On Thursday 10 November, Auckland Council’s Governing Body will meet to discuss the current financial projections of the council group as part of the council’s Annual Budget process.
Auckland Council Group Chief Financial Officer, Peter Gudsell says that like many other organisations the council is experiencing an ongoing impact from rising inflation and interest rates, which is leading to costs rising faster than revenues.
“In our published Annual Budget 2022/2023, the council estimated an ongoing operating gap between $90 and $150 million per year. However, as inflation and interest rates have risen higher and more rapidly than economic forecasters had projected at the time, our latest estimate of the total ongoing operating budget impact for 2023/2024 is around $270 million.
“This means around $180 million of additional operating budget mitigations, over and above the $90 million previously signalled, will be needed for the next financial year, beginning 1 July 2023.
“The council has some financial flexibility to respond to the budget situation and is continuing to prepare and use several options to mitigate the operating gap, but choices and trade-offs will need to be made given the scale of the challenge.”
These options include prudent use of debt, considering higher general rates increases, asset ownership options, capital expenditure changes, increasing non-rates revenue, working with central government on different ways to approach funding and financing and reductions to operational expenditure which could affect council services. Different options will have different consequences, and some will provide more sustainable and enduring benefits in future years than others.
Auckland Council Chief Executive, Jim Stabback says, “As agreed in the current year’s Annual Budget, the council will prepare information to allow informed consideration by the Governing Body and local boards about options for the services we provide, how they are delivered and the role of the council in delivering the services. This work will help inform advice to elected members and management decisions that are focussed on financial sustainability and improved outcomes for Aucklanders.
“As an organisation and across the council group (ourselves and our council-controlled organisations), we will continue work to deliver the best value for money and services as we can for all Aucklanders.
“While we can’t predict the outcomes of the annual budget decision-making, we will provide staff advice and work closely with the Governing Body, local boards and CCOs throughout this process and on any decisions that are made.”
Final budget decisions will be made following public consultation early next year, and prior to adoption of the final Annual Budget by 30 June 2023.
The council is strongly committed to maintaining a prudent and sustainable approach to long-term financial management, with credit ratings of AA/Aa2 from S&P Global and Moody’s respectively, both on stable outlook. The S&P Global rating was last affirmed in September 2022 and the Moody’s rating was affirmed in October 2022.
We also remain committed to delivering the services that Aucklanders want and value, and working with Aucklanders to understand what these are.
The full report to be presented to Governing Body can be read at infocouncil.aucklandcouncil.govt.nz.