Auckland Council reveals half billion-dollar funding shortfall thanks to COVID-19

Phil Goff.
Phil Goff. Photo credit: The AM Show

Auckland Council says it is facing a $550 million shortfall in the next financial year thanks to COVID-19.

About 60 percent of the council's income comes from sources other than rates, and those sources dried up over the past couple of months as the country went into lockdown.

"The majority of our revenue comes from non-rates sources like recreation facilities, transport, concerts, and dividends from council assets," Mayor Phil Goff said on Friday.

"We are forecasting a shortfall of $30 million in revenue just from community facilities, pools and leisure centres over the next year. We've already seen a shortfall of $1.1 million in revenue from the zoo in April, and expect another $5 million over the next year.

"Overall, Auckland Council is forecast to have more than half a billion dollars less income as a result of COVID-19. The reality is, we have less money coming in, so we have less money that we can spend on the city and less money to deliver the essential services that Aucklanders rely on."

Auckland Council in 2019 took in almost $4 billion in revenue. Only $1.6 billion of this came from rates. Losing $550 million would be an almost 14 percent cut in its income.

The council has been under pressure not to increase rates to cover increasing costs and inflation, but Goff has stood firm. He's recently said he's open to a lower increase than planned - 2.5 percent perhaps - and on Thursday the council agreed to set up a deferred payment scheme for financially struggling businesses and households.

"That's the right thing to do, but it means council may suffer a shortfall of  around $65 million worth of rates income in the time that it would normally be available to support the funding of services and facilities like libraries, leisure centres and parks," said Goff.

"All of this adds up to a huge challenge for Auckland. As a city and a council, we will have to make difficult decisions to reduce costs while ensuring we can continue to deliver key services and invest in critical infrastructure the city needs and which boosts jobs and economic recovery."

The council has asked staff to take voluntary pay cuts, and is looking for way to cut operational and capital spending. Operational spending took up about $3 billion in 2019, the rest going on capital.

"It won't be easy and we will need to make some tough choices in the coming weeks as part of our emergency budget. But I'm confident that together we can get through this and recover stronger as a city," said Goff.

In a memo leaked to NZME, council chief executive Stephen Town said he expected "a reduction in permanent employees". Auckland Council has 12,000 full- and part-time staff.