Finance and Performance Chair, Councillor Desley Simpson, reflects on how finances have fared since amalgamation
This month Auckland Council is ten years old. Yes, it has been that long since amalgamation brought together Auckland Regional Council with seven territorial authorities to form the so-called ‘super city’.
Unprecedented in terms of scale in New Zealand, it was hoped the new Auckland Council with one mayor, 20 councillors, 21 local boards and, initially, seven council-controlled organisations would unite the region and deliver value for the then approximately 1.4 million ratepayers.
A decade on, albeit during a global public health and economic crisis, I thought I would reflect on how we have managed our finances. While the super city’s first decade has not been without its setbacks, there have certainly been some significant achievements that deserve to be highlighted.
I’ll start with the obvious one. Has the model actually saved ratepayers any money? As the current Chair of our Finance and Performance Committee, I’m pleased to be able to report that it has.
Each year since the formation of Auckland Council, we have set savings targets and met them. Up to the end of June, we have saved $1.89 billion of cumulative savings. To put this into perspective, this is more than all the rates we collected last year. I’m confident that by the end of the current financial year, that figure will exceed $2 billion.
In essence, even though our region has grown from approximately 1.4 million people in 2010 to around 1.7 million people in 2020, we are operating with around $2 billion less (the value of our accumulated savings over the last ten years) than we would have been had we not been so focused on saving ratepayers money.
Now more than ever it is important we continue our strong focus on savings and cost avoidance. We will continue to remove duplication as well as develop process improvements and continue to find smarter ways of working.
Given the financial pressures the council is facing as a result of COVID-19 and drought, we are doing everything we can to identify savings and cut non-essential expenditure, but our bottom line is the need to maintain the key services that Aucklanders need, such as drinking water and wastewater networks, rubbish and recycling services, our transport network, libraries and community projects.
I would also like to mention the income we get from rates. Typically, a New Zealand council generates between 60 and 74 per cent of its income from rates[i]. At Auckland Council it’s around 46 per cent[ii] with the rest of our income and funding coming from other sources, including debt. And, it’s because of our size (over $50 billion worth of assets), and our prudent financial management (Aa2 credit rating by Moody’s Investor Service, AA credit rating by S&P Global Ratings, both on a “Stable” outlook) that we are able to raise debt the way we do. Without this ability, to continue to invest in our region, rates would need to be considerably higher.
We’ve spent the last ten years, improving our systems, working smarter and more productively and using our size to secure better procurement outcomes. The next ten years will be no different. As technology evolves and the wants and needs of our customers change, Auckland Council will too. And now, in the shadow of one of the largest ever global pandemics, keeping an eye on our bottom line is more important than ever.
[i] Dept of Internal Affairs, Costs and Funding of Local Government, July 2018.
[ii] As at 30 June 2020. Annual Report quotes rates revenue (Total rates)/(Total Revenue) as 36 per cent. For the purposes of comparing with the DIA Costs and Funding of Local Government, 46 per cent rates revenue in this article is based on (Total rates)/(Total Revenue less Capital Revenue)