen Town

> Back to contents list

Part 1: Our Plan

1.1 Auckland's Challenges

The recently revised Auckland Plan identified three key challenges facing Auckland. This 10-year Budget has focused on key aspects of each of these challenges and how the council can respond to them.

Key Challenge 1: Population growth and its implications

Our growth

Underpinning the challenges facing Auckland is the pace of growth that we have been experiencing for the last few years and expect to continue facing over the foreseeable future. Our growth has consistently exceeded forecasts and we expect to be a region of around two million people by 2028. That means the number of people in Auckland will grow by an amount equivalent to the size of the population of Tauranga every three years.

Growth presents us with many opportunities but also presents challenges with demand for new housing, increasing congestion on our roads and pressure on the natural environment.

In addition, there has been past underinvestment in key infrastructure such as transport, stormwater and some community facilities. The pressures of growth just exacerbate some of these existing problems.

Recent increase in Auckland's population

Table of the charted information

Table of the charted information ends.

Population

Table of the charted information

Table of the charted information ends.

Transport

The combination of rapid growth and a history of underinvestment in transport infrastructure, particularly public transport, means that Auckland's transport system does not meet our needs. Congestion costs the region $1 billion to $2 billion a year and other major transport challenges include:

• poor travel options, especially in lower income areas
• a near doubling of deaths and serious injuries on roads since 2012
• the need to reduce the transport system's environmental impact
• enabling and supporting a rapid acceleration in the rate of housing construction
• the need for streets to play a growing role in creating vibrant and inclusive places.

Addressing these transport issues has been a major focus since the councils of Auckland were amalgamated in 2010. Progress has been made in some areas, for example public transport use has grown by around 50 per cent since Auckland Council was formed. However, congestion continues to grow, with up to 800 cars arriving on our roads every week.

These issues reduce our economic productivity and lower the quality of life for those with long and unreliable commutes. Without major new investment, the transport network will struggle to provide sufficient capacity and travel choice to address current issues, let alone keep pace with the 300,000 extra people projected to live in Auckland over the next decade.

The level of investment required is beyond our ability to address on our own, and within traditional funding mechanisms. We need to work with central government to align our transport investments and to find new ways of funding transport infrastructure.

Community cohesion

The rate and speed of Auckland's population growth is putting pressure on our communities. It is not just the rate of growth but the increasing diversity of our population which requires planning and response. There is an increased demand for community infrastructure but also differing types of provision because of an ageing population and the different ethnicities that now call Auckland home. Responding to this changing picture means ensuring our community facilities are fit for purpose going forward and providing a range of community-building initiatives at a local level.

Housing

A major concern to Aucklanders is housing supply. The building of new houses has not kept pace with the growing population resulting in a shortage of housing and escalating prices. Housing availability and affordability are difficult problems to solve. The council does not build houses. Our role is to:

• enable development through our planning functions; such as the Unitary Plan
• provide infrastructure such as (transport, water, community facilities) to support new housing areas and intensification of existing areas
• work with central government, iwi and the private sector to support their building programmes
• regenerate town centres to make them more attractive for development of new housing and businesses.

Infrastructure is a key enabler of housing development, but it is also expensive. While some of the cost can be recovered from developers, often this is long after we have built the infrastructure, and in the meantime, we borrow to cover that cost. We are nearing the limits of what we can sustainably borrow, but the demand to make land available for new housing continues to grow.

Key Challenge 2: Sharing prosperity with all Aucklanders

Many Aucklanders are prosperous and have high living standards, yet there are significant levels of socioeconomic deprivation, often in distinct geographic areas. Income, employment, health and education outcomes are different in various parts of Auckland, and there are distinct patterns across broad ethnic and age groups. In part this is due to unequal access to education and employment opportunities. Along with high and often unaffordable housing costs this is resulting in fewer Aucklanders being able to fully prosper. As Auckland continues to grow, we need to play our part in ensuring that all Aucklanders can benefit from the social and economic prosperity that growth brings and can participate in and enjoy community and civic life.

Māori are over represented in the areas of socioeconomic deprivation. Current data tells us that while socio-economic indicators for Māori are improving, Māori are not benefitting from Auckland's success in comparison to most other Aucklanders. In housing, Māori have higher rates of household crowding, low home ownership rates, and less stability due to high rents.

More than 50 per cent of Māori in Auckland are under the age of 25 and Māori are estimated to continue, over the next thirty years, to have a relatively young population. This means tamariki and rangatahi remain a priority focus. Income levels of Auckland's Māori are directly related to employment in lower paying jobs.

Key Challenge 3: Reducing environmental degradation

Environment

The latest State of the Environment (2015) report shows that while Auckland's air quality has improved significantly, marine and freshwater sites have been polluted by sediments and contaminants arising from development, building and industrial activities.

Our ageing sewerage and stormwater systems overflow after heavy rainfall, depositing contaminants into our natural waterways. Many of our beaches are unsafe for swimming after these storm events, with some being permanently closed.

In addition, approximately two-thirds of Auckland's local native species are under threat of extinction. Without substantial increases in investment in this area we estimate:

• the risk of Kauri dieback spreading is over 80 per cent
• only 30 per cent of significant ecological sites in council parks will have adequate pest control
• only 20 per cent of rural Auckland will have adequate possum control
• there is a high risk of marine pests establishing with risks to ecosystems and costs to aquatic industries.

Auckland's population growth places increasing pressure on the environment. The development of 15,000 hectares of future urban land identified in the Unitary Plan could cause further problems if not managed carefully. Increasing intensification in the existing urban area could exceed the capacity of our current infrastructure unless we invest in keeping up with the growth.

Climate change

Climate change is a global problem that we are experiencing increasingly at a local level. The most recent climate change projections for Auckland indicate warming temperatures, less annual rainfall in the north but more in the south and stronger winds. More frequent, and severe, weather events are expected. Some of our infrastructure may no longer be adequate to deal with more rainfall, or a warmer climate. Sea-level rise will increase risks for assets on the coast from inundation and erosion.

We are already seeing increasing problems with coastal assets, such as sea walls, being severely damaged during storms and roads such as Tāmaki Drive are experiencing inundation on a more regular basis.

Dealing with these issues takes careful planning and a much better understanding of our existing assets - which should be renewed, which should be replaced with more appropriate solutions and which may no longer be needed. It will also require more investment than we have currently been making to maintain these assets.

The Financial Challenge for Auckland Council

All of the challenges outlined above require additional investment to address them. Not all of these costs fall on the council but many of them do. Delivering this new investment while maintaining services such as parks, libraries and waste collection presents a significant financial challenge; balancing the need for investment with:

• acceptable costs to the community
• prudent management of debt and sustainable financial management.

We are forecasting about $26 billion of capital investment over the next 10 years and operating costs of around $4 billion to $5.6 billion each year.

We fund our expenditure from different sources depending on the nature of the cost. Our best known source of funding is general rates, charged to homes and businesses. However, more than half of our operating revenue comes from other sources such as water charges, public transport fares, consenting fees, central government subsidies and contributions from developers. We also borrow, when appropriate, for much of our investment in infrastructure roads, footpaths, pipes, and libraries. These are long life assets and by using borrowings, we spread the cost over the generations that use them.

The sustainable management of debt presents a major challenge. Council's approach to manage this challenge is to maintain an AA credit rating from Standard and Poor's (or similar rating from an independent rating agency). To ensure that debt levels continue to remain prudent and sustainable, the council has set a prudential limit of group debt being less than 270 per cent of group revenue. Breaching this ratio is likely to increase our interest costs.

We believe there is no public appetite for major rate increases and if we want to make progress with some of these big challenges that face us we need to find other ways of raising funds.

> Back to contents list

1.2 The next 10 years

Over the years since the formation of Auckland Council we have been having conversations with Aucklanders about what they want for their city, both in the long term and in the next few years. These conversations have informed the recent revision of the Auckland Plan and the development of our 10-year Budget (LTP).

In this 10-year Budget we are prioritising our new investment to meet the most pressing needs of Auckland and looking at new ways to fund that investment.

Transport investment and the Regional Fuel Tax

As highlighted earlier in this document, transport is one of the top concerns of Aucklanders. The increasing congestion on our roads reduces our economic productivity (estimates range between $1 billion to $2 billion) and lowers the quality of life for those with long and unreliable commutes. Road safety also continues to deteriorate with a 65 per cent increase in road deaths and serious injuries in Auckland since 2013.

Earlier this year the council and the government jointly released the revised Auckland Transport Alignment Project (ATAP) which sets out key outcomes, focus areas and a package of projects and programmes to achieve those outcomes. This means that both the government's transport investment and the council's are aligned to achieve the best outcomes for Auckland.

In order to fund our additional contribution, we have decided to use a Regional Fuel Tax of 10 cents per litre (plus GST). The government has passed legislation enabling councils to do this. The Regional Fuel Tax will come into effect from 1 July 2018. It will raise revenue of $1.5 billion over 10 years. This will enable us to deliver a transport programme of $12 billion over the 10 years which will include $4.3 billion of transport projects supported by the Regional Fuel Tax ($1.5 billion plus subsidies from the New Zealand Transport Agency and developer contributions). When added to the rest of government funded projects in ATAP Auckland will have $28 billion of investment in transport over the next 10 years.

The key projects that are supported by the Regional Fuel Tax and will be delivered by Auckland Transport over the next 10 years are:

This programme will enable a significant step in transforming Auckland's transport system by achieving:

• improved road safety through supporting a substantial reduction in deaths and serious injuries
• increased availability and use of public transport, which enables more efficient use of existing infrastructure, provides travel options free from congestion and supports improved economic, environmental and social outcomes from less pollution, and from people and business traffic spending less time in congestion
• more active transport options (walking and cycling) with resultant health benefits and a positive impact on congestion
• improving access to employment areas which will enable improved economic and social outcomes
• enabling growth and housing development to address the current shortfall in housing stock.

Water infrastructure

Watercare Services Limited, a Council Controlled Organisation (CCO), is responsible for providing and maintaining the drinking water (water supply) network and the sewerage system (wastewater network). Watercare is funded from user charges for water and wastewater. Stormwater, the network that deals with rainwater from urban areas, such as roads is managed from within the council and is funded by rates and borrowings.

The water and wastewater networks are mostly in good shape and are being developed to cope with the growth of Auckland. However, much of the stormwater network is ageing and does not have sufficient capacity for the growth that is happening. In some areas there are still combined stormwater and wastewater networks. It is these issues that cause major problems in heavy rainfall with sewage and other contaminants polluting our natural waterways.

We did have a programme to fix these issues over the next 30 years but this will now be accelerated and addressed over the next 10 years. This programme will deliver:

Some of this work will be funded from Watercare's water and wastewater charges. These were already projected to increase by 2.5 per cent per year for water supply and 3.3 per cent per year for wastewater. This increase will be sufficient to cover Watercare's contribution to the programme.

To pay for the balance ($452 million) we have decided to implement a targeted rate, based on property value. This will cost the average residential ratepayer $66 per year, and the average business ratepayer $308 per year.

Housing and development

The council's key role in housing is as an enabler. The Unitary Plan, which was adopted in 2016, sets out where development can occur. We also have a role in enabling development by providing infrastructure in a timely way. Much of this expenditure is eventually recovered from developers through developer contributions. However, it does require upfront financing, and the council's ability to borrow sustainably is now limited.

To address this we have a number of actions underway:

• the Regional Fuel Tax enables $300 million over 10 years as "seed funding" for transport projects in new development areas
• we are working with Crown Infrastructure Partners to find ways of funding some of the major infrastructure investments required to support growth
• investigation of targeted rates, for specific developments, to fund the infrastructure for that development.

We also have a programme, through Panuku Development Auckland (a CCO), to "Transform" or "Unlock" a number of centres around Auckland. Working with the private sector in these locations will enable new housing and business opportunities. This work will be funded through the development and sale of property within each development area.

The city centre will have its development programme accelerated to create a more family, pedestrian and environmentally friendly location, with timing focused on the America's Cup and APEC, due to be held in 2021.

The Downtown programme delivers a connected and accessible waterfront, prepares for growth of cruise and ferry services and supports activation of Queens Wharf. The total forecast cost of this programme is $430 million.

Our contribution to the America's Cup is also included in the 10-year Budget. This is $57 million of capital expenditure and $41 million of operating expenditure (excluding government contributions).

Other infrastructure

Coastal assets and climate change

The effects of climate change are increasingly being felt in storm damage to coastal assets and more frequent landslips across the region. We are implementing a programme to review all of our coastal assets and develop an asset management plan which will enable us to prioritise funding for the renewal of these assets. $1 million is provided in the first two years of the budget to prepare the plan and $10 million per year for the first three years to renew these assets. $79 million is provided for years four to 10 subject to the completion of the asset management plan.

We are also providing an additional $2 million per year for capital works to non-coastal assets and a $20 million response fund for reactive storm damage works.

Parks, recreation and community assets

A key part of our role, and one that is valued at a local level, is the provision of sport, recreational and community facilities. In addition to the existing programme to renew, upgrade and build new facilities we are providing funding in this budget to partner with community groups on increasing provision of indoor and outdoor sports facilities. This contestable fund of $120 million will enable us to leverage external funding to build these facilities to meet the needs of our growing population and their changing preferences. We will also be continuing to develop our network of swimming pools, recreation and leisure centres ($152 million).

As part of this 10-year Budget, each of our 21 Local Boards has identified a project that they believe to be the most important for their local community. Some of these projects are transport related and are therefore funded through the transport budget. Others are funded through existing regional budgets, but the remainder ($170 million) are projects focused on local communities. These projects include major park developments, indoor court facilities, town centre/ precinct developments, beach erosion works and sustainability initiatives.

Protecting our environment

Many of the infrastructure projects already described will help improve our environment. A significant proportion of the transport investment is in public transport. Getting people out of their private car and onto a bus, ferry or train reduces vehicle emissions which has a positive benefit to air quality and our carbon footprint. Similarly, the more people on public transport the less congestion there is which means less travel time and less vehicle emissions.

The investment in the water quality project (described above) has direct environmental benefit for fresh water and marine ecosystems.

In addition, we are implementing an increased programme of environmental initiatives to address the spread of pests, weeds and diseases that are threatening many of our native species.

These projects will make a significant difference in a number of key areas. We expect to be able to reduce the risk of Kauri dieback disease spreading, from 80 per cent to 15 to 25 per cent. The number of significant ecological sites within council parks that have adequate control of pests and weeds will more than double, rural possum control will also be significantly increased.

To pay for this programme we are introducing a targeted rate which will enable $311 million investment over the 10 years. This rate will be set based on property value but for the average residential ratepayer will cost $47 per year and for the average business ratepayer $219 per year.

Another key initiative that has been underway for some time but takes another step forward in this 10-year Budget is the Waste Management and Minimisation Plan. We already offer kerbside recycling and inorganic collections across the Auckland region, which reduce the amount of waste going to landfill.

The next step in this programme is the introduction of food scrap collections across the urban area. This service is expected to divert approximately 50,000 tonnes per year from landfill which equates to approximately 21 per cent of kerbside waste. Alongside the rollout of this programme, user pays will be implemented for the remaining parts of Auckland that do not currently operate this way (the former Auckland and Manukau areas).

Other projects and programmes

The 10-year Budget has made provision for a range of other new, or increased, projects or programmes which support the community, many of them by working with community based partners. Some examples are:

• additional funding for co-governance entities - Tūpuna Maunga Authority ($16.8 million capital and $6.7 million operating), Ngāti Whātua Ōrākei Reserves Board ($7.7 million capital and $6.6 million operating), Te Poari o Kaipātiki ki Kaipara ($8.7 million capital and $2.8 million operating)
• additional funding ($4.3 million) of the contestable grant funds for arts and culture programmes, community development and safety programmes, and regional events. This brings the total amount of these funds to $20 million over the 10 years
• additional capital funding for Surf Lifesaving Northern Region for the development or renewal of facilities at Karioitahi, North Piha and Orewa ($3.7 million)
• a capital grant to the Auckland Marine Rescue Centre Trust for urgent repair and renewal of their building ($2 million)
• operating grants to - the Auckland City Mission ($475,000), Māngere Mountain Education Trust ($204,000), Hibiscus Youth Council Centre ($100,000).

Another partnership project follows the success of the place based programme in the south of Auckland (the Southern Initiative). This programme is being extended to the western part of Auckland with funding of $500,000 per year. This programme works with central government departments and community groups to address some of the social and economic challenges that these communities face.

Some additional funding has also gone into regional facilities such as Auckland Zoo (for renewals and animal acquisition) and the Art Gallery (for operating costs).

Māori

The council runs a programme, across the council group, which focuses on achieving improved outcomes for Māori - Te Toa Takitini. The Independent Māori Statutory Board has identified areas, for this 10-year Budget, where additional funding should be applied. These areas focus on improving visibility and support for Māori identity, relationship agreements with the 19 iwi of Tāmaki Makaurau, support for Māori economic development and infrastructure development for sites of cultural significance. This will bring the total budget for Te Toa Takitini to $150 million over the 10 years.

Financial impacts

Capital Programme

The additional investment described in the sections above, when added to the existing projects and programmes in the base budget results in a capital investment of about $26 billion (including our funding of CRL Ltd and investment made by Crown Infrastructure Partners) over the next 10 years.

The capital programme includes $12 billion of transport infrastructure investment and $7.1 billion of water infrastructure. See the chart below:

This level of spend would result in council debt growing by $4.8 billion over the next 10 years, from $8.3 billion in June 2018 to $13.1 billion by June 2028. This level of debt still enables us to remain within our prudential borrowing ratios, particularly in respect of our target to keep borrowings at a level not exceeding 265 per cent of our revenue. To maintain our credit rating with Standard and Poors the limit is 270 per cent.

Capital investment for Auckland

Table of the charted information

Table of the charted information ends.

Debt to revenue ratio

Table of the charted information

Table of the charted information ends.

Operating costs

Operating costs cover provision of day to day services such as waste collection, mowing parks, maintaining our roads, footpaths, water and stormwater pipes, environmental protection, running our libraries, swimming pools and other community facilities. They also include interest and depreciation which are driven by our capital programme. In this 10-year Budget operating costs will move from $4 billion in 2018/19 to $5.6 billion in 2027/28. These costs are funded from a variety of sources including general rates, targeted rates (for specific projects and programmes), user charges and government subsidies.

Average general rate increases have been set at 2.5 per cent per year for the first two years of the 10-year Budget. The average general rate increases for the remaining years are 3.5 per cent per year.

New targeted rates have been introduced (as described earlier in this section) to fund the accelerated water quality programme and the additional investment in protecting our environment [1].

The Regional Fuel Tax is a new funding source and is specifically dedicated to new transport projects and is matched by a lift in funding from the New Zealand Transport Agency (represented by government subsidies in the chart).

Council's sources of operating funding

Table of the charted information

Table of the charted information ends.

Maximising value

To manage the pressure on our costs we focus on delivering our services in the most efficient manner, to ensure we get the best value from every dollar we collect. Ongoing efficiency initiatives include improved business processes, better use of technology and better procurement and tendering processes. Through this we will aim to control the growth in our core operating expenditure.

Additionally, in this 10-year Budget we have decided to disestablish the CCO, Auckland Council Investments Limited, absorbing their functions into the council and making a saving of approximately $800,000 per year.

We also continue to review our non-strategic assets with a view to releasing funding for re-investment through sale of those assets.

Our total budget and activities

The following chart sets out the total budget for the next 10 years by each of our key activity areas and also shows how each area is funded.

10-year Budget at a glance

> Back to contents list

2.0 Our finances

2.1 Financial overview

Introduction

This section provides a high-level overview of our key financial information and explains how we fund our activities. This should be read in conjunction with the Prospective financial statements in Part 2.2 of this volume, the financial information for individual groups of activities in volume 2 (Part 2) and the Revenue and Financing policy in volume 2 (Part 3.1) of this plan.

Key financial parameters for 2018-2028

Capital investment and debt levels

Capital expenditure is for purchasing, building, replacing or developing the city's assets (for example roads, libraries, parks and sports fields). The assets of the Auckland Council group are expected to grow from $51.3 billion to $77.2 billion over the period of this plan.

Over the next ten years we plan to invest $15.9 billion in new and improved assets for Auckland. Combined with $8.1 billion to restore and replace existing assets, our total capital expenditure programme for 2018-2028 is $24 billion. In addition City Rail Link Limited and Crown Infrastructure Partners are expected to incur a further $2 billion dollars of capital expenditure over this period. Therefore the total capital investment for Auckland over the next 10 years is $26 billion.  

The following table shows how we plan to fund our capital expenditure and other capital outflows over the course of the 10-year Budget 2018-2028.

Operating expenditure and revenue sources

Operating expenditure covers the council's day-to-day operations and services, from collecting rubbish to maintaining parks and issuing building consents. It includes costs related to the capital expenditure programme such as interest, maintenance and depreciation.

It is forecast that the Auckland Council group will spend $48 billion in operating expenditure to support service delivery over the next 10 years, of which $4 billion is budgeted for 2018/2019.

The $48 billion of operating revenue sources includes a surplus of $12.4 billion to fund capital expenditure.

> Back to contents list

2.2 Prospective financial statements

Prospective statement of comprehensive revenue and expenditure

Auckland Council group consolidated

Prospective Statement of Changes in Equity

Auckland Council group consolidated

Prospective Statement of Financial Position

Auckland Council group consolidated

Prospective Statement of Cash Flows

Auckland Council group consolidated

Notes to the prospective financial statements

Note 1: Statement of significant accounting policies

BASIS OF REPORTING

Auckland Council (the council) is a local authority domiciled in New Zealand and governed by the Local Government Act 2002 (LGA 2002), the Local Government (Auckland Council) Act 2009 (LGACA 2009) and Local Government (Rating) Act 2002. The council is a FMC Reporting entity under the Financial Markets Conducts Act (FMCA) 2013. The council's principal address is 135 Albert Street, Auckland Central, New Zealand.

Financial information within this 10-year budget is prepared and disclosed on a full group basis (except where specifically stated otherwise). The Auckland Council Group (the Group) consists of the council, its Council Controlled Organisations (CCOs), associates and joint ventures. A summary of substantive CCOs is provided in the table below[3]. All entities are domiciled in New Zealand. The council considers that presenting group information enhances transparency of information about cost of services provided to Auckland ratepayers and enables ratepayers to make more informed decisions about the impact of delivering the Auckland Plan.

The primary objective of the Group and the council is to provide services and facilities to the Auckland community for social benefit rather than to make a financial return. Accordingly, the council has designated itself and the Group as public benefit entities (PBEs) and applies New Zealand Tier 1 Public Benefit Entity accounting standards (PBE Accounting Standards). These standards are based on International Public Sector Accounting Standards (IPSAS), with amendments for the New Zealand environment.

The Group and council have a balance date of 30 June and these prospective financial statements are for the period from 1 July 2018 to 30 June 2028. The actual results achieved for the period covered by this plan are likely to vary from the information presented in this document, and these variances may be material. The Group and council do not intend to update the prospective financial statements after publication. 

The substantive CCOs within the Group comprise the following:

BASIS OF PREPARATION

These consolidated prospective financial statements are prepared:

• For the purposes of meeting the Group and council's requirements under the LGA 2002, the LGACA 2009 and the Local Government (Financial Reporting and Prudence) Regulations 2014;
• in accordance with New Zealand Generally Accepted Accounting Practice (NZ GAAP), and comply with PBE Accounting Standards. In particular, these prospective financial statements have been prepared in accordance with PBE Financial Reporting Standard 42: Prospective Financial Statements;
• on a going concern basis and the accounting policies have been applied consistently throughout the planned period;
• on a historical cost basis with the exception of certain items identified in specific accounting policies below; and,
• in New Zealand dollars (NZD) and are rounded to the nearest thousand dollars, unless otherwise stated.

This information may not be suitable for use in any other context.

These consolidated prospective financial statements were adopted by the governing body of Auckland Council on 28 June 2018.

The governing body is responsible for the prospective financial statements included in this plan, including the appropriateness of the significant financial assumptions these are based on, and the other disclosures in the document.

All items in the financial statements are stated exclusive of Goods and Services Tax (GST), except for receivables and payables, which include GST invoiced.

COMPARATIVE INFORMATION

The Annual Plan 2017/2018 adopted by the council on 30 June 2017 has been provided as a comparator for these consolidated prospective financial statements. The closing balance in this comparative differs from the opening position used to prepare these consolidated prospective financial statements which is based on the most up-to-date forecast information.

The prospective consolidated financial statements include the forecasts of the council and its subsidiaries which are added on a line-by-line basis adding together like items. Transactions and balances between the council and its CCOs are eliminated on consolidation. Investments in subsidiaries are carried at cost less any accumulated impairment. Where necessary, adjustments are made to the financial information of subsidiaries, associates and joint ventures to bring their accounting policies in line with the Group.

SIGNIFICANT JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the financial statements requires judgements, estimates and assumptions. Application is based on future expectations as well as historical experience and other factors, as appropriate to the particular circumstances.

Significant judgements, estimates and assumptions have been applied in measuring certain provisions and property, plant and equipment revaluations.

Refer to note 2 for significant forecasting assumptions.

IMPLEMENTATION OF NEW AND AMENDED STANDARDS

PBE International Financial Reporting Standard (IFRS) 9 Financial Instruments is effective from periods beginning on or after 1 January 2021.  PBE IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities and relaxes current requirements for hedge accounting. The Group and the council intend to early adopt the standard when it becomes effective for for-profit entities from period beginning on 1 July 2018.

The Group and the council have determined that adopting PBE IFRS 9 does not materially impact the financial instruments of the Group and the council, except for the borrower notes of the Group and the council which will be accounted for at fair value through surplus or deficit. For the purposes of this 10-year plan we have not budgeted for any fair value gains of losses on financial instruments.

The five new standards, PBE IPSAS 34 Separate Financial Statements, PBE IPSAS 35 Consolidated Financial Statements, PBE IPSAS 36 Investment in Associates and Joint Ventures, PBE IPSAS 37 Joint Arrangements and PBE IPSAS 38 Disclosure of Interests in Other Entities, are effective from periods beginning on or after 1 January 2019. The Group and the council are yet to assess the impact of these new standards, although the impact is unlikely to be material.

All other standards, interpretations and amendments approved but not yet effective in the current year are either not applicable to the Group and the council or are not expected to have a material impact on the financial statements of the Group and the council and, therefore, have not been disclosed.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 2: Significant forecasting assumptions

The level of uncertainty for each assumption refers to the difficulty of predicting outcomes because of limited or inexact knowledge. Council cannot control all of the variables that affect future outcomes, such as the wider economy and changes in legislation.

• Low level of uncertainty - information available to council point to a high likelihood of the assumption being accurate and/ or most of the variables are under council's control.
• Moderate level of uncertainty - council has most of the information available on the assumption but variables outside of council's control may still affect the accuracy of the assumption.
• High level of uncertainty - council has some of the information on the assumption but there is a high likelihood that variables outside of council's control will impact on the accuracy of the assumption.

Note 3: Reconciliation between Prospective Statement of comprehensive revenue and expenditure and Prospective funding impact statement

This statement is prepared on a group basis.  This statement should be read in conjunction with the Prospective Funding Impact Statement (group consolidated).

Auckland Council group

Note 4: Reserve Funds

The Local Government Act 2002 requires the Long-term Plan to identify each reserve set aside by the council, the purpose of each fund, the activities to which each fund relates and funding flows for the period of the plan.

The funding flows for these reserves are:

Note 5: Auckland Council (Parent) financial statements

Prospective statement of comprehensive revenue and expenditure

Auckland Council parent

Prospective statement of movement in equity

Auckland Council parent

Prospective statement of financial position

Auckland Council parent

Prospective statement of cash flows

Auckland Council parent