emergency budget 2020/2021 supporting information · 2020. 9. 1. · 3. the financial impacts of...

S U P P O R T I N G I N F O R M A T I O N

Te Tahua Pūtea Mate Ohotata 2020/2021

Emergency Budget 2020/2021Further consultation on the Annual Budget due to COVID-19.

akhaveyoursay.nz/emergency-budget

Together we can recover stronger.

SUPPORTING INFORMATION

Auckland Council Emergency Budget Supporting Information 2

About this document

Once every three years, councils are required to adopt a long-term plan (10-year budget), and in the intervening years an annual plan (referred to by Auckland Council as the Annual Budget). Each year our budget enables rates to be set for the year and includes a Local Board Agreement for each of our 21 local boards.

This supporting information is to be read in conjunction with the consultation document and seeks to provide additional background information which informs the consultation document.

Contents

Page No.

Section One: Minor changes to rates and fees following your feedback in February/March 3

Section Two: Budget Proposal 4

2.1 Budget movement analysis 18

2.2 Proposed capital expenditure 23

2.3 Proposed measures to achieve $120 million savings 38

2.4 Service level reductions options 43

2.5 Asset recycling opportunities 48

2.6 Proposed draft budget 55

Section Three: Rates postponement for ratepayers impacted by COVID-19 61

3.1 Draft Rates Remission and Postponement Policy 69

Section Four: Suspending the Accommodation Provider Targeted Rate 78

Section Five: Business Improvement Districts 79

Section Six: Your rates for 2020 81

6.1 Funding Impact Statement (Including the Rating mechanism) 88

Section One: Minor changes to rates and fees following your feedback in February/ March

Auckland Council Emergency Budget 2020/2021 Supporting Information

Section One: Minor changes to rates and fees following your feedback in February/March

Consultation and decision making 1. In February and March 2020, we consulted on a number of minor changes to rating policy and some fees

for 2020/2021. The changes proposed ensured users are paying for services or improved the customer experience. We considered your feedback on these proposals in May 2020.

2. As consultation took place over February and March 2020, feedback on the proposed changes was provided before you were able to fully understand the impact of COVID-19. However, we have reviewed the proposed changes in light of COVID-19 and assessed that the reasonably practicable options for each of these matters has not changed and that the choices for the community and council remain the same. To continue to provide these core services the costs will need to be funded by either users, general ratepayers or from savings made in other service areas.

Summary of Decisions 3. The decisions we made are summarised below:

• Retain the Waitākere rural sewerage service for ratepayers in the Waitākere Ranges Local Board area and increase the targeted rate from 1 July 2021 to recover the full cost of providing this service

• Discontinue the Waitākere rural sewerage service and targeted rate for ratepayers in the Henderson-Massey Local Board area effective from 1 July 2021

• Introduce an annual swimming pool fencing inspection targeted rate of $44 (incl. GST) to replace the three yearly inspection fee of $130 (incl. GST)

• Introduce a Clevedon wastewater and water targeted rate for those ratepayers who want to connect to the ‘town’ water supply

• Require a Home Fit assessment for all applications for the Retrofit Your Home scheme greater than $2,000 and to recover the cost ($260 plus GST) through the targeted rate

• Introduce a new targeted rate for ONE Warkworth Business Improvement District • Expand the Manukau Central Business Improvement District.

A few of the proposals that we previously consulted on have been agreed in principle subject to consideration of any further feedback received in the Emergency Budget consultation:

• Increase to the waste management base service targeted rate • Increase to the waste management standard refuse rate in former Auckland City and Manukau City

areas • Discontinuation of the Waitākere rural sewerage service and targeted rate for ratepayers in the Upper

Harbour Local Board area effective from 1 July 2021 • Introduction of a new targeted rate for Central Park Henderson Business Improvement District. For

more information on this proposal please read Section Five of the Supporting Information.

We have also deferred the introduction of a $20 entry fee for international visitors to the Auckland Botanic Gardens for further consideration once our borders are reopened.

More information To read a summarised feedback report and to see all submissions, go to akhaveyoursay/annual-budget-submissions received

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Section Two: Budget proposal


Section Two: Budget Proposal

Purpose 1. To outline the potential implications of rates increases between 0 per cent and 3.5 per cent for the proposed

2020/2021 draft Emergency Budget for public consultation. In addition, to set out the specific options for consultation with average general rates increases of either 3.5 per cent or 2.5 per cent.

2. The scope of this proposal is limited to budgetary considerations, with rating policy proposals covered in other parts of the Supporting Information.

Executive summary 3. The financial impacts of COVID-19 on the Auckland Council group budget for 2020/2021 remain highly

uncertain. Therefore, the work to prepare a draft budget for consultation has needed to be assumption driven and follow a systematic approach to scenario modelling.

4. On 16 April 2020, the Emergency Committee acknowledged that there is no “business as usual” budget scenario for next year and therefore agreed that council staff prepare an Emergency Budget for public consultation. It was agreed that the consultation materials will identify the impacts of rates increases between 0 per cent and 3.5 per cent on council services and business activity in Auckland. It was also agreed that Aucklanders would be asked if they support specific options with average general rates increases of either 2.5 per cent or 3.5 per cent.

5. It was agreed that the key principles for developing this budget would include maintaining a strong commitment to long-term financial prudence, while maintaining critical council services and investments to support economic activity and the overall wellbeing of our community.

6. The latest financial projections, based on the best information currently available, include a $550 million reduction in cash revenue, a $400 million cash operating deficit and 305 per cent debt to revenue ratio for 2020/2021. This is the position after all savings to date have been accounted for.

7. On 14 May 2020 the Emergency Committee noted that this would not be a prudent and sustainable position without further mitigation. It further noted that the key levers available to council for further mitigation include capital expenditure deferrals, temporary reductions in operating service levels and asset recycling.

8. Based on an assessment of the optimal balance between financial prudence, community impacts and overall economic and social wellbeing, council staff recommended the following mix of levers be used to prepare the draft Emergency Budget for consultation:

Lever 3.5% rates increase 2.5% rates increase

Debt to revenue 290% in 2020/21 270% in 2021/22

290% in 2020/21 270% in 2021/22

Capital investment $2.3b for 2020/21 $280m of deferrals in 2020/21

$2.2b for 2020/21 $345m of deferrals in 2020/21 (a

further $65m)

Additional savings and temporary service reductions

$54m of reductions in 2020/21 $75m reductions in 2020/21 (a further $21m total)

Additional asset recycling target $200 million in 2020/21 $200 million in 2020/21

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9. In order to inform decisions about the key trade-offs for this budget, detailed information about possible budget changes and their likely impacts were reported to the Emergency Committee and are set out in this budget proposal.

10. Given the compressed timeframe for developing the Emergency Budget, and the highly uncertain and fast-moving situation we are in, it was not possible to prepare comprehensive advice on each possible budget change that the council may need to consider. However, council staff sought every opportunity to get as much input as possible from members of the Emergency Committee, local boards and CCOs to make sure they were as well informed and advised as possible in the circumstances.

11. On 21 May 2020 the Emergency Committee agreed that the proposed draft Emergency Budget 2020/2021 for consultation would be based on this budget proposal for both the 2.5 per cent and 3.5 per cent average general rates increases scenarios. It was also agreed that the consultation material for the Emergency Budget would describe the implications of average general rates increases between 0 per cent and 3.5 per cent as set out in this proposal.

12. More work will be required to retest the underlying assumptions, incorporate any new developments and work through the details of the budget prior to the council making final budget decisions in July.

Context 13. The starting point for budgets for the Auckland Council group was year three of the 10-year Budget 2018-

2028, as updated and adjusted via the Annual Budget 2019/2020 and other subsequent budget decisions made by the Finance and Performance Committee or the Governing Body.

14. In December 2019, the council agreed to include a modest amount of new expenditure in the draft budget for the first round of public consultation on the Annual Budget 2020/2021 for the following items:

• $1.3 million to begin extending the living wage to contracted cleaners • $500,000 continued support for tackling homelessness in Auckland • $1.8 million capital and $100,000 operational expenditure to begin decarbonising the council’s fleet • $1.5 million to begin phasing out gas boilers in council aquatic centres • $2.7 million for planting an additional half a million trees over the next three years, totalling a million

and a half trees this term • $900,000 for foundation work for climate change interventions • $4.13 million per annum to increase the subsidy for child fares across public transport services.

15. In March 2020, budgets across the group were updated as part of the standard annual budget refresh process. This process identified the following cost pressures:

• $10 million additional ATEED operational expenditure for 2021 events • $31.9 million to $40.9 million additional AT operating expenditure for 2021 events • $12.7 million additional AT operating expenditure to fund growth in public transport services to meet

demand (continued from the prior year) • $4.5 million for operating expenditure incurred by Auckland Transport in relation to the City Rail Link

and its future operation, but which are not part of the project delivery costs • $14 million additional operational and $8 million capital expenditure costs from bottom-up review of

budgets for Regional Facilities Auckland (RFA) • $7.5 million additional repairs and maintenance for community assets.

16. On 16 April 2020, the Emergency Committee acknowledged that there is no “business as usual” budget scenario for next year and therefore agreed that council staff prepare an Emergency Budget for public consultation on the basis of:

• a “most likely scenario” approach to budgeting, disclosing the impacts of uncertainty

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• maintaining essential and critical council activities, with advice provided on reducing spending on discretionary activities

• identifying impacts on local activities and the most vulnerable in our community • identifying impacts on Māori outcomes • maintaining capital investment to support economic activity • maintaining strong commitment to long-term financial prudence.

17. The committee also agreed that Aucklanders would be asked if they support average general rates increases of either 2.5 per cent or 3.5 per cent, and agreed that the consultation materials will identify the impacts of rates increases between 0 per cent and 3.5 per cent on council services and business activity in Auckland.

18. The committee agreed to provide immediate support for all ratepayers, including businesses, facing hardship due to the crisis. This includes waiving the Accommodation Provider Targeted Rate (APTR) payment from 1 April to 30 June 2020 for all accommodation businesses and offering all ratepayers experiencing financial hardship the opportunity to defer payment of their fourth quarter rates instalments. Further measures to support ratepayers on a targeted basis will be publicly consulted on alongside the Emergency Budget.

19. In May 2020, budgets were further updated to reflect the estimated impacts of COVID-19, along with a wide range of mitigating actions, and reported to the Emergency Committee on 14 May 2020.

20. The updated projections include $550 million in cash revenue loss, a $400 million cash operating deficit and 305 per cent debt to revenue ratio for 2020/2021, after all savings to date are accounted for. A detailed analysis of the budget movements is set out in Section 2.1 of the Supporting Information.

21. This is primarily the result of persistent revenue reductions due to the economic outlook, border closures, social distancing and the drought, while at the same time expenditure will be returning to normal levels. Without further mitigations, the group debt position would head into imprudent and unsustainable territory, with the debt to revenue ratio projected to remain above the council’s 270 per cent policy limit for a total of four years.

22. On 14 May 2020 the Emergency Committee noted that the latest budget position based on a “most likely scenario” and mitigations identified to date would not be a prudent and sustainable position without further mitigation. It further noted that the key levers available to council for further mitigation include capital expenditure deferrals, temporary reductions in operating service levels and asset recycling.

23. The committee also requested that each of the CCOs be requested to identify further savings and opportunities for mitigation. A letter was subsequently sent to the chair of the board of directors for each CCO by the Mayor and Chair of the Finance and Performance Committee. Responses were received on 19 May 2020 and considered when agreeing the proposed budgets for consultation.

24. The response from Watercare confirmed that while there were no viable opportunities to further reduce their operating or capital expenditure, a review of their revenue forecasts had identified that an additional $25 million of Infrastructure Growth Charge revenue (payable when new developments connect to their network) was now likely to be received compared to their earlier forecast. This means that the overall cash revenue for the group is now projected to be $525 million rather than the $550 million reported to the Emergency Committee on 14 May 2020.

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Analysis and advice

Key considerations 25. In developing a recommended draft Emergency Budget for consultation, council staff used the following

criteria and principles to guide thinking about the appropriate balance between the levers and the extent of change for each lever:

• ensuring long-term financial prudence and sustainability - ensuring the council can continue to access capital markets on favourable terms to finance the investments required to progress its long-term objectives, and avoid placing an unsustainable debt burden on future ratepayers.

• honouring contractual commitments – avoiding the cost and any other adverse consequences of cancelling in-flight projects or long-term operational contracts. The extent of change may require some contracts to be reviewed, varied or renegotiated, but unilateral cancellation of contracts should generally be avoided.

• protecting public health and safety – ensuring changes do not result in unacceptable risks to the health and safety of our community.

• preserving asset integrity – ensuring short-term changes do not lead to severe and irreversible long-term declines in the condition of critical assets.

• statutory obligations – ensuring we are able to continue to comply with key legislative requirements for the provision of council services.

• Māori outcomes – ensuring that we continue to honour our commitments to Māori and that we continue to act in accordance with our statutory provisions relating to Te Tiriti o Waitangi.

• jobs and employment – minimising the impact of changes on jobs and businesses in Auckland. While a material impact is now unavoidable, different changes have different impacts on employment outcomes. Where possible, preferences should be given to budget changes with the least impact on employment outcomes for Auckland, regardless of whether or not the council group is the employer.

• ease of implementation - some changes can be implemented quickly and easily, while others are will be long, complex and less certain. Where possible, preference should be given to the budget changes that are quick to implement and have less implementation risk.

• protecting the most vulnerable - some changes may have material impacts on the most vulnerable people within our community. Such changes should be avoided or minimised wherever possible.

• supporting our communities – the council plays a key role in supporting a number of community organisations. Some of these organisations are facing a greater increase in community need while their other funding sources are at risk. Wherever possible, changes should at least avoid making these community groups an worse off.

• climate change – different changes will have different implications for climate change. Budget changes that slow or reverse our progress in this critical area should be avoided wherever possible.

Use of debt 26. As discussed above and set out in the budget update to this committee on 14 May 2020, council staff

consider that the latest budget position based on a “most likely scenario” and mitigations identified to date would not be a prudent and sustainable position without further mitigation.

27. Relying solely on the use of debt would be a significant departure from the council’s current strong commitment to long-term financial prudence. This path could lead to higher borrowing costs, reduced access to debt markets and a reduced ability to progress long-term strategic objectives while keeping costs affordable for future ratepayers.

28. Given the high degree of uncertainty, in addition to analysing the “most likely scenario”, council staff have also considered a “more optimistic” and a “more pessimistic” scenario.

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29. The “more optimistic” scenario assumed health outcomes well under control, strong business confidence, rapid economic recovery and borders reopening sooner than currently anticipated. The reduction in council revenue would be around $400 million rather than the $550 million in the “most likely scenario”, and the net operating gap would likely be $275 million rather than $400 million.

30. The “more pessimistic’ scenario assumed a surge in cases leading to two more months of lock down (at alert level 3 and 4), weak business confidence, slower economic recovery and borders closed for longer. The reduction in council revenue would be around $780 million rather than the $550 million, and the net operating gap would likely be $600 million rather than $400 million.

31. The following chart shows the impact the different scenarios are projected to have on the group’s debt to revenue ratio. Without further mitigation, all three scenarios would see the debt to revenue ratio exceed the 270 per cent debt policy limit for at least four years. However, the peak in 2021/2022 varies considerably, indicating that adverse circumstances could increase the ratio by 20 per cent in that year compared to the “most likely scenario”.

32. Financial scenario modelling also indicates that there is no viable option to operate within existing debt policy limits in 2020/2021. The same is true of complying with the balanced budget test set out in the Local Government Act 2002. The extent of mitigations required to achieve these outcomes would be well beyond the scope of what is envisaged in this proposal.

33. Not complying with the balanced budget test means that operating revenues are not sufficient to cover operating expenditure including depreciation. In the council’s Revenue and Financing Policy and 10-year Budget, the policy requirement is to fund 85 per cent of depreciation in 2020/2021. The consequence of not complying with these financial policy requirements is an over reliance on debt funding to pay for operating costs and asset renewals, which over time would become unsustainable.

34. Council staff consider that in the circumstances, it is entirely prudent and indeed necessary to temporarily depart from these policies. The intent of the policies and the related legislation is to promote long-term financial sustainability, not to require rigid adherence to fixed policy settings in time of crisis.

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35. Legislation expressly permits the council to make a departure from its financial policy settings provided that each of the following requirements are met:

i. the council formally resolves that it is prudent to do so

ii. material budget variations from the 10-year budget are subject to public consultation

iii. the decision is disclosed in the council’s annual report.

36. On 16 April the Emergency Committee agreed in principle that priority should be given to maintaining investment and critical services over strict compliance with financial policies.

37. After considering all relevant factors, on 21 May the council agreed that it is prudent to temporarily depart from the council’s financial policies of limiting debt to revenue to 270% and balancing the budget (including funding a specified proportion of deprecation) as set out in the council’s 10-year Budget and Revenue and Financing Policy.

38. Specifically, the council agreed the proposed draft budget for consultation include a projected debt to revenue ratio of 290 per cent for 2020/2021, reducing to 270 per cent in 2021/2022. This is consistent with the earlier resolution passed by 16 April that the Emergency Budget should maintain a strong commitment to long-term financial prudence. It could be argued that a budget with a projected debt to revenue ratio closer to 300 per cent for 2020/2021 would represent a better balance between maintaining long-term financial prudence and maintaining investment and critical services. However, given the high uncertainty and the sensitivity analysis above which suggest the ratio could be up to 20 per cent higher than projected if circumstances change, council staff consider that the budget should be set at around 290 per cent. This will allow the council to be confident that the actual ratio will not exceed 300 per cent as things change over the course of the year, and provide the council with the time necessary to consider further budget changes in-year should it become necessary.

Capital expenditure budgets 39. Council staff considered three possible group capital investment scenarios for 2020/2021. In each scenario,

priority was first given to investments already contractually committed, then investments necessary to meet statutory requirements and critical renewal requirements and then finally investments to cater for growth and service level improvement. The three scenarios are:

$2.5 billion scenario – this is the current budget position. While Auckland Council, Auckland Transport and Watercare all identified sizeable reductions in their intended work programme for next year (including their intended catchup for projects that have now been delayed from this financial year), the revised programme was only about $50 million less than the assumed group capex delivery for 2020/2021 provided for in the group budget. Council staff consider that funding issues aside, it is highly credible that a group programme of this size could be delivered over the next year given recent delivery rates, existing contractual commitments and the amount of preparatory work already completed.

$2.3 billion scenario – this scenario represents a $280 million reduction in group capex delivery for 2020/2021 relative to the current budget position. For modelling purposes, a similar reduction is also assumed for the following year. While this scenario would see many projects and programmes delayed or stretched out over a longer timeframe, it would still represent a significant increase relative to the $1.6 billion of group capex delivered on average over recent years. At this level, most existing contractual arrangements would still be able to be honoured but there would be noticeable impacts on service levels and the timeframes for achieving key council objectives. Some major projects that are not yet committed would be delayed and there would necessarily be less investment in renewal and safety programmes than previously planned. The proposed changes from the current budget position, and the impact of these changes are set out in Section 2.2 of the Supporting Information.

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$1.9 billion scenario -this scenario represents a $700 million reduction in group capex delivery for 2020/2021 relative to the current budget position. For modelling purposes, a $300 million reduction is assumed for the following year as delivery ramps back up to previously planned levels. While this scenario remains above historical delivery levels, it would be challenging to achieve this while honouring all existing contractual commitments. Some contracted projects would need to be slowed down with variations to contracts negotiated. Other contractually commitments may need to be broken entirely, leading to higher costs and significant reputational damage in the construction market. Council staff have not yet been able to develop a proposed group programme at this level, partly because of the difficult contractual issues that need to be properly considered. As a consequence of the commitments, achieving a $1.9 billion scenario would require delaying most new projects that have not yet commenced as well as making significant reductions to programmes such as safety and renewal programmes. This could have significant health and safety implications and would fail to meet many of the criteria outlined above. Therefore, this scenario is not recommended.

40. Watercare have advised that existing contractual commitments and new projects that must be commenced to deliver to Watercare’s statutory obligations mean that a capital spend for 2021/2022 any lower than previously submitted would not be achievable. They noted that Auckland is in an unprecedented and severe drought and advised that constraining Watercare’s capital programme any further will put at risk core lifeline services for water supply and wastewater collection. For this reason, the second scenario above has been revised up to $2.3 billion from the $2.2 billion that had initially been reported to the Emergency Committee.

41. In addition, Watercare have signalled that there may be an additional capital investment required in the near future of between $50 million and $180 million to address critical water supply issues arising from the current drought situation. Because there is not yet sufficient certainty about this potential investment, this has not been included in the proposed draft budget at this stage. If further investment is required and no reprioritisation or alternative funding and financing solution can be identified, this would further increase the group debt to revenue ratio by up to 6 per cent.

42. In addition to contractual issues and the near-term service level trade-offs associated with reduced capex delivery, Auckland Transport have raised several longer-term concerns including:

• a significant reduction in Auckland Transport’s capacity to deliver projects, with significant job losses, which will be slow and expensive to rebuild in the future

• the loss of construction industry capacity and capability in Auckland which will take years to rebuild • increased roading maintenance costs in medium term as a result of deferred renewals • slower progress with achieving intended reductions in emissions and deaths and serious injuries on

Auckland’s roads • significant reputational issues associated with reduced responsiveness to communities and

stakeholders, with many of these projects already publicly consulted on. • reputational risk due to unused Regional Fuel Tax revenue which will continue to accumulate (albeit at a

slightly reduced rate).

43. The advice of the council’s Chief Economist is that it is critically important to continue to invest in quality capital projects at this time to stimulate the Auckland Economy, both in terms of maintaining business confidence, and the flow-on impact of this spending through the economy.

44. In his professional opinion, the economic benefit that this would stimulate compared to reducing the rates burden cannot be underestimated. A lower rates bill in times of economic nervousness, will generally be banked to pay off debt. It will play almost no role in stimulating more confidence or economic activity. But spending that achieves the twin goals of supporting direct employment and enabling significant further downstream employment should be supported wherever feasible.

45. The Chief Economist considers that investing in capital projects with demonstrable downstream or catalysing benefits is particularly helpful. Investment in infrastructure such as pipes and roads will generally

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enable more house-building activity. Town centre upgrades bring people back into those town centres. Transport upgrades that do both of these two things again should be prioritised. They have much more stimulatory power than adding more staff or people-oriented programmes. With the Canterbury rebuild, there was a missed opportunity in terms of government not fulfilling a greater catalyst role in restoring confidence and stimulating private sector activity.

46. Overall, council staff consider that there is a compelling case for council to continue with as much capital investment as it is prudently able to do so. The $2.3 billion scenario is considered to be the appropriate balance between maintaining investment and maintaining long-term financial prudence. The council therefore agreed to include a proposed $2.3 billion capex delivery budget for 2020/2021 (as outlined in Section 2.2 of the Supporting Information) in the proposed draft Emergency Budget for consultation under the 3.5 per cent rates increase option.

47. The council considers that there is also a compelling case for central government to support ongoing high levels of capital investment in Auckland. That may well eventuate in due course through processes such as the “shovel ready” projects initiative. However, there is not yet enough certainty or clarity of the outcome of any such processes for us to include a budget assumption about this in the council’s draft budget. The Office of the Auditor General has previously given clear guidance that any such budgetary assumptions must be supported by strong evidence that demonstrates the assumption is reasonably likely to occur.

48. Under the 2.5 per cent rates increase, further capital expenditure mitigation is required to offset the $45 million of lost debt headroom associated with the $17 million further revenue reduction.

49. After council staff considering which areas are most constrained and least constrained by contractual commitments in the $2.3 billion capital programme, the council agreed to include the following further capex delivery changes for 2020/2021 in the proposed draft Emergency Budget under the 2.5 per cent scenario:

• $10 million further reduction in the community investment programme. This would include further timing changes for regional park renewals such as deferring upgrades of tracks, toilet facilities and accommodation. It would also include further reductions in renewals of local assets like community halls and playgrounds, resulting in risk of closure of some facilities

• Additional $28 million deferral for transport growth and improvement programmes with delayed planning work for future walking and cycling projects and deferring delivery of any remaining local road sealing and local board programmes. This would also include deferring investment in the Airport to Botany Mass Rapid Transport investigation works and slowing down work on the Māngere cycle route.

• $12 million of further reductions in Auckland Transport’s planned renewals leading to further implications for asset conditions, future maintenance requirements and deaths and serious injury reduction targets.

• $5 million reduction in RFA’s capital investment on critical facility renewals, leading to a risk that one or more facilities may temporary close or provide reduced service

• $10 million of further deferrals for Panuku’s town centre development programme.

50. For rates increase scenarios below 2.5 per cent, the kind of further reductions envisaged under the $1.9 billion scenario would be required. This would likely lead to the need to break many existing contractual arrangements, significant reductions in service levels, safety and asset condition and would substantially erode capex delivery capacity in Auckland for years to come. It would also fail to bring the wider economic benefits that are desperately needed by businesses and employers in Auckland right now.

Operating expenditure budgets 51. The current budget position reflects a $150 million reduction in operating expenditure due to both the direct

impacts of COVID-19 disruption and reductions in discretionary expenditure to help mitigate the financial impacts of the situation. While large, this only serves to offset a portion of the $550 million projected revenue reduction in the “most likely scenario” giving rise to the projected $400 million reduction in net operating cashflow.

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52. The analysis in Section 2.1 of the Supporting Information shows significant reductions in expenditure for Regional Facilities Auckland, Ports of Auckland and ATEED which are directly related to the reduced revenue and activity from COVID-19 disruption. In terms of discretionary savings, Auckland Transport moved early to announce significant reductions to its operating expenditure on staff costs and professional services. The other CCOs also submitted budgets with some reductions in staff cost and other discretionary costs.

53. The biggest single movement in operating expenditure has been the $120 million of savings for Auckland Council. This is a sizeable number with sizeable impacts for both staff and our community. With savings of this magnitude, the Auckland Council organisation will get smaller and it is not possible for reductions to only touch back-office functions as opposed to having some impact on frontline services.

54. The list of savings items included in the $120 million are set out in Section 2.3 of the Supporting Information. Notable examples include:

• workforce cost reductions through voluntary pay reductions, consideration of options for this year’s pay review (including whether it should be limited or dropped altogether), reducing the staff training budget by half, and a review of Auckland Council’s operating model with an expectation of a reduction in permanent staff numbers

• reductions in the budgets for professional services consultancy and travel costs

• lower interest and insurance costs

• reductions in some discretionary regional grants budgets of about $4 million or around 10 per cent of the regional grants budget for non-essential projects or events. This includes the Regional Natural Environment Fund, Water Protection Fund, Sports and Recreation Facilities Investment Fund, Regional Events Fund and the Regional Historic Heritage grant.

• reductions in stormwater maintenance levels

• operational efficiency opportunities in the areas of animal management and consent processing.

55. Because these savings (including the $120 million) are already included in the current budget position, further operating expenditure reductions are required to reduce the projected $400 million net operating cashflow deficit.

56. Reducing this operating gap to zero will not be possible, so debt funding will temporarily need to be used to fund operating expenditure. This is not a prudent approach long-term and in the short-term, debt funding of operating costs should be minimised where possible.

57. Because back office costs have already been significantly reduced, further reductions in operating expenditure will almost certainly affect the services delivered to our community. Because the revenue problems are primarily affecting the 2020/2021 financial year, temporary rather than permanent reductions in service levels may be adequate to prudently manage through this situation.

58. The implications of service reductions depend greatly on the particular area of spend. Many reductions will impact on jobs, either within council or across the wider Auckland economy. The nature of many services provided by or on behalf of the council are associated with lower paying jobs, so some service reductions may have a disproportional effect on lower income households. In addition, many grants and community services provided by the council help support the communities in Auckland that are most in need so reduction in these areas could have a noticeable impact on those communities.

59. After reviewing elected member feedback on the Emergency Budget received to date, and the latest responses back from the CCOs, council staff have developed a list of additional savings and possible temporary reductions in services that could provide up to $100 million of operating cost mitigation. This list is set out in Section 2.4 of the Supporting Information.

60. While the advice of our Chief Economist that spending on operating activities will not have the same economic stimulatory impact as capital investment, council staff consider that service reductions of $100

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million or more (on top of the savings already in the current budget position) would have unacceptable social and community impacts.

61. The council therefore agreed that in the 3.5 per cent rates increase scenario, a package of $54 million of further savings and temporary service level reductions be included in the proposed draft Emergency Budget for consultation. This package is detailed in Section 2.4 of the Supporting Information and includes:

• a target for removal of duplication across organisations in the group • additional savings in staff costs and discretionary expenditure for Auckland Transport, RFA, ATEED and

Panuku • temporary reduction in some public transport services and a delayed introduction of new services • additional transport enforcement measures resulting in improved safety, improved trip times for buses,

high occupancy vehicles and freight, and increased revenue • fewer shows and cultural performances delivered through Auckland Live and further cancellation of

exhibitions at Auckland Art Gallery • reduced project readiness work for Panuku’s development projects • a lower level of new funding to support for the 36th Americas Cup and other 2021 events in terms of

event activation and promotion, traffic management and additional event-related public transport services

• reduction of services, events and grants to the community • a reduction in local board funding equivalent to a 10 per cent reduction in Local Delivered Initiatives

(LDI) operational funding.

62. The council also agreed that a further package of $21 million additional temporary service level reductions be included in the proposed draft Emergency Budget for consultation under the 2.5 per cent rates increase scenario. This further package includes:

• a reduction in local board funding equivalent to a 20 per cent reduction in LDI operational funding rather than 10 per cent

• reduced open space maintenance standards through reduced footpath cleaning, closing some public toilets and removing litter bins to reduce emptying costs

• reduced maintenance and cleaning of public spaces at the city centre waterfront • a review of public transport fares (which could see the temporary removal of some fare concessions)

and introducing car parking charges at park and rides. • a reduction in regional grants funding.

63. For rates increase scenarios below 2.5 per cent, the further reductions of the kind shown in Section 2.4 of the Supporting Information would be required to increase the saving in operating costs to $100 million or more. This could include:

• delaying the start of implementing a living wage policy for contracted cleaners • not continuing support for the Homelessness coordination programme • delaying the climate change initiatives proposed in the first round of consultation • delaying the foundation work for climate change interventions proposed in the first round of consultation • not resuming inorganic collection services for a year, potential leading to increased illegal dumping • permanently closing and vacating some community facilities with low utilisation rates • reduced road and footpath maintenance standards for a year, with potential risks to safety and whole of

life costs • further reductions to economic development activities delivered by ATEED, making Auckland

businesses and employers more reliant on central government’s economic development activities • delaying the implementation of initiatives to progress Māori outcomes (e.g. marae development).

13



64. Council staff have not yet been able to identify any viable operating reductions that would enable a cost reduction of more than $100 million without dramatically reducing or stopping services. It is clear lower rates increase scenarios would necessarily result in significant impacts on core council services and unacceptable implications for climate change, Māori outcomes and supporting the most vulnerable in our community. It is estimated that a 0 per cent rates increase would also result in council job losses of the order of 900 staff members.

Asset recycling 65. Asset recycling is an important lever for the council as it can allow capital to be invested in the most

strategically important activity. This is an aspect that both credit agencies and central government consider when assessing Auckland Council’s financial position.

66. Asset recycling has been underway since amalgamation. At amalgamation Auckland Council received a number of assets (property, investments, business operations) from legacy councils and over time there has been some rationalisation activity. In 2015 the council received advice from EY and Cameron Partners (reports on Alternative Sources of Finance), with some further rationalisation then occurring.

67. The 10-year budget has financial targets from asset recycling (excluding asset sales linked directly to specific projects and programmes such as the unlock and transform programme). These targets are as follows:

Proceeds ($m) 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Budget 24 24 24 20 20 20 20 20 20 20

Actual 44

68. The Emergency Budget provides an opportunity to increase the budget targets and accelerate asset recycling to reduce the debt requirement. However, this may require an alternative approach to approving property disposals.

69. An analysis of the key asset recycling opportunities is set out in Section 2.5 of the Supporting Information. There are three broad categories of potential asset recycling opportunities:

a. Accelerate sale of property (includes Panuku rationalisation pipeline)

b. Consider ongoing investment in non-core commercial assets

c. Further optimisation of service property.

70. Each recycling option differs in their liquidity – how quickly the asset can be converted to cash. Shares (e.g. in Auckland International Airport) are very liquid with an active market, sale of property less so; particularly with the anticipated recession. The timing of when proceeds may be realised is a key consideration to meet the budget parameters.

71. The current economic environment may result in less value being realised than if a sale occurred last year. This is hypothetical and not relevant as the opportunity for asset recycling is part of a trade-off against other financial levers (debt, capital, operating cost). However, some of the opportunities have a long lead time and this is a key consideration when assessing the ability to meet the budget parameters.

72. A review of the potential opportunity to sell and lease back 135 Albert Street has previously concluded that any benefits to the council’s financial position would only be marginal. This is primarily because the resulting lease obligation would be factored into the council’s debt to revenue ratio. It would effectively result in lower debt levels but a similar increase in debt-like financial obligations.

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73. The broader implications of asset recycling will vary according to the specific opportunity. Simply transferring ownership of an asset will not generally impact employment and business activity in the same way that reduced capital or operating expenditure would. The impact on the community will vary, but often the impact is a potential lost opportunity to possibly use that asset for some unspecified alternative use in the future.

74. Section 2.5 of the Supporting Information identifies $200 million to $350 million of near-term opportunities for recycling capital from assets classed as both non-strategic and non-service assets. This is comprised of $150 million to $200 million of land, building and leasehold interests and $50 million to $100 million of opportunities related to city centre car park buildings.

75. The council agreed to include an additional asset recycling target of $200 million for 2020/2021 in the proposed draft Emergency Budget for consultation for both the 3.5 per cent and 2.5 per cent rates increase options. Achieving this target within this timeframe will be challenging, requiring a clear political mandate and different approach to approval.

76. Under the lower rates increase scenario, further asset recycling opportunities may need to be considered to maintain long-term financial prudence and sustainability. This could include looking at the ownership of strategic assets.

Proposed draft budgets • The combined impact of all the proposed budget changes under the 3.5 per cent rates increase scenario on

group budgets is set out in Section 2.6 of the Supporting Information. This information will form the basis of financial projections in the consultation materials, with the incremental differences shown for the 2.5 per cent rates scenario. This is necessary because the material must present one set of base budgets for information, but this does not imply in any way that the 3.5 per cent option is preferred over the 2.5 per cent option. The 3.5 per cent option has been selected as the base purely because it reflects the status quo position in the current 10-year Budget.

• Debt modelling indicates that the debt to revenue ratio after accounting for all of the recommended changes is projected to be 290 per cent in 2020/2021 and 270 per cent in 2021/2022 under each of the two rates increase options.

• The following table sets out an assessment of the overall proposed draft budgets against the criteria and principles outlined above for each of rates increase scenarios.

Principle / criteria Considerations at 3.5%

Further considerations at 2.5%

Further considerations at 1.5% to 0%

Ensuring long-term financial prudence and sustainability

While temporarily exceeding debt limits, the draft budget settings are prudent and signal a strong commitment to long-term sustainability.

The additional mitigations in this budget scenario ensure long-term financial prudence is maintained.

Further mitigations would be more difficult to implement, creating doubt about long-term prudence. There would also be potential long-term damage to our reputation as a borrower as we are seen as willing to benefit ratepayers at the expense of bondholders.

Honouring contractual commitments

Most contracts would be honoured, with some delays and variations negotiated.

Most contracts would be honoured, with some delays and variations negotiated.

Some contracts will need to be broken leading to higher costs and significant damage to council’s reputation in the construction market.

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Protecting public health and safety

Deferral of capital investment (including facility renewals and the Auckland Transport safety programme) will result in less progress with improving public health and safety. This may result in closing of facilities to protect the public.

Further deferrals will further impact intended public health and safety outcomes. This will result in the closure of more facilities on safety grounds.

More substantial reductions are likely to lead to materially higher risks to public health and safety. Even more facilities will need to be closed to protect the public.

Preserving asset integrity The need to prioritise some renewal and maintenance budgets will increase asset risks.

Further prioritisation will increase asset risks further and likely lead to higher costs over the medium term.

Whole of life costs would materially increase as would the risk of critical asset failure.

Statutory obligations Statutory obligations able to be complied with.

Statutory obligations able to be complied with.

Increased risk of non-compliance due to loss of internal capability and institutional knowledge.

Māori outcomes Māori outcomes able to be progressed as a key priority area.

Māori outcomes able to be progressed as a key priority area.

Some key initiatives such as marae development may be delayed. Likely to see slower progress with achieving intended outcomes.

Jobs and employment Lower capital and operational spending compared to previous plans will result in lower levels of employment within the council group and across the wider Auckland economy.

Further spending reductions will lead to further reductions in jobs and employment in Auckland.

Further reduction in the investment in economic development will slow down regional economic recovery.

Ease of implementation Significant organisation change will be required, and savings targets will not be easy to achieve.

The challenges will become more difficult and implementation risk will increase.

Extensive change will be required. Highly complex contractual issues will need to be worked through. Increased risk that planned savings are not achieved resulting in more borrowing than planned.

Protecting the most vulnerable

Reductions in grants, community services and local board funding may impact our most vulnerable communities in a time of greater need. Funding will need to be carefully prioritised to address the most critical needs.

Further reductions in grants programmes and local board funding may further impact vulnerable communities.

Significant reductions to services will further impact the most vulnerable. Not continuing funding for Homelessness coordination and delaying the extension of the living wage policy to contract cleaners will fail to

16






provide support to where and when it is needed most.

Supporting our communities

Reductions in grants, community services and local board funding will temporarily reduce our ability to support our local communities compared to current plans.

Further reductions in grants, programmes and local board funding will further reduce our ability to support our local communities.

Significant reductions to services and investment will further impact support for local communities.

Climate change Reduced local activity budgets will temporarily reduce our ability to progress climate change response actions. Temporary reductions in some public transport services and delayed investment in public transport, walking and cycling infrastructure are likely to adversely affect Auckland’s carbon emissions in the near-term.

Adjustments to transport fares and further delays to investment in public transport, walking and cycling infrastructure are likely to further adversely affect Auckland’s carbon emissions in the near-term.

Reductions such as not proceeding with the foundation work for climate change interventions will further reduce the council’s ability to adequately respond to the climate emergency. Further delays in proceeding with public transport and active mode infrastructure investment will further impact Auckland’s emissions.

Finalising the budget 77. Public consultation on the proposed draft budget is taking place from 29 May 2020 to 19 June 2020. Final

budget decisions will be made on 16 July 2020 and the final Emergency Budget will be adopted by the Governing Body on 30 July 2020.

78. Council staff are also continuing to progress discussions with credit rating agencies and continuing to engage with central government officials on statutory compliance matters and opportunities for greater collaboration on capital investment in Auckland post-disruption.

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Section Two: Budget proposal 2.1 Analysis of COVID-19 financial impacts for the “most likely scenario”


Section 2.1: Analysis of COVID-19 financial impacts for the “most likely scenario”

Purpose The purpose of this document is to provide a breakdown of the high-level financial impacts of the council’s “most likely scenario” for financial year 2020/2021 as presented to the Emergency Committee on 14 May 2020.

Summary of financial impacts of the most likely scenario Projected operating impacts $M Projected capital impacts $M

Cash operating revenue* -$525M Capital delivery -$50M

Cash operating expenditure -$150M External capital funding +$50M

Net operating cashflow -$375M Net capital funding requirement -$100M

* Watercare have reviewed their revenue forecasts and identified an additional $25 million of infrastructure Growth Charge revenue (payable when new developments connect to their network) likely to be received compared to their earlier forecast. This means that the overall cash revenue for the group is now projected to be $525 million rather than the $550 million reported to the Emergency Committee on 14 May 2020.

Summary of key group assumptions Following the initial COVID-19 budget update to the Emergency Committee on 16 April 2020, council staff worked on updating the underlying assumptions for a “most likely scenario” that the draft Emergency Budget 2020/2021 will be based on.

The updated assumptions are based on latest information available and advice from Auckland Council’s Chief Economist and is supported by economic commentary and outlooks from bank economists and The Treasury.

In summary, the key assumptions are:

• Alert levels for the 2020/2021 financial year are assumed to be level 2 for the first quarter and level 1 for the remainder of the year.

• The New Zealand economy is projected to begin the 2020/2021 year markedly below its pre-COVID-19 position. Economic activity and unemployment are expected to recover with shifts towards lower alert levels.

• Under the “most likely scenario”, population growth is muted, which leads to slower development activity that will impact regulatory and growth infrastructure-related activities.

• Under the “most likely scenario”, New Zealand border restrictions will apply with a few possible exceptions.

The assumptions were presented to the Emergency Committee in a workshop on 23 April 2020 and the “most likely scenario” has been used to form the draft Emergency Budget 2020/2021.

Methodology The impacts stated are against draft budgets submitted by council departments and CCOs in March. Impacts from across the council group were collected and consolidated by the council’s group finance team and reviewed to ensure consistency.

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These impacts are not the final changes to the draft Emergency Budget as further mitigation actions were included to mitigate the cash flow impacts.

Analysis of operating impacts

Cash operating revenue Note all figures have been rounded to the closest $5 million.

Item Council entity $M Explanation

Rates postponement provision (Net) Group -$65M

Estimate by the council’s financial policy team for rates postponement for the 2020/2021 financial year is $100M. However, this is reduced by recovery of forecast rates postponement for 2019/2020 of $35M

Ports of Auckland revenue POAL -$65M Due to reductions in shipping volumes due to COVID-19 restrictions and reductions in economic activity

AIAL dividend projection Group -$60M Assuming no airport dividend will be received during the 2020/2021 financial year.

Regulatory services Auckland Council -$50M Assuming a 25%-30% reduction in building and resource consenting volumes

Water charges Watercare -$50M

Reductions due to COVID-19 restrictions, change in volumes from water restrictions and change in pricing (changing from a 3.5% increase to a 2.5% increase)

Infrastructure Growth Charges Watercare -$20M Reductions as rate of development falls due to COVID-19 restrictions and reductions in economic activity

Regional Facilities revenue RFA -$40M Large reductions due to COVID-19 restrictions and lack of public appetite for mass gatherings

Public transport fare box (Net) Auckland Transport -$40M Gross reduction of $95M projected, however

assuming that NZTA will top-up 51% of the shortfall

Parking and enforcement Auckland Transport -$40M

Reductions in parking requirements from commutes due to less trips mainly from COVID-19 restrictions and more people working from home.

Customer & community revenues Auckland Council -$30M Reductions in patronage of leisure centres, holiday parks and active recreation such as pools.

Other Auckland Transport revenue lines

Auckland Transport -$20M Petrol tax, rental revenue and other revenues

Regional Fuel Tax Group -$20M Assuming a 20% reduction in fuel usage at Alert Level 2, and a 10% reduction in fuel usage otherwise

Accommodation Provider Targeted Rate Group -$10M Suspension for the first nine months of the

2020/2021 financial year

Other minor impacts -$15M Other items include Panuku revenue, and inflation adjustments held centrally

Total -$525M

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Cash operating expenditure Note all figures have been rounded to the closest $5 million.


Additional savings over and above existing targets Auckland Council -$58M

Additional initiatives undertaken to help mitigate revenue loss. Total savings of $120M include: - $62M of savings to meet current targets - $58M over and above existing targets savings

to mitigate COVID-19 impacts.

Ports of Auckland expenditure POAL -$30M Lower operating requirement due to less volumes.

Regulatory services expenditure Auckland Council -$25M Lower operating requirement due to lower volumes

Regional facilities expenditure RFA -$20M

Reduced cost of sales as a result of reduced performances and events, and reduced shop and café sales. Also included are $6m of efficiency savings.

2021 events funding Auckland Transport -$20M Revised cost estimate from original $40M budget

bid

Accommodation Provider Targeted Rate funded expenditure ATEED -$10M Reductions in activities supported by the APTR

Auckland Transport net operating gap Auckland Transport +$5M

Gross operating pressures of $25M primarily due to additional Public Transport costs, reduced by $20M operating savings including pay reductions and reductions in professional services and contract staff.

Other minor impacts +$8M

Minor cost pressures (mainly in Auckland Council) including additional repairs and maintenance, pay parity and utilities. Other items include inflation savings held centrally and reductions in staff and other costs in Watercare.

Total -$150M

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Analysis of capital impacts

Capital delivery Note all figures have been rounded to the closest $5 million.


Auckland Council mitigation initiatives Auckland Council -$100M Holding capital programme to $550M to help mitigate debt impact of revenue loss

Auckland Transport mitigation initiatives

Auckland Transport -$55M Holding capital programme to $850M to help

mitigate debt impact of revenue loss

Watercare COVID-19 impacts Watercare -$55M Delays due to impacts of COVID-19 on supply chains and procurement

Total gross changes -$210M

Reversal of under-delivery assumption Group $160M

Previous budgets assumed timing changes within the capex programme. In 2020/2021, the latest assumption was $160M of the programme would not be delivered. With a large reduction in capex investment under the current scenario this assumption is no longer valid and is reversed.

Total -$50M

See the draft group capital investment list for more details of the impact of these changes.

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Capital funding Note all figures have been rounded to the closest $5 million.


Mill Road/Penlink asset sales Group +$100M

As part of the NZ Upgrade project, the Crown will be taking over the delivery of these projects. The council will be able to sell land previously acquired for these projects to the Crown to recover the cost.

Development contributions Group -$60M Reductions due to lower consenting activity from COVID-19 restrictions and lower economic activity

NZTA capital subsidies Auckland Transport +$30M

Assuming that NZTA will co-fund 40% of the planned Auckland Transport capital programme. This is a higher assumption than considered in March.

Transform/Unlock asset sales Panuku -$20M Delays to the programme due to COVID-19 restrictions and changes to the property market.

Total +$50M

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Section Two: Budget Proposal 2.2: Auckland Council Group draft capital investment for the Emergency Budget


Section 2.2: Auckland Council Group draft capital investment for the Emergency Budget

This Annual Budget 2020/2021 is the third year of the 10-year budget. This document provides an overview of the key changes between the capital investment indicated in the Financial Planning Pack (also known as the Budget Book), published 22 November 2019, and the capital investment planned for in the Emergency Budget.

Group summary

Item Budget

Book Proposed

Budget Change Impacts

Auckland Council $668M $447M -$221M

As at March 2020, Auckland Council was planning a capital programme of $630 million. There are typically project delays encountered during the course of any year which mean that the capital programme is normally under-delivered. The $450 million programme represents a large reduction in planned activity, below the level of capital investment in the current and previous years. Auckland Council was projecting around $300m of current year projects to be deferred to next year, this is larger than normal due to the lengthy pause in construction due to the COVID-19 situation. These projects will be funded from the $450m proposed budget which means projects that were planned to be delivered next year will be delayed into 2021/2022 or later years.

Auckland Transport

$905M $700M -$205M Programme details and impacts are contained within this document.

Watercare $536M $513M -$23M Reductions are a result of COVID-19 impacts, primarily due to rephasing of the forecast growth component of the capital programme.

Regional Facilities Auckland

$41M $50M +$9M Increased due to on-going works that still need to be completed at the Zoo and Aotea Centre. These projects will now be completed next year and reflected in the proposed budget.

Panuku $173M $100M -$73M Focus will be mainly on completion of committed projects and critical renewals.

Ports of Auckland $91M $79M -$12M

Reduction due to COVID-19 impact. Capital expenditure will only be made if it relates to projects that are already committed and underway or projects required (e.g. for health and safety and mandatory replacement items).

City Rail link investment (AC share)

$395M $395M -

Group capex delivery assumption

-$160M - +160M

Previous budgets assumed timing changes in the capex programme. In 2020/2021, the assumption was $160m of the programme would not be delivered. With a large reduction in capex investment under the current scenario this assumption is no longer valid and is reversed

Total Auckland Council Group

$2,650M $2,284M -$366M

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Auckland Council

Item Budget

Book Proposed


Healthy Waters $129M $90M -$39M

Deferral of all externally contracted design work including Waiheke Island Stormwater Improvements, Falder Avenue, Westmere Capacity Upgrade, Omaha Beach Stormwater Improvements and Stanmore to Fife Grey Lynn Renewal. Deferral of all stormwater pipe relining. Deferral all network growth projects including Te Atatu Peninsula Town Centre, Clinker Place New Lynn, Hayman Park Manukau, TŌtaravale Drive Sunnynook and Birkenhead Ave/Waratah St Birkenhead. Deferral of most renewal/capacity construction upgrades other than emergency works including Portland Road, Remuera, Kitchener Street, Milford, Oakley Creek Bank Rehabilitation, Ports of Auckland, Swaffield Road, Papatoetoe and Corbans Reserve, Henderson. Deferral of most small water upgrades including Martins Bay Mahurangi, Shelly Beach Helensville and Sinclair Park Kaukapakapa. Deferral of most small wastewater upgrades including Long Bay, Judges Bay Parnell, Karekare Beach, Puhoi Sports Club and Palm Beach Waiheke. Deferral and/or restaging of some Water Quality Targeted Rate projects including Hurstmere Road Water Quality upgrade and the Waterview Separation project.

Wynyard Edge Alliance $12M $18M +$6M Completion of AC36 works as planned Project is critical to event delivery and already contracted

Development Programme Office

$75M $91M +$16M

Deferral of City Centre Targeted Rate projects not yet commenced including Hobson St, Myers Park and Nelson St slip lane. Deferral of stage 4 of Otahuhu Town Centre and restaging of the Hurstmere Road upgrade. The new cruise mooring structure (mooring dolphin) that was planned for at the end of Queens Wharf will not proceed any further.

Environmental Services (Including NETR)

$17M $7M -$10M Delay to planned Natural Environment Targeted Rate work including 35% of planned track upgrades.

Community investment $342M $180M -$162M

Capital budget below previous levels of delivery (27% less than last year). Accommodating carry forwards from 2019/2020 ($132m) would require 85% of the planned 2020/2021 programme to be deferred into outer years. Major impacts include: - 65% reduction in land acquisition meaning only

land acquisitions already signed and settling next year could be purchased, in addition to the Manukau cemetery land purchase

- Major delay to all One Local Initiatives (key programmes for local boards to provide/upgrade community assets and facilities) and to the

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Item Budget

Book Proposed


growth/development programme unless the works are already contractually committed

- Deferral of all unallocated Locally-driven initiatives (LDI) capex and uncommitted LDI projects

- A minimum reduction of 80-90% of planned 2020/2021 renewals for buildings, playgrounds and open space. This level of reduction will mean a noticeable deterioration of community assets and a risk of closure of assets should they become a health and safety risk (example broken walkways, broken play equipment, leaking buildings with dampness or mould issues). This may also result in increased response maintenance costs due to failing elements of assets as they pass their useful life. Prioritisation will be led by Local Boards.

- Possible closure of facilities under the seismic code when assessments completed, with no seismic remediation of facilities funded

- 28% reduction in library budgets means significant impact on availability and long-term impact on breadth and depth of collection. Reduction in digital budget means no new or improved online services in short-term; increasingly outdated and inefficient technology

- 70% reduction in public art spend meaning most projects will be delayed to 2021/2022 unless committed

- Co-governance deferred projects to be accommodated in existing 2020/2021 budget envelope

ICT $25M $17M -$8M Reduction of ICT enablement initiatives which may jeopardise efficiency savings

Corporate Property $30M $22M -$8M

Slowing of WorkSmart programme (the council’s corporate property optimisation strategy) with some risk as property sales are already unconditional Reduced renewals e.g. Auckland House toilet facilities. Manukau Hub work paused. Some local board office refits deferred. Pause $1M sustainability fund.

Central Risk Fund $15M $15M - Central budget for contingencies

Other $23M $7M -$16M

Climate Change Response Fund (funding for reactive storm damage) reduced from $20M to $5M so that more funds are available for planned projects. Reductions to smaller capex areas including Waste, Regulatory, Governance, Planning.

Total Auckland Council $668M $447M -$221M

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Auckland Transport

Reduction of capital programme to $700 million

The financial planning pack shows Auckland Transport’s planned capital investment as $905 million. Pre-COVID-19, investment was projected to be lower at $850 million but now due to current financial constraints the revised programme under the 3.5 per cent rates scenario is $700 million.

Due to COVID-19 disruptions capital investment that would otherwise have been spent in 2019/2020 will now occur in 2020/2021. Close to $600 million of work is contracted for 2020/2021 and includes the Downtown Infrastructure Development Programme, the Puhinui interchange, elements of the Urban Cycling Programme (such as the Karangahape Road Enhancements Project and New Lynn to Avondale Shared Path) and the delivery of new trains.

The following impacts have been identified due to the proposed reduction in capital investment:

Pausing or cancelling of safety improvements including further rollout of red-light cameras in urban areas, the rural road delineation programme, and improvements to high risk intersection and pedestrian crossing improvements. The reduced investment in safety is likely to impact on Auckland Transport’s deaths and serious injury (DSI) statistics.*

Pausing or deferring work on all walking and cycling projects not in construction including Glen Innes to Tāmaki Stage 4, Point Chevalier to Herne Bay, Waitematā Safe Routes programme, Links to Glen Innes and Great North Road. In short, momentum would be lost.

No further investment in electric buses and charging infrastructure is likely to be made in 2020/2021 other than three electric buses already on order.

The ability to renew assets could be compromised and much more expensive asset failure will be an increasing risk.

Previous expansions to the Local Board Transport Capital Fund and the creation of the Community Safety Fund will be compromised.

Progress made on multi-modal projects such as Glenvar Road, East Coast Road, Lake Road, Esmonde Road and the significant improvements to Lincoln Road will have to be deferred.

Delays in the ferry strategy development and implementation

Increased roading maintenance costs in medium term as a result of deferred renewals.

Additionally, this level of investment will not allow AT to support capital programmes undertaken by other agencies or developments in Auckland

*Potential Impact of Reduced AT 2020/21 Safety Capex on Death and Serious Injuries Outcomes for the 2018/28 Road Safety Programme Business Case (PBC)

Key points:

The estimated impact of a potential Road Safety Programme funding reduction from $107.7 million to $36 million in 2020/21 is an immediate reduction in annual DSI savings from 70.7 to 19. Based on initial estimates, 51.7 DSI not saved in 2020/2021 could mean, worst case scenario, up to 10 lives not saved along with more than 40 serious injuries.

The longer-term impacts are non-linear, with the Auckland Road Safety Programme Business Case identifying that a delay of two years in beginning the implementation of the road safety programme could result in an additional 900 DSI occurring on Auckland’s roads over ten years.

The primary problem identified in the Road Safety PBC was ‘insufficient leadership and priority for road safety in policy and decision-making has prevented the full delivery of a safe system’. A delay in delivering

26



the Programme Business Case as committed to the public and key partners has significant risks relating to trust and credibility and creates flow on leadership challenges for key partners.

Road safety harm impacts more vulnerable road users and communities disproportionately, including Māori, people walking and cycling, high deprivation Local Boards and older people. Any reduction in safety delivery is expected to create greater harm in these communities.

Climate Change Impacts

Auckland Council’s aspirations for addressing the impacts of climate change and reducing congestion by increasing walking and cycling, encouraging mode shift, and improving access to frequent and attractive public transport will be impacted by a reduction in the capital budget and a reduction in public transport services. Our current targets relating to a reduction in carbon emissions, total transport boarding’s and kilometres of new cycleway added to the network are unlikely to be met.

AT Capital Programme Analysis

RLTP Project Name Budget Book $850m scenario

$700m scenario

Comments

New Footpaths Regional Programme

4,024,731

2,079,065

1,000,000

Significant deferrals from the proposed budget prior to COVID-19.. In $700m scenario would need to defer Links to Glen Innes, Great North Road, Glen Innes to Tāmaki Drive shared path Stage 4, Point Chev to Herne Bay, Waitematā Safe Routes

Urban Cycleway Programme

52,111,488

68,632,757

51,132,757

Walking and Cycling Programme

5,604,685

5,818,309

3,162,511

61,740,904

76,530,131

55,295,268

Downtown bus Improvements

3,902,367

8,790,797

8,790,797

Contractual commitments. The programme is well underway cannot reduce or pull back delivery. Will need to finish the project.

Downtown Ferry Basin Piers 3 and 4

16,725,054

24,650,000

24,650,000

On-going Seismic Strengthening Works

24,495

24,495

Seismic Strengthening Programme

15,265,245

35,071,178

35,071,178

35,892,666

68,536,470

68,536,470

EMU Rolling Stock 26,758,151

53,036,316

53,036,316

Significant deferrals from COVID-19

Murphys Rd Upgrade Bridge Improvements

7,035,826

6,864,037

6,864,037

Contractual commitment

Rosedale and Constellation Bus Stations

33,562,500

33,108,747

33,108,747


Supporting Growth - Investigation for Growth Projects

16,500,000

10,000,000

7,000,000

We will need to slowdown the Supporting Growth Alliance in the $700m scenario. This has contractual implications

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$700m scenario

Comments

Tāmaki Drive/ Ngapipi Road safety improvements

2,907,500

2,907,500

Safety related

Wainui Improvements 2,000,000

1,940,319

1,940,319


Wynyard Quarter Integrated Road Programme

6,153,283

10,298,834

10,298,834

Deferral of Land payment

92,009,760

118,155,752

115,155,752

Additional Seal Extensions

3,050,000

3,000,000

-

Defer additional seal extensions

Glenvar Road/East Coast Road intersection and corridor improvements

1,648,946

Will need to put on hold

Lake Road/Esmonde Road Improvements

5,337,609


Lincoln Road Corridor Improvements

17,572,688


Matakana Link Road 15,060,000

17,137,500

17,137,500

Continue with Matakana Link Road, 100% front loaded funding from NZTA

42,669,243

20,137,500

17,137,500

Proposed Deferrals from 2017-18

5,339,349

Ormiston town centre upgrade - need to put on hold.

5,339,349 - -

Electric Buses and Infrastructure

2,541,760

1,270,880

1,270,880

3 busses on order

Environmental sustainability infrastructure

1,631,648

515,824

515,824

Tetra traps, EV charging poles etc.

Street Lighting Improvements

7,746,156

12,000,000

7,000,000

90% NZTA funded - LED bulbs accelerated delivery

Tāmaki Drive resilience Investigation

2,201,250

2,201,250

Bring forward to mitigate flooding

11,919,564

15,987,954

10,987,954

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$700m scenario

Comments

Greenfield transport infrastructure projects

29,134,581

Land purchases in growth areas (Redhills and Tōtara/Trigg Road extensions) - HIF funded may be over programme depending on funding source

Local Board Initiatives 20,842,000

17,500,000

5,000,000

Material reduction in local board projects

49,976,581

17,500,000

5,000,000

Ōrākei shared path 4,400,880

4,000,000

OLI project, paused under proposed plan.

Projects funded by Rodney Targeted Rate

1,598,854

3,000,000

3,000,000

Park and Ride in Kumeu/Warkworth - design completed might need more money

5,999,734

7,000,000

3,000,000

Auckland Transport Operations Centres Amalgamation

5,022,972

2,511,486

5,022,972

Amalgamation mid flight

Intelligent Transport Systems

5,660,400

5,660,400

4,245,300

Slow down ITS improvements

Network Performance 10,332,900

7,749,675

5,166,450

Slow down network performance improvements

21,016,272

15,921,561

14,434,722

Bus Priority: Localised Improvements

4,729,510

2,364,755

2,364,755

Bus lanes, shelters etc.

CPCG Approved 13,552,322

13,000,000

13,000,000

Wolverton culverts

Marae and Papakainga (turnout) Safety Programme

1,000,000

750,000

750,000

Potential reduction

Parking Programme 4,239,661

2,500,000

2,500,000

Slow down

Public Transport Safety, Security and Amenity and other capital Improvements

8,358,263

9,000,000

4,500,000

Slow down

Regional Improvement Projects

4,261,088

3,767,974

706,477

This includes improvements / installation of cycleway, transit lanes, bus lanes, zebra crossings etc.

36,140,844

31,382,729

23,821,232

29





$700m scenario

Comments

City Centre Bus Improvements

1,344,000

Defer

Whole of Route Bus Priority Programme - Phase 1

17,289,695

10,237,051

5,000,000

Connected communities programme - need to slow down to base level commitments

18,633,695

10,237,051

5,000,000

Matiatia Park and Ride

3,550,000

Pause

Papakura rail station Park and Ride

1,792,032

Pause

5,342,032 - -

Airport to Botany RTN via Manukau and Airport Access Improvements (Investigation

36,622,475

56,231,235

56,231,235

Deferral of Puhinui Interchange including cost increases. This includes STAAI and A2B MRT related spend

Eastern Busway: Pakuranga Bus Station and Reeves Road Flyover

36,986,934

15,000,000

15,000,000

Proceed with IPA phase, but not PAA

Eastern Busway: Panmure to Pakuranga

63,779,784

69,074,582

69,074,582

EB1 increased due to deferrals

137,389,193

140,305,816

140,305,816

Renewals

215,231,610

199,089,239

162,000,000

Reduce renewals down towards minimum contracted levels to accommodate deferrals and lower envelope

215,231,610

199,089,239

162,000,000

LRGF Huapai SHA 5,910,000

2,500,000

Pause

LRGF Medallion Drive Link

9,000,000

12,500,000

12,500,000

Cost increase on land

Seal Extensions 4,300,000

5,000,000

1,000,000

Reduce

Tāmaki Regeneration 5,470,000

Deferral of payment for development on Tāmaki regeneration.

24,680,000

20,000,000

13,500,000

30





$700m scenario

Comments

Minor Safety Improvements

20,624,145

12,500,000

9,375,000

Material reductions in the road safety programme would have flow on implications on targets to reduce deaths and serious injury

Red Light Cameras 787,405

Rural Road Safety Programme

21,766,866

16,250,000

6,093,750

Safer Communities and Speed Management

16,592,779

10,500,000

7,875,000

Urban Road Safety Programme

47,504,888

35,750,000

13,406,250

107,276,083

75,000,000

36,750,000

AT Metro Business Technology

2,733,467

3,000,000

2,733,467

Reduce base level spend in Business Technology, reduced customer facing initiatives

Core Technology Upgrades and Replacements

9,543,888

10,000,000

9,543,888

Customer Contact Centres, Channel Technology and Innovation

2,127,297

2,750,000

2,127,297

Innovation and Customer Centric Applications

2,264,160

2,500,000

2,264,160

Integrated Ticketing - Improvements, Replacement and National System

17,372,528

16,250,000

12,372,528

One Network ITS System Integration

194,688

194,688

34,236,028

34,500,000

29,236,028

905,493,558

850,284,204

700,160,743

AT Capital Programme Summary under $700m scenario $m

Renewals 162.0

Eastern Busway: Panmure to Pakuranga 69.0

City Centre and Waterfront Projects supporting America's Cup 68.5

Airport to Botany RTN via Manukau and Airport Access Improvements (Investigation) 56.0

31



AT Capital Programme Summary under $700m scenario $m

Walking and Cycling 55.3

EMU Rolling Stock 53.0

Safety projects 36.8

Rosedale and Constellation Bus Stations 33.0

Business technology 29.2

Matakana Link Road 17.0

Eastern Busway - 2-4 15.0

Wolverton Culverts 13.5

Medallion Drive Link 12.5

Wynyard Quarter Integrated Road Programme 10.0

Street Lighting Improvements - LED Programme 7.7

Supporting Growth - Investigation for Growth Projects 7.0

Murphys Rd Upgrade Bridge Improvements 7.0

Network performance - Optimisation 5.2

Local Board Initiatives 5.0

Whole of Route Bus Priority Programme - Phase 1 (Connected communities) 5.0

Auckland Transport Operations Centres Amalgamation 5.0

Public Transport Minor improvements 4.5

Intelligent Transport Systems 4.2

Projects funded by Rodney Targeted Rate 3.0

Tāmaki Drive/ Ngapipi Road safety improvements 3.0

Parking Programme 2.5

Bus Priority: Localised Improvements 2.3

Tāmaki Drive resilience Investigation 2.2

Wainui Improvements 2.0

Environmental sustainability infrastructure 1.8

Seal extensions 1.0

Marae and Papakainga (turnout) Safety Programme 0.8

Regional Improvements 0.7

Total 700.6

32



Further reductions required under 2.5 per cent rates scenario

Additional $28 million deferral for transport growth and improvement programmes ($14 million debt reduction after adjusting for NZTA subsidies) would be required under the 2.5 per cent rates scenario. This would mean no investment in the planning of future Regional Fuel Tax funded walking and cycling projects and deferring delivery of any remaining local road sealing and local board programmes so that none of these are progressed next year. It would also mean deferring investment in the Airport to Botany Mass Rapid Transport investigation works and slowing down work on the Māngere cycle route elements within the Short Term Airport Access project. Further reductions would also occur in investment in Network Optimisation, Public Transport Minor Improvements, Parking and ITS Programs.

$12 million of further reductions in Auckland Transport’s planned renewals programmes, (a $6 million reduction in debt requirement after adjusting for NZTA subsidies). These programmes will have to be further prioritised in following years, but there will inevitably be implications for asset conditions, future maintenance requirements and deaths and serious injury reduction targets.

33



Projects and Programmes not included in $700m programme $m

Safety projects 70.6

Renewals 53.0

Greenfield transport infrastructure projects 29.0

Eastern Busway - 2-4 22.0

Lincoln Road Corridor Improvements 17.6

Local Board Initiatives 15.8

Whole of Route Bus Priority Programme - Phase 1 (Connected communities) 12.3

Supporting Growth - Investigation for Growth Projects 9.5

Seal extensions 6.3

LRGF Huapai SHA 5.9

Business technology 5.8

Tāmaki Regeneration 5.5

Park and Ride programme 5.3

Lake Road/Esmonde Road Improvements 5.3

Network performance - Optimisation 5.1

Deferrals 5.0

Ōrākei shared path 4.4

Public Transport Minor improvements 3.9

Regional Improvements 3.5

Walking and Cycling 2.4

Bus Priority: Localised Improvements 2.4

Environmental sustainability infrastructure 2.3

Intelligent Transport Systems 1.8

Parking Programme 1.7

Glenvar Road/East Coast Road intersection and corridor improvements 1.6

City Centre Bus Improvements 1.3

Marae and Papakainga (turnout) Safety Programme 0.3

Total 299.5

34



Watercare

Watercare has an ongoing capital programme delivering renewal and growth improvements to our assets. The reduction in capital investment indicated is from a reduction of the forecast growth component of the capital programme.

The $513 million planned investment includes $417 million of works that are subject to existing construction contracts, including the Central Interceptor at $197 million. These projects are underway and any amendment to construction contracts would result in delayed benefits and additional costs for Watercare from cancellation or deferral. There will also be negative effects on the contractors who have been reliant on this pipeline of work as they emerge from the COVID-19 lockdown.

There are $96 million of significant projects planned for next year, which have not yet been contracted. These include significant projects such as the Western Isthmus water quality improvement programme, the Warkworth / Snells Wastewater programme, a watermain renewals programme, the Redoubt Road Reservoir Expansion, as well as other planned renewals.

Item Budget Book Proposed Budget Change Impacts

Central Interceptor $189M $197M +$8M Committed project.

Network capex including renewals

$347M $316M -$31M

Committed projects, any further amendment to construction contracts would result in delayed benefits and additional costs. There will also be negative effects on the contractors who have been reliant on this pipeline of work as they emerge from the COVID-19 lockdown. Projects planned for next year, which have not yet been contracted include significant projects such as the Western Isthmus water quality improvement programme, the Warkworth / Snells Wastewater programme, a watermain renewals programme, the Redoubt Road Reservoir Expansion, as well as other planned renewals.

Total Watercare $536M $513M -$23M

35



Drought Response

If the dry weather persists in line with current forecasts there is a significant probability that additional treated water supply will be required during the 2021 calendar year. Watercare is with urgency looking at the feasibility of accelerating additional extractions, treatment and transmission from the Waikato River, a project which had previously been planned for mid-2020. The first stage of this second water treatment plant will need be brought forward and completed mid-2021. If it is concluded this is feasible to address the impacts of the current drought a further $50 million to $180 million would be required in Financial Year 2020/2021. This would be in addition to our current forecasted capital spend of $513 million, as such a target capital spend target of lower than $513 million would be unachievable in the current environment.

Regional Facilities Auckland (RFA)

A large proportion of RFA’s capital programme is already contracted or committed. The disruptions caused by COVID-19 mean both the Auckland Zoo and Aotea Centre projects will be delayed and completed next financial year.

The following projects will be impacted under the 3.5 per cent rates scenario:

Heritage restoration works for the old Art Gallery building will be deferred for a year. Some works will be required to ensure safety standards are met, leading to temporary fixings remaining in place for 18 months;

Carbon emissions reduction works (gas-to-electric conversions) for the Art Gallery and Mt Smart Stadium will be deferred;

At Mt Smart Stadium, replacement of end-of-life floodlights on Arena 2 and stadium seats will be deferred, as will works aiming to deal with ground settlement issues;

The Vodafone Events Centre’s heat exchange system will not be replaced this year, as planned, this will lead to some associated increased operational costs;

Implementation of the multi-year security infrastructure improvement programme across RFA venues will be slowed down;

IT infrastructure investment will be limited to critical systems requirements; and

Essential marina renewals work at the Maritime Museum will be deferred, and we will not proceed with visual upgrades programmed in for delivery prior to AC36.

Item Budget Book Proposed


Auckland Zoo $16M $19M +$3M The upgrade works at the Zoo are ongoing and will be completed next financial year.

Aotea Centre $6M $12M +$6M The upgrade works at the Aotea Centre are ongoing and will be completed next financial year.

Auckland Stadiums $6M $6M -

Auckland Art Gallery $5M $5M -

Auckland Live and other facilities

$9M $9M -

Regional Facilities Auckland Total

$41M $50M +$9M

36



Panuku Development Auckland

Following a budget review in March 2020 Panuku revised their capital investment for next year to $130 million. Under the 3.5 per cent rates scenario a further reduction of the programme is proposed with total investment planned at $100 million. This will result in slowing project initiation work and deferring lower priority projects, while generally maintaining a credible programme of capital works.

Panuku has approximately $85 million of capital works in delivery or contractually obliged to deliver in 2020/21. The focus next year will be mainly be on completing these projects under construction, a continuation of acquisitions to further Northcote town centre and minor pipeline preparation.

Work will continue on Waterfront Development, 36th America’s Cup work and Haumaru Housing for Older People as planned. Major areas to be deferred include Manukau, Henderson and Hobsonville development work.

Any further delays and reduction in project initiation work and place activation areas will have a medium impact to the scale and pace of the next 3 years’ programme.

Item Budget Book Proposed


AC36 $7M $11M +$4M Committed works, increase in budget relates to work already underway from this year.

Asset renewals $10M $8M -$2M

Waterfront $48M $38M -$10M

Transform and Unlock

$70M $31M -$39M

Onehunga - deferral of laneway work in early planning stages and wharf renewals. Panmure - deferral of development work currently in early planning stages and some property acquisitions. Hobsonville - deferral of some development work. Pukekohe - deferral of some land acquisitions and preparation work for site sales. Avondale - deferral of work at the Civic Precinct and streetscape improvements. Henderson - Deferrals of works including, Oratia Link Cycleway and Bridge Construction, precinct redevelopment (acquisitions) and the Temporary Tiny House Village.

Other capex $38M $12M -$26M Includes contingency for underway projects, Haumaru Housing and property optimisation.

Panuku Total $173M $100M -$73M

37

Section Two: Budget Proposal 2.3: Proposed measures to achieve $120 million savings


Section 2.3: Proposed measures to achieve $120 million savings

Ref Department Measure Description Estimated financial

impact $m

Staff impact

Ease of implementa

tion

Community impact

1 Corporate Annual pay rise

The council is in discussion with the PSA on options relating to this year’s annual remuneration review for staff, and whether it should be limited or cancelled. Those discussions will continue over the coming weeks.

8.60 Moderate Easy None

2 Corporate Voluntary pay reduction scheme

Voluntary salary reduction scheme for six months from 1 July 2020. 5% reduction $100-175k, 7.5% reduction $175-275k, 10% reduction $275k and over. Assumed 75% uptake.

3.71 High Moderate None

3 Corporate Voluntary 4-day weeks

Possible voluntary offer to staff to reduce hours e.g. 4-day working week - impact cannot be quantified

0.00 Moderate Moderate None

4 Corporate Interest costs Interest cost savings based on interest rates expected to be lower than budgeted

15.00 None Easy None

5 Corporate Defer trienniel property valuation

Trienniel property valuation process would commence shortly for valuations effective 1 July 2021. Level of market uncertainty makes valuations difficult and likely to lead to substantially more objections to process. Enabling legislation is now in place. Propose to apply to Valuer General to defer revaluation for one year.

4.50 None Easy Low

6 Corporate Travel costs 50% reduction to travel costs budget of $1.4m. Will not affect travel within the region.

0.70 Low Easy None

7 Corporate Training costs 50% reduction to staff training and conference budget of $7.3m

3.75 Low Easy None

8 Corporate Professional services

10% reduction to professional services budget of $41m, excluding audit fees

4.00 None Easy None

9 Corporate Marketing spend

Reduction of Communications department budget of $1m, mainly in marketing and advertising. OurAuckland to continue based on high level of value for money.

1.00 Low Moderate Low

10 Corporate People & Performance budget reduction

Additional 10% budget reduction for People & Performance (council's human resources function) to be achieved through efficiency measures, such as improved employee self-service.

2.60 Moderate Hard None

11 Corporate Insurance claims

Reduction in insurance claims cost through more efficient claims management, including changes to excess levels

1.00 Low Easy None

38




impact $m

Staff impact

Ease of implementa

tion

Community impact

12 Corporate Corporate property maintenance

Improved efficiency of corporate property maintenance and renewals through re-prioritisation

1.00 None Moderate None

13 Corporate Corporate property utilities costs

Building management services efficiencies to reduce utilities costs, e.g. lighting programming and new lifts in Auckland House


14 Corporate Print and distribution

Initiative to provide print services to CCOs. Increase document digitisation to reduce printing volumes.

0.45 Low Moderate None

15 Corporate Business support services

Optimisation of business support services offering through more efficient delivery model, reducing duplication

1.30 Moderate Hard None

16 Corporate Vehicle fleet Lower fleet operating costs through reduced fleet size and usage along with other optimisation of services


17 Corporate Targets Additional savings targets allocated to Finance, Planning, Governance divisions

16.40 ? ? ?

18 Healthy Waters

Healthy Waters reduction in preventative maintenance

Less preventative maintenance and reduction in small opex projects. Ties into broader workforce management initiative to significantly reduce contractors with some insourcing of specialist expertise that should reside within the Department. Reduction in outsourced works and repairs and maintenance through reducing contractors and reprioritising the programme.

2.25 None Moderate Moderate

19 Healthy Waters

Grants Water Protection Fund grants stopped for one year. Represents grants to rural landowners for riparian planting and fencing.

0.17 None Easy Moderate

20 Waste Services

Waste collection

Reduction of waste collection budget through efficiencies, for example, reducing inorganic waste collection marketing costs

2.00 None Moderate Low

21 Environmental Services

Pest eradication

Delay for a year beginning the rat eradication component of the overall Te Koro o Waiheke project and pest eradication on Kawau Island, plus some reduction in large pest reduction programme and Kauri dieback research.

1.17 None Easy Low


Kauri dieback enforcement

Reduced kauri dieback compliance monitoring through fewer contracted enforcement staff

0.20 None Easy Low

39




impact $m

Staff impact

Ease of implementa

tion

Community impact


Covenant programme on private land

Programme to support rural landowners restore high ecological value sites. Scaled back through fewer contracted staff. The contractors provide specific restoration plans (e.g. what to plant, maintenance and fencing needs) for rural property owners.

0.12 None Easy Low


Grants Regional Natural Environment Heritage Grant reduction (total grant budget $2.9m). This contestable grant is for community led conservation and low carbon living projects. Reduction of 14% proposed.



Staff reductions

Mix of staffing initiatives, including bringing work in-house

0.39 Low Easy None

26 Regulatory Services

Front of house services

Review front of house services by driving uptake of online and telephone services to maintain service levels

0.34 Moderate Moderate Low


Animal Shelter consolidation

Reduction in number of animal shelters from 3 to 2, supported by operational changes to retain service levels. Waiheke animal shelter closure with operational changes to support ongoing service.



Staff measures

Pausing induction, graduate and training programmes for one year. Manages expected lower consenting volumes.



Process optimisation

Optimisation and automation of consenting processes, such as billing, to simplify processes and reduce costs

5.00 High Hard None

30 Customer & Community Services

Staff management

Management of staff to reduce overtime and use of temporary staff and contingent workers across all services



Catering and entertainment

Reduction in budget for catering and entertainment

0.35 Low Easy None


Outsourcing Outsourced works savings target of 5% across the division, to be delivered through efficiencies



Facilities opening hours review

Direct facility costs savings achievable by reducing opening hours, based on utilisation information and with local board consultation

0.80 High Moderate High

34 Parks Sport & Recreation

Scaling back programmes

Gyms move to in-house developed fitness programme, replacing Les Mills licence costs

0.18 None Easy None

40




impact $m

Staff impact

Ease of implementa

tion

Community impact



Reduced park activations and Arataki Visitors Centre programme delivery

0.24 None Easy Low


Reduced events

Reduced regional park events for one year (e.g. cancellation of Ambury Farm Day and Sculpture in the Gardens at the Botanic Gardens)

0.09 None Easy Low


Parks maintenance

Regional parks reduction in planned general and track maintenance

0.26 None Easy Low


PSR other measures

Reductions to graduate programme and additional reductions in professional services spend

0.40 Low Easy None


Grants Sport and Recreation Facilities Investment Fund deferral of unallocated grant funding

3.00 None Easy Low

40 Arts Community & Events

Events Cancellation or scope change of events (Matariki and SUSO changed delivery, Music in Parks and Movies in Parks, Waitangi Ki Manukau and heritage festival reduced, citizenship ceremonies digital delivery to end December

0.52 None Easy Low

41 Arts, Community & Events


Reduction in programmes delivered through community centres (regional budget not LDI)

0.42 None Easy Low



Reduction in arts and culture programmes delivered at arts facilities (regional budget not LDI)

0.45 None Easy Low


Consequential opex

Consequential opex not required due to community centre build delay (Community Centre in Manurewa)

0.30 None Easy None


Grants Due to anticipated reduction in activity, lower Q Theatre grant.

0.27 None Easy Low


Grants Regional Events Fund reduction savings through fewer events being held

0.20 None Easy Low


Grants Combine regional contestable events funds (Regional Events, Community Empowerment, Arts and Culture) into one fund and reduce overall amount

0.20 None Easy Low

47 Libraries Scaling back programmes

Reduction in library programmes across the region based on experience of low attendance (poor value for money)

0.20 None Easy Low

48 Libraries Budget adjustment

Budget correction for Fit for the Future efficiencies adjusted in FY21 and outer year budgets

1.60 None Easy None

41




impact $m

Staff impact

Ease of implementa

tion

Community impact

49 Community Facilities

Budget adjustment

Budget correction for prior year permanent savings adjusted in FY21 and outer year budgets

0.50 None Easy None

50 Strategy & Service Integration

Staff reductions

Mix of staffing initiatives including not filling vacancies and adjusting work programmes

0.49 Low Easy None

51 Governance EM remuneration

Remuneration Authority set elected member remuneration below budgeted level

0.30 None Easy None

52 Governance IMSB budget The IMSB has proposed a budget reduction of $200k (total budget $3.1m)

0.20 None Easy None

53 Governance Mayoral office budget

The Mayoral Office has committed to an underspend of the statutory budget

2.00 None Easy None

54 Governance Staff reductions

Staff reductions initiatives 0.65 Moderate Hard None

55 Planning Professional services

Additional reduction in professional services above corporate 10% reduction

0.38 None Easy None

56 Planning Grants Reduction in Regional Historic Heritage grant for one year

0.10 None Easy Low

57 Other Other Other minor items 0.25

TOTAL 95.26

Other initiatives still to be identified including operating model changes

24.74

TOTAL SAVINGS

120.00

42

Section Two: Budget proposal 2.4: Service level reductions options


Section 2.4: $100 million of further savings and temporary service level reductions

Measure Description Potential Financial

impact $m

Staff impact

Ease of implementati

on

Community impact

Reductions under 3.5% rates increase scenario

Auckland Council Group efficiency target

We are setting a formal target for the removal of duplication between organisations in the Council Group. This will be achieved through increased shared services and implementation of any structural changes the council decides to make following the completion of the CCO review. This should improve back-office efficiency without impacting front line services.

5.0 High Hard None

Auckland Transport (AT) – Reductions in public transport service levels

A $20 million reduction in public transport services is proposed by optimising timetables on lower patronised routes at the periphery of our network and use of on-demand services where possible. No new public transport services will be possible that are not already committed. These measures will result in a $10 million reduction in revenue after taking into account reductions in Transport Agency funding and losses of fare revenue. Momentum from recent years of growth in use of public transport through service improvements will be reduced and patronage is expected to reduce for the first time in many years, resulting in increasing private transport use, congestion and emissions.

10.0 None

Easy High

AT enforcement measures

Aucklanders are likely to increase private vehicle use in the near term due to physical distancing requirements on public transport. Providing clear road space for buses, high occupancy vehicles and freight will be more important than ever with more private motor vehicles on our roads in the short-term, and to promote the use of public transport moving forward. We are proposing to increase enforcement measures to mitigate the risk of motorists infringing in current bus and transit lane arrangements. These measures will improve operating conditions for buses and high occupancy vehicles, improve productivity of the network and improve our safety outcomes. The $7 million projected increase in infringement revenue from these initiatives will reduce the budgeted decline in infringement revenues in 2020/2021 from $22 million to $15 million.

7.0 None Moderate Low

AT operational savings and

AT will make further $5m operational expenditure savings without impacting service levels.


43




impact $m

Staff impact


on

Community impact

additional revenue

AT believes other revenues (such as rental income and credit card transaction fees) can potentially be increased by $2 million.

AT has offered rental reductions to tenants during lock down. AT now believes rental income may recover quicker than first anticipated.

Many service providers add a very small charge to recover costs associated with credit card transactions for payment of services. AT has not previously recovered the costs associated with customers using credit cards for payment of public transport trips, parking, and infringements. The cost currently falls on either ratepayers or taxpayers. AT proposes to commence recovering the costs of credit card payment by customers through adding a small surcharge (approximately 1%) to these transactions.

Regional Facilities Auckland (RFA) operational cost savings

RFA propose to reduce staff costs by a further $2.2m by considering options such as analysis of a 4-day week, workforce optimisation strategies and voluntary salary reductions. Further discretionary savings of $1m will be achieved across repairs and maintenance, professional services, advertising and marketing and IT expenditure. RFA is also projected a net benefit of $2.6m from the extension of the WINZ Wage Subsidy.


RFA - Auckland Live & Art Gallery exhibitions – reduced level of service

RFA will reduce additional programming that were planned for Auckland Live’s public programmes and to Auckland Art Gallery’s exhibition programme with the proposed cancellation of a third significant exhibition, to generate a combined $1.1M savings. This will be in addition to the previous cancellation of the Monet and Picasso exhibitions.

1.1 Moderate Easy High

Panuku Development Auckland operational savings

Panuku have proposed to reduce staff costs, functional support and corporate operating costs that will result in $3m of savings.

3.0

High Moderate None

Panuku Project readiness

In line with the deferral of capital expenditure spend on Panuku’s project and procurement planning will be reduced. For some projects, completing readiness work too far in advance of delivery may lead to rework being required. Not progressing readiness work will mean longer lead in times should capital funding become available in the future.

2.4 High Moderate Low

44




impact $m

Staff impact


on

Community impact

2021 Events funding to be reduced

We were planning additional funding of $30m to support the large programme of events in 2021 including the 36th Americas Cup. We are proposing to scale this back to $20m. This will mean less activation and promotion with less ability to leverage wider economic benefits from the events. It will also mean less traffic management and event public transport services which may reduce public attendance, create a poorer visitor experience and may result in greater disruption when large events are being held.

10.0 Low Hard Moderate

Local board discretionary funding reduction

We propose to reduce the Local Board funding Locally Driven Initiatives (LDI) funding by 10% for 2020/2021. Local boards will reprioritise their planned programmes for next year to meet the funding reduction. Flexibility will be provided for local boards to identify some reductions in Asset Based Services (ABS) spending if that is preferred to finding all savings from LDI funding.

3.0 Low Moderate Moderate

54.3

Additional reductions under 2.5% rates increase scenario are required and outlined below

Local board discretionary funding reduction

A further reduction in Local Board LDI funding extended from 10% to 20% for 2020/2021 will be required under a 2.5% rates scenario. This further reduction is likely to impact on community programmes that have previously been funded by local boards.

3.0 Moderate Hard High

Maintenance spend in open spaces reduced

A temporary reduction will be required to service levels for the maintenance of open spaces across Auckland. This could include reduced mowing frequencies, removing some litter bins, closing some public toilets and less frequent footpath cleaning.

8.0 Low Moderate High

Waterfront public space maintenance reduced

Public spaces in the Wynyard Quarter are high profile and therefore cleaning and maintenance is currently at a high level. We propose that some service level reductions could be implemented temporarily while international visitor numbers are reduced due to COVID-19.


Auckland Transport fare concessions reduced

Auckland Transport provides a range of card concessions and discount fares. Auckland Transport will investigate possible changes in concessions across child, student and tertiary students, senior and supergold, and look at the broader fare structure including the opportunity to review differentiated fares across weekday peak and off-peak periods. A reduction in off-peak fares may assist in spreading user demand in the peak period and reduce costs. By removing or reducing some concessionary fares

4.0 None

Moderate High

45




impact $m

Staff impact


on

Community impact

temporarily and charging standard fares is projected to provide additional revenue of $4 million. Where demand for services grows quicker than forecast, any fare changes may be reset.

Auckland Transport - Park & Rides

Auckland Transport will consider locations where charging for park and ride could be implemented. The potential revenue generation across locations would be in the order of $900,000 per annum. Auckland Transport’s Parking Strategy provides several pre-conditions that will need to be in place before the commencement of charging for park and ride.

0.9 None Moderate High

Auckland Council Regional grants

Further reductions under the 2.5% rates scenario are proposed to regional grants for one year

5.0 Low Easy High

21.4

Other possible reductions to operational costs

Mayoral proposal: Living Wage

A number of items were proposed by the Mayor for the 2020/2021 annual budget. Options to defer these items for one year will lead to further operational savings for one year. The deferral of extending the living wage to contracted cleaners for one year will result in operational savings.

1.3 None Easy High

Mayoral proposal: Homelessness coordination

Not proceeding with the proposal to continue support for homelessness coordination for one year.

0.5 None Easy High

Mayoral proposal: Climate change

Deferral of the foundation work for climate change interventions.

0.9 Low Easy High

Inorganic Collection

Suspending the inorganic waste collection, meaning that it would not be re-introduced until 1 July 2021 could be considered. The savings indicated are net of estimated contract penalties. This proposal if implemented may lead to increases in illegal dumping.

7.0 None Moderate High

Community facilities

Permanently close and vacate a proportion of our community facilities that are under-utilised, this would lead to operational cost savings.

1.0 High Hard High

46




impact $m

Staff impact


on

Community impact

Auckland Transport - Road & footpath maintenance

Maintenance of roads and footpaths are undertaken to ensure the safety of traffic and to sustain the use and appearance our roads. Under a zero-rates increase scenario reductions would be required to the roads and footpaths maintenance programme to save costs. Typical maintenance activities such as fixing pot-holes, repairing cracked surfaces and repairs of road side furniture would be delayed until they are deemed to be critical. Taking shorter term actions such as this could result in safety issues as well as leading to irreversible long-term declines in the condition of critical assets. The impacts of such a reduction will also flow on to job losses for our contractors who repair and maintain our assets.

7.0 Low Moderate High

Auckland Tourism, Events and Economic Development (ATEED)

ATEED is currently moving urgently to focus all its resources on achieving the biggest impact on regional economic recovery possible: attracting government (and private) investment; working with key industry sectors (tourism, screen, food and tech) to recover; and managing existing commitments. Reducing funding at this point could put the economic recovery of some sectors at risk and mean a greater reliance on central government to support Auckland businesses and employment.

5.0 High Moderate High

Māori outcomes

Defer some initiatives intended to improve Maori outcomes such as marae development and other programmes.

2.0 Moderate Moderate High

24.7

Total potential reductions 100.4

47

Section Two: Budget Proposal 2.5 Analysis of asset recycling opportunities


Section 2.5: Analysis of asset recycling opportunities

Purpose 1. The purpose of this document is to provide an outline of asset recycling or optimisation opportunities

which may be available to help mitigate the financial impacts of the COVID-19 situation on the Auckland Council group.

Introduction 2. Asset recycling is an important lever for the council allowing capital to be invested in the most

strategically important activities. This is an aspect that both credit agencies and central government consider when assessing Auckland Council financial position.

3. Asset recycling has been underway since amalgamation. At amalgamation Auckland Council received a number of assets (property, investments, business operations) from legacy councils and over time there has been some rationalisation activity. In 2015 the council received advice from Ernst & Young and Cameron Partners (reports on Alternative Sources of Finance), with some further rationalisation then occurring.

4. The 10-year budget has financial targets from asset recycling (excluding asset sales linked directly to specific projects and programmes such as the unlock and transform programme). These targets are as follows:

Proceeds ($m) 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

Budget 24 24 24 20 20 20 20 20 20 20

Actual 44

5. The Emergency Budget provides an opportunity to increase the budget targets and accelerate asset recycling to reduce the debt requirement. However, this may require an alternative approach to approving property disposals.

6. A key consideration for asset recycling is the opportunity cost of holding an asset which is not providing a service or generating an appropriate financial return against the opportunity of investing in new assets which deliver council services.

7. Decisions will also need to take into consideration projected future revenue streams generated by assets or any potential for capital gains.

Opportunities for asset recycling 8. The council has three potential asset recycling opportunities

a. Accelerate sales of property (includes Panuku rationalisation pipeline)

b. Consider ongoing investment in non-core commercial assets

c. Further optimisation of service property.

9. Each recycling option differs in their liquidity – how quickly the asset can be converted to cash. Shares (e.g. in Auckland International Airport) are very liquid with an active market, sale of property less so;

48



particularly with the anticipated recession. The timing of when proceeds may be realised is a key consideration to meet the budget parameters.

10. The current economic environment may result in less value being realised than if a sale occurred last year. This is hypothetical and not relevant to the key trade-off decisions against other financial levers (debt, capital, operating cost). However, some of the opportunities have a long lead time and this is a key consideration when assessing the ability to meet the budget parameters.

Accelerate sale of property (includes Panuku rationalisation pipeline) 11. The most common asset recycling is the property rationalisation managed by Panuku. Panuku operate

across the Group identifying property (land and buildings) which do not have a current or future service use and could be candidates for rationalisation. Panuku have identified a potential pipeline of property which has no current or future service. Additionally, there are a number of properties that have been approved for sale that are yet to be sold by Panuku on behalf of the Council.

12. Panuku is responsible for urban renewal and urban redevelopment in its priority Transform and Unlock locations. In these locations the proceeds are generally re-invested but there has been an opportunity identified for an alternative approach for the Hobsonville Employment Precinct.

13. In addition, Watercare have a number of properties which are now surplus to their future requirements which can be added to the rationalisation pipeline.

14. Panuku face some constraints to effective property rationalisation. These include

a. consultation requirements – public, iwi

b. Public Works Act requirements

c. political and community opposition to the sale

d. natural incentive to hold property for an unidentified future use.

15. Notwithstanding resolutions made by the Finance and Performance Committee some local boards do not support rationalisation decisions resulting in properties being in the pipeline for a number of years. This reduces the proceeds realised from these sales and takes significant staff time to manage and prevents additional investment in assets which support service delivery.

16. The rationalisation and sales process is labour intensive and the current portfolio includes smaller properties (rather than few large properties). To accelerate the process Panuku require support, in particular approval from the Emergency Committee to mobilise the sale of the identified portfolio of assets.

Consider ongoing investment in non-core commercial assets 17. The council owns certain assets to facilitate the delivery of core business services and outcomes rather

than financial returns.

18. The council also provides services or owns assets in areas which are either not core to the council meeting their objectives, can be provided by the free market or council can achieve its objectives through mechanisms other than ownership (e.g. as a regulator).

19. Many of these non-core assets are a result of amalgamation rather than being strategic decision making of the council.

20. As part of the additional funding commitment for the City Rail Link project $50 million was identified as proceeds from the sale of carpark concessions and incorporated into group budgets in 2023/2024. Work is underway by Auckland Transport to develop a parking strategy and assess the commercial

49



opportunities of the council carparks. It is anticipated that an additional $50 - $100 million can be realised from these opportunities.

21. Council offices at Albert Street and Bledisloe building could both be considered for sale with the council as a long-term tenant. While this would generate a cash inflow and introduce a new source of funds the lease agreement is considered as debt by credit agencies and would not assist the debt to revenue ratio. Embedding changed ways of working (staff working from home) may mean that the council group require less office space and this will be considered as part of future budgets.

22. There are other assets which could also be candidates for sale and lease back arrangements, but these would also be treated as debt.

23. The council also holds the following two strategic assets which it could consider as part of an asset recycling opportunity. As strategic assets, any disposal would require an LTP amendment process with public consultation.

a. Auckland International Airport (AIAL) – partial or full sell down

The council own approximately 18 per cent in AIAL (Market value $1.5 billion). This is the most liquid asset owned by the council (other than cash). A shareholding of 10 per cent provides the council the opportunity to block any full takeover of AIAL.

b. Ports of Auckland (POAL) – partial or full sell down

POAL have previously been listed on the NZX until the former Auckland Regional Council acquired 100 per cent of the shares. There is an opportunity for the council to sell all or part of its investment. Due to the uncertainty around the Upper North Island Supply Chain Strategy this opportunity is unlikely to maximise the potential value at this time.

24. Opportunities have been identified where council is the lessor of certain assets and a different commercial arrangement may be possible. These opportunities are commercially sensitive but include the sale of interests in certain leases, prepayment of leases by lessees and the potential divestment of other commercial businesses.

Optimisation of council investment in community assets 25. The council has significant investments in community assets to support service delivery and community

outcomes. Opportunities exist to optimise the ownership of these assets and whether there is an alternative approach to the council achieving their desired outcomes.

26. Many of these opportunities have higher change impact (staff, community) and involve both Governing Body and Local Board in decision making. No substantive analysis has been undertaken of these opportunities. Investigation into these opportunities could inform the next 10-year Budget and the Value for Money committee could consider as part of their work programme.

27. The following opportunities have been identified:

a. Services that the council could exit as there is also adequate private market provision. This includes:

i. gyms

ii. holiday parks

iii. early childhood education.

b. The council could consider and reduce the scale of investment in certain activities. This includes:

i. provision of golf courses.

a. Optimisation and rationalisation of community facilities (land and buildings). This includes:

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i. consolidation into community hubs ii. land which is part of a community facility but is not currently used or needed to provide

council services iii. low use, poorly positioned assets (buildings and/or land) iv. alternative service delivery model which includes a non-asset owning response to achieving

outcomes v. sale of assets to community groups.

Summary of potential current opportunities 28. Council proposes an additional $200 million target is included in the 2020/21 budget as proceeds from

asset recycling with the total budget being $224 million.

29. The following table sets out a list of potential asset recycling opportunities that may potentially help mitigate the current financial situation. Realising these opportunities in a short timeframe would be challenging, requiring a clear political mandate and different approach to approval.

Opportunity Low ($m) High ($m)

Accelerate sale of property including Panuku rationalisation pipeline (2020-2022) outlined below 100 150

Alternative commercial arrangements (leasing, sale of lease interests) 50 100

Auckland Transport car park opportunities 50 100

Total opportunity 200 350

Panuku rationalisation pipeline (as at May 2020) The properties listed below have not yet been declared surplus by Auckland Council. The process to determine if these properties are surplus to council’s requirements is yet to be undertaken. Should these properties be deemed surplus to Auckland Council’s requirements, it will comply with its statutory obligations relating to each property.

None of these properties have been approved for disposal

Opportunity Potential amount Low ($m)

Potential amount High ($m)

Properties considered by Finance and Performance Committee and not approved (no future service use has been identified)

5 10

2020/2021 potential programme of disposals 25 40

2021/2022 potential programme of disposals 40 60

Total opportunity 70 110

1. Properties considered but not approved for sale by the Finance and Performance Committee

Address Status 2 Wiremu Street, Balmoral Recommended for sale to Finance and Performance Committee in 2016 and

decision deferred

34 Moore Street, Howick Recommended for sale to Finance and Performance Committee in 2013, 2014 and 2018 and decision deferred

14 Baxter Street, Warkworth Recommended for sale to Finance and Performance Committee in 2017 and decision deferred

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Address Status 26-32 O'Shannessey Street, Papakura Recommended to Finance and Performance Committee in 2018 and retained for

up to three years

36 Coles Crescent, Papakura Recommended to Finance and Performance Committee and in 2018 and retained for up to three years

2 Forrest Hill Road, Forrest Hill Recommended to Finance and Performance and not approved for sale

24R Linwood Avenue, Forrest Hill Recommended to Finance and Performance and not approved for sale

80 Vincent Street, Howick Recommended to Finance and Performance in 2017 and not approved for sale

2. Proposed pipeline of non-mandated properties 2020/2021 Address 5R Ferguson Road, Māngere

31R Killington Crescent, Māngere

45 Georgina Street, Freemans Bay

72R Karaka Road, Beachlands

2R Ti Rakau Drive, Pakuranga

12 (part) Waimauku Station Road, Waimauku

37 Olive Road, Penrose

26 Princes Street, Otahuhu

19/28 and 20/28 Remuera Road, Newmarket

20 Hopetoun Street, Freemans Bay

3 Ponsonby Road, Freemans Bay

300 West Coast Road, Glen Eden

4 and 6 Brightside Road, Stanmore Bay

472, 474, 476, 478, 480, 482, 484, 486, 488,1/490, 2/490, 492, 494, 496, 1/498, 498B, 500, 502, 599A, 616A and 750A Whangaparaoa Road, Stanmore Bay

119A May Road, Mt Roskill

20 (part) Uxbridge Road, Howick

36 Cooper Street, Grey Lynn

143 Keri Vista Rise, Papakura

145 Keri Vista Rise, Papakura

16 Fencible Drive, Howick

12 Western Road, Laingholm

1-5 Lippiatt Road, Otahuhu

4 Blomfield Spa, Takapuna

1/328 Lake Road, Hauraki

25R Alfred Street, Northcote Point

2 The Strand, Takapuna

72 Wood Street, Papakura

3 Victoria Road, Devonport

520 Dominion Road (aka 173 Balmoral Road), Mt Eden

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3. Proposed pipeline of non-mandated properties 2021/2022 and beyond

Address Adj. 45 Brandon Road, Glen Eden

Rear 18-22 Keven Road, Clarks Beach

34,36-38 Greys Avenue, Auckland Central

8 Magnolia Drive, Waiuku

738 Mt Eden Road, Mt Eden

30 Willerton Avenue, New Lynn

Lot 6 DP 119411 Trojan Crescent, New Lynn

Lot 1 DP 36821 State Highway 16, Reweti

220-240 Shaw Road, Titirangi

3R Taylor Road, Māngere Bridge

23 Waipuna Road, Mt Wellington

31 & 17R Aspiring Avenue & Hilltop Road, Clover Park

11R Birmingham Road, Ōtara

84 Cosgrave Road, Ardmore

76R Aberfeldy Avenue, Highland Park

111R Golfland Drive, Howick

9R Fortyfoot Lane, Sunnyhills

1R Hutchinsons Road, Highland Park

54R McCahill Views, Highland Park

28R Simon Owen Place, Howick

100R Uxbridge Road, Howick

13 Davern Lane, New Lynn

4/222 Edmonton Road, Te Atatu South

67A Glengarry Road, Glen Eden

2R Keeney Court, Papakura

12R Rockfield Road, Ellerslie

24 Saleyard Road, Whitford

R 105 Stott Avenue, Beach Haven

Land off Verbena Road, Birkdale

R 107 Lynn Road, Bayview

36-38 Waipareira Avenue, Henderson

54 Whitford Park Road, Whitford

751 Whitford-Maraetai Road, Whitford

2 Popes Road, Takanini

Sec 1 SO 427897 and Sec 2 SO 427897 Albatross Road, Red Beach

213R Fisher Parade, Sunnyhills

107R Uxbridge Road, Cockle Bay

2R (part) Bucklands Beach Road, Bucklands Beach

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Address 116R Reeves Road, Pakuranga Heights

2/97 Mahia Road, Manurewa

R 33A Tauhinu Road, Greenhithe

1B Rankin Avenue, New Lynn

7 Waitai Road, Waiheke

9 Tagalad Road/aka 6a Nihill Crescent, Mission Bay

13 Crown Lynn Place, New Lynn

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Section Two: Budget Proposal 2.6 Proposed draft budget


Section 2.6: Proposed draft budget

Financial overview

This section provides an overview of the draft budget that underpins the Consultation Document. This should be read in conjunction with the Indicative prospective financial statements that follow.

Key financial parameters for 2020/2021

$ million 10-year Budget 2020/2021

3.5% rates increase

2.5% rates increase

Total capital investment 2,474 2,285 2,220

Total operating expenditure 4,347 4,445 4,428

Rates revenue 1,965 1,976 1,959

Average general rates increase 3.5% 3.5% 2.5%

Total assets 58,662 59,457 59,392

Total borrowing 10,657 10,785 10,720

Total equity 44,229 43,643 43,643

Debt to revenue ratio 264% 290% 290%

Balanced budget and funded depreciation

The Local Government Act 2002 requires that each local authority ensures that each year’s projected operating revenues are set at a level sufficient to meet that year’s projected operating expenses. Additionally, however, it provides that a local authority may set revenues at a different level if it resolves that it is financial prudent to do so, having regard to -

a) the estimated expenses of achieving and maintaining the predicted levels of service provision set out in the long-term plan, including the estimated expenses associated with maintaining the service capacity and integrity of assets throughout their useful life; and

b) the projected revenue available to fund the estimated expenses associated with maintaining the service capacity and integrity of assets throughout their useful life; and

c) the equitable allocation of responsibility for funding the provision and maintenance of assets and facilities throughout their useful life; and

d) the funding and financial policies adopted under section 102.

Auckland Council’s revenue and financing policy, set through its 10-year Budget 2018-2028, included a progressive movement towards the full funding of its depreciation expense from operating sources. As a consequence of this the council resolved that it would not balance its budget for the first three years of the plan (2018/2019 – 2020/2021). The policy had set a minimum level of depreciation funding for 2020/2021 of 85 per cent.

The projected impacts of COVID-19 disruption on the 2020/2021 revenue streams of the Auckland Council group are such that an attempt to balance the budget by offsetting them with reductions in operating spend

55



would be impossible without extreme impacts on core council service delivery. This means that the amount of depreciation funded in 2020/2021 is projected to be 47 per cent.

These impacts are, however, expected to only be temporary in nature and revenue levels are largely projected to return to previous levels in the following year and we expect the council will return to a balanced position from 2021/2022.

Given this, the council considers that it is financially prudent to agree to a budget that does not balance for the 2020/2021 year.

Breakdown by entity

The charts below show the breakdown of our capital investment and direct operating expenditure between the council entity and each of its CCOs (reflects budgets at a 3.5% average general rates increase).

Auckland Council, $447 million

Auckland Transport, $700 million

Watercare, $513 million

Regional Facilities, $50 million

Ports of Auckland, $79 million

Panuku, $100 million

CRLL, $395 million

Auckland Council Group Capital Investment programme $2.3 billion

Auckland Council, $1,329 million

Auckland Trasnport, $964 million

Watercare, $272 million

Regional Facilities, $99 million

Panuku, $78 million

ATEED, $68 million

Group adjustments(including Ports of Auckland), $149 million

Auckland Council Group direct operating expenditure $3.0 billion

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Indicative prospective financial statements

Please note all financial statements reflect the budgets at a 3.5 per cent average general rates increase.

Prospective statement of comprehensive revenue and expenditure

Auckland Council group consolidated

$000 Financial year ending 30 June

Annual Budget

2019/2020

Long-term Plan

20202021

Annual plan 2020/2021

Variance from LTP

2020/2021

Revenue

Rates 1,877,457 1,965,237 1,976,213 10,976

Fees and user charges 1,410,529 1,529,558 1,165,657 (363,901)

Grants and subsidies 837,395 781,007 690,594 (90,413)

Development and financial contributions 258,310 306,698 127,698 (179,000)

Other revenue 444,087 430,473 424,128 (6,345)

Vested assets 299,609 375,122 409,921 34,799

Finance revenue 11,064 12,967 6,120 (6,847)

Total revenue 5,138,451 5,401,062 4,800,331 (600,731)

Expenditure

Employee benefits 959,552 950,505 971,649 21,144

Depreciation and amortisation 964,835 1,037,578 1,104,981 67,403

Grants, contributions and sponsorship 156,233 133,743 162,935 29,192

Other operating expenses 1,705,561 1,659,706 1,764,960 105,254

Finance costs 456,399 565,169 440,453 (124,716)

Total expenditure 4,242,580 4,346,701 4,444,978 98,277

Operating surplus 895,871 1,054,361 355,353 (699,008)

Share of surplus in associates and joint ventures 67,848 69,700 5,201 (64,499)

Surplus before income tax 963,719 1,124,061 360,554 (763,507)

Income tax expense 39,477 40,264 53,649 13,385

Surplus after income tax 924,242 1,083,797 306,905 (776,892)

Surplus after income tax is attributable to:

Ratepayers of Auckland Council 924,242 1,083,797 306,905 (776,892)

Other comprehensive revenue/ (expenditure)

Net gain on revaluation of property, plant and equipment 1,219,210 2,697,640 2,697,640 0

Tax on revaluation of property, plant and equipment 0 (193,913) (193,913) 0

Total other comprehensive revenue 1,219,210 2,503,727 2,503,727 0

Total comprehensive revenue 2,143,452 3,587,524 2,810,632 (776,892)

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Prospective statement of changes in equity



Annual Budget

2019/2020

Long-term Plan

20202021


Variance from LTP

2020/2021

Contributed equity

Opening balance 26,732,016 26,728,538 26,732,015 3,477

Surplus after income tax 0 0 0 0

Other comprehensive revenue 0 0 0 0

Total comprehensive revenue 0 0 0 0

Transfer to/ (from) reserves 0 0 0 0

Balance as at 30 June 26,732,016 26,728,538 26,732,015 3,477

Accumulated funds

Opening balance 2,257,379 3,238,302 2,419,264 (819,038)

Surplus/ (deficit) after income tax 924,245 1,083,797 306,905 (776,892)

Other comprehensive revenue 0 0 0 0

Total comprehensive revenue 924,245 1,083,797 306,905 (776,892)

Transfer to/ (from) reserves 60,139 16,539 16,541 2

Balance as at 30 June 3,241,763 4,338,638 2,742,710 (1,595,928)

Reserves

Opening balance 10,508,664 10,674,393 11,681,155 1,006,762

Surplus after income tax 0 0 0 0

Other comprehensive revenue 1,219,210 2,503,727 2,503,727 0

Total comprehensive revenue 1,219,210 2,503,727 2,503,727 0

Transfer to/ (from) reserves (60,139) (16,539) (16,541) (2)

Balance as at 30 June 11,667,735 13,161,581 14,168,341 1,006,760

Total equity

Opening balance 39,498,059 40,641,233 40,832,434 191,201

Surplus after income tax 924,245 1,083,797 306,905 (776,892)

Other comprehensive revenue 1,219,210 2,503,727 2,503,727 0

Total comprehensive revenue 2,143,455 3,587,524 2,810,632 (776,892)

Transfer to/ (from) reserves 0 0 0 0

Balance as at 30 June 41,641,514 44,228,757 43,643,066 (585,691)

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Prospective statement of financial position



Annual Budget

2019/2020

Long-term Plan

20202021


Variance from LTP

2020/2021

Assets

Current assets

Cash and cash equivalents 100,000 200,000 100,000 (100,000)

Receivables and prepayments 465,605 458,736 535,504 76,768

Derivative financial instruments 6,812 0 2,713 2,713

Other financial assets 151,619 50,850 56,063 5,213

Inventories 43,034 38,633 49,950 11,317

Non-current assets held-for-sale 136,213 174,000 53,374 (120,626)

Total current assets 903,283 922,219 797,604 (124,615)

Non-current assets

Receivables and prepayments 12,078 11,967 37,434 25,467

Derivative financial instruments 282,190 170,000 440,525 270,525

Other financial assets 141,112 178,813 146,570 (32,243)

Property, plant and equipment 50,644,368 53,865,450 54,287,334 421,884

Intangible assets 525,311 499,049 586,830 87,781

Investment property 761,153 735,000 628,818 (106,182)

Investments in associates and joint ventures 2,031,828 2,268,279 2,519,160 250,881

Other non-current assets 14,872 11,000 12,978 1,978

Total non-current assets 54,412,912 57,739,558 58,659,649 920,091

Total assets 55,316,195 58,661,777 59,457,253 795,476

Liabilities

Current liabilities

Payables and accruals 1,050,197 900,675 887,989 (12,686)

Employee entitlements 111,039 105,859 113,532 7,673

Borrowings 922,500 1,444,451 1,411,306 (33,145)

Derivative financial instruments 5,488 7,000 8,940 1,940

Provisions 62,334 30,411 111,987 81,576

Total current liabilities 2,151,558 2,488,396 2,533,754 45,358

Non-current liabilities

Payables and accruals 91,964 111,463 146,330 34,867

Employee entitlements 5,397 5,572 5,299 (273)

Borrowings 8,797,152 9,212,395 9,373,879 161,484

Derivative financial instruments 962,541 865,000 1,839,402 974,402

Provisions 168,357 167,118 162,056 (5,062)

Deferred tax liabilities 1,497,712 1,583,078 1,753,467 170,389

Total non-current liabilities 11,523,123 11,944,626 13,280,433 1,335,807

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Annual Budget

2019/2020

Long-term Plan

20202021


Variance from LTP

2020/2021

Total liabilities 13,674,681 14,433,022 15,814,187 1,381,165

Net assets 41,641,514 44,228,755 43,643,066 (585,689)

Equity

Contributed equity 26,732,016 26,728,538 26,732,015 3,477

Accumulated funds 3,241,763 4,338,636 2,742,710 (1,595,926)

Reserves 11,667,735 13,161,581 14,168,341 1,006,760

Total equity 41,641,514 44,228,755 43,643,066 (585,689)

Prospective statement of cash flows



Annual Budget

2019/2020

Long-term Plan

20202021


Variance from LTP

2020/2021

Cash flows from operating activities

Receipts from rates revenue 1,877,457 1,965,237 1,976,213 10,976

Receipts from customers and other services 2,907,415 3,036,196 2,369,473 (666,723)

Interest received 11,064 12,967 6,120 (6,847)

Dividends received 62,900 60,463 5,566 (54,897)

Payments to suppliers and employees (2,829,045) (2,820,329) (3,009,521) (189,192)

Income tax refund/(paid) 0 0 0 0

Interest paid (452,999) (562,711) (438,016) 124,695

Net cash inflow from operating activities 1,576,792 1,691,823 909,835 (781,988)

Cash flows from investing activities

Sale of property, plant and equipment, investment property and intangible assets

254,639 71,000 430,013 359,013

Purchase of property, plant and equipment, investment property and intangible assets

(2,471,263) (2,112,858) (1,918,720) 194,138

Acquisition of other financial assets (3,168) (2,960) (6,173) (3,213)

Proceeds from sale of other financial assets 0 1,027 0 (1,027)

Investment in joint associates and ventures (203,000) (359,100) (395,000) (35,900)

Advances of loans to external parties (50,162) (6,000) (6,000) 0

Proceeds from community loan repayments 4,475 4,776 5,034 258

Net cash outflow from investing activities (2,468,479) (2,404,115) (1,890,846) 513,269

Cash flows from financing activities

Proceeds from borrowings 2,081,687 2,060,198 1,903,511 (156,687)

Repayment of borrowings (1,290,000) (1,347,906) (922,500) 425,406

Net cash inflow from financing activities 791,687 712,292 981,011 268,719

0

Net increase/(decrease) in cash and cash equivalents and bank overdrafts

(100,000) 0 0 0

Opening cash and cash equivalents and bank overdrafts 200,000 200,000 100,000 (100,000)

Closing cash and cash equivalents and bank overdrafts 100,000 200,000 100,000 (100,000)

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Section Three: Rates Postponement for ratepayers impacted by COVID-19


Section Three: Rates postponement for ratepayers impacted by COVID-19

Summary

1. The economic fallout of COVID-19 is confronting many residents and businesses with both immediate cash challenges and medium to longer term uncertainty. The council is providing short term assistance using existing policies to allow ratepayers to defer the fourth quarter rates instalment until 31 August 2020.

2. Economic recovery is forecast to take two to three years and many ratepayers may still be in the early stages of adjusting their financial position as we enter the 2020/2021 rating year. The council is also facing a fall in revenue and must operate within its borrowing limits.

3. We propose a targeted postponement scheme to support struggling ratepayers with their 2020/2021 rates. This balances support for ratepayers with the council’s need to maintain services and support economic recovery. Under the proposed scheme postponement will be available to all ratepayers (residential and business) financially stressed as a result of COVID-19 (excluding government entities, utilities and overseas based owners); specifically:

residential and lifestyle ratepayers with a mortgage (property owners without a mortgage are very unlikely to be financially stressed)

financially stressed business and farm ratepayers.

4. To focus support on small and medium business all postponements will be capped at $20,000 (GST incl) of 2020/2021 rates per property. Ratepayers be able to carry forward up to $5,000 (GST incl) of any rates deferred from the fourth quarter instalment of their 2019/2020 rates.

5. This will make full support available to 85 per cent of business properties. Larger businesses tend to be better capitalised and have greater access to finance. Properties with higher rates will be able to postpone the first $20,000 (GST incl) of rates. A cap reduces the council’s exposure to uptake of postponement in excess of forecasts. Postponement of rates over $20,000 (GST incl) could be assessed on a case-by-case basis against more stringent criteria but this could present administrative challenges and greater uptake risk.

6. Not-for-profit ratepayers will be eligible for postponement under either the residential or business criteria depending on the rating classification of the property they are applying for. Not-for-profit applications for residential property will not be required to have a mortgage.

7. The proposed scheme provides for applications to be made up until 31 December 2020 by which time we expect ratepayers to have a clearer view of their financial position. It will be available to properties owned prior to 26 March 2020 to ensure that the council is not taking on the risk of decisions made by ratepayers after the full impact of COVID-19 was becoming clear.

8. The proposed scheme is primarily targeted at postponement of rates for the 2020/2021 rating year and the fourth quarter of the 2019/2020 year but has provision for extension to subsequent years by committee resolution.

9. The scheme will provide for the council to set a postponement fee to cover the costs of interest and administration.

10. A draft scheme to be added to our Rates Remission and Postponement Policy as set out in Section 3.1 of the Supporting Information.

11. We forecast that up to 11,000 ratepayers will postpone up to $65 million of rates for the 2020/2021 year and the fourth quarter of 2019/2020 under this proposed scheme (but could be as high as $85 million). The

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council can manage the reductions in cashflow arising from the forecast increase in ratepayers taking up the option to postpone their rates. The proposal is cost neutral as recipients will meet our interest and administration costs. However, this does mean we will have less to spend on activities and projects until we receive the postponed rates.

Background

Economic impact

12. Many of our ratepayers are facing immediate financial stress and an uncertain future. Nationally around 1.6 million workers have received the wage subsidy through nearly 500,000 businesses. Across New Zealand 100,000 homeowners have reduced or deferred their mortgage payments. Economic forecasts include major falls in output, rising unemployment and a recovery that could take two to three years.

13. To assist with the short term impacts the council is allowing financially stressed ratepayers to defer their fourth quarter rates instalment, due on 28 May 2020, to 31 August 2020. As of 21 May 2020, $19 million of the fourth quarter instalment has been deferred for 4,908 residential and 1,706 business properties. This temporary respite will allow some ratepayers to reorganize their finances as restrictions on economic activity are lifted. As we move into the new rating year some of these ratepayers will remain short of cash having consumed capital reserves and savings. They will be facing a longer period with greatly reduced incomes and the prospect of unemployment or business failure.

14. Auckland Council will also be severely impacted. However, council has an important role to play continuing to provide essential services and supporting the government’s efforts to maintain stability and stimulate recovery. In order to fulfil that role with reduced income and constrained borrowing the council needs to ensure cashflow remains robust.

Cost of rates to property owners

15. Rates are a fixed cost for property owners. For those who have become unemployed or are facing major falls in business or personal income, rates may present a demand on cash they cannot easily meet now or over the next few months. However, rates are a small proportion of business and household costs.

16. The Productivity Commission notes that residential rates are only 5 per cent of income for the lowest 20 per cent of household income earners. The average residential rates in Auckland are $2,600 per year, $650 per quarter or around $50 per week. In comparison the average residential mortgage is around $387,000 which costs $525 per week over 20 years at current interest rates.

17. For businesses rates are also a small proportion of outgoings and much lower than rents. The return sought on commercial property is generally more than 5 per cent which is ten times business rates.

18. Any rates relief is also small relative to the support being offered by government through wage subsidies, tax deferrals and loan guarantees.

Current council support for ratepayers

19. The deferral of the fourth quarter instalment at no cost is available to all ratepayers who are financially stressed. Prior to COVID-19 only 490 ratepayers were on payment plans including 20 businesses.

20. In addition to the deferral the council:

offers rates postponement to residential ratepayers who have owned their property for two years and have sufficient equity while they live at the property

administers the government’s rates rebates scheme which provides rates relief of up to $640 for those on incomes below a specified level

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supports ratepayer’s applications for the government’s Accommodation Supplement. This is the primary assistance for accommodation costs and can include help with rates payments. People do not need to receive a main benefit to be eligible.

Analysis

21. In proposing a rates postponement scheme to address the challenges presented by COVID-19, we sought to balance:

targeting support to those ratepayers who are financially stressed

aligning the length of postponement to predicted recovery timeframes

maintaining the council’s cashflows

providing security for future payment of postponed rates.

22. If, following consultation, council decided to proceed with the Rates postponement for ratepayers impacted by COVID-19, the scheme will be added to the Rates remissions and postponement policy. The scheme will allow ratepayers to defer payment of their rates for the 2020/2021 year and the fourth quarter of 2019/2020 for one year until 30 June 2021.

23. The support being proposed extends beyond the timeframe of Alert Levels 3 and 4. Many ratepayers will have consumed their capital reserves or savings while activity was restricted. We recognise that reorganizing their financial position may take longer than one year for some ratepayers. The council will be able to review the scheme over the coming year and extend the postponement scheme if it is considered that further assistance for some ratepayers is required.

24. Alternative options for targeting financially stressed ratepayers along with the terms and conditions for postponement are discussed in the sections below.

25. The analysis of eligibility criteria groups ratepayers into two classifications, business and residential. The current differential groupings (residential, business and farm/lifestyle) are based on the council’s decisions on the distribution of the rates burden. Council does not consider these classifications represent the basis on which financial stress from COVID-19 will manifest or can be managed. We have therefore split the farm/lifestyle differential group placing farms alongside businesses and lifestyle in the residential category.

Targeting the impacts of COVID-19

26. Applications for the proposed postponement will be open until 31 December 2020. While the economic impacts may extend well beyond this period, unemployment is forecast to peak by the end of 2020. Council considers that most ratepayers will have more clarity about their future financial position by this time.

27. Council also proposes that the postponement be limited to applications from ratepayers who owned their property, or entered into agreement to buy their property, before 26 March 2020. The purpose of this criteria is to limit council’s financial exposure to situations that are out of a ratepayer’s control due to COVID-19.

28. Some ratepayers may have purchased or transferred properties after 26 March 2020 while being in a financially secure situation only to find their situation changes. While this change in circumstances may not be the ratepayer’s fault, they would have been aware of the economic uncertainty and associated risk. The council will consider applications from residential ratepayers in these circumstances on a case-by-case basis. Business ratepayers have a greater responsibility to undertake due diligence.

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Targeting options: excluded properties

29. To balance provision of support to financially stressed ratepayers within the council’s financial constraints the proposed postponement is not available to:

government entities

utilities

overseas owners of residential properties or businesses without a physical presence in New Zealand.

30. We rejected the option of making this postponement open to all ratepayers. Limiting support to financially stressed ratepayers reduces the risk of excessive uptake. It also ensures other ratepayers aren’t bearing the cost of supporting those who don’t need assistance.

31. Council considers that it isn’t necessary to provide assistance to government entities including the Ministries and Departments of the public service, State enterprises and Crown entities. Government entities can draw on the resources of the Crown to ensure they can meet their commitments. We also consider that utilities while facing reduced demand will continue to have strong cashflows.

32. The intention of the scheme is to support ratepayers who may be facing financial stress. Council considers that it will not be practical to establish the financial position of overseas based ratepayers unless this can be verified by use of New Zealand government sources.

33. To qualify, owners of residential properties must be citizens or New Zealand residents living here. For business properties, the property owner must be the recipient of the wage subsidy which requires proof of New Zealand operation or where receiving other forms of government support the property owner will be required to provide similar evidence to the council.

Supporting residential and lifestyle 34. Council proposes that all residential and lifestyle ratepayers financially stressed due to COVID-19 be eligible

to apply for postponement of the first $20,000 (GST incl) of their 2020/2021 rates per property. They will also be able of postpone up to $5,000 (GST incl) of any rates deferred from the fourth quarter instalment of their 2019/2020 rates. Only 285 residential and lifestyle properties that aren’t businesses owning residential land pay more than $20,000 (GST incl) rates. These ratepayers aren’t operating in the sectors most affected by the COVID-19 economic fall-out and will still be able to postpone the first $20,000 (GST incl) of their rates 2020/2021 and up to $5,000 (GST incl) of their deferred fourth quarter rates instalment for 2019/2020, if they are in financial hardship.

35. Council proposes that rates postponement for residential and lifestyle properties is only available to residential property owners with a mortgage. Residential ratepayers with a mortgage-free property are unlikely to be under significant financial stress given that rates are a small proportion of household costs and may be able to access the rates rebate scheme. Residential ratepayers with mortgage-free properties who have owned their property for two years may, however, qualify for postponement under the existing residential postponement policy.

36. The postponement will be available to landlords who can display that they are under financial stress. While landlords may hold more wealth than owner occupiers, they too may face financial stress. Some landlords support mortgage payments through paid employment which may have been affected by COVID-19.

37. Council will assess financial stress for residential and lifestyle ratepayers based on evidence provided by applicants which may include amongst other factors whether they have:

suffered a 30 per cent drop in income

become unemployed.

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Supporting businesses and farms 38. Council proposes that all business and farm ratepayers financially stressed due to COVID-19 be eligible to

apply for postponement of the first $20,000 (GST incl) of their 2020/2021 rates per property. They will also be able of postpone up to $5,000 (GST incl) of any rates deferred from the fourth quarter instalment of their 2019/2020 rates.

39. The cap is proposed per property rather than per ratepayer because of the difficulty of establishing ownership by related parties. Around 5,900 business properties (15 per cent of the total) pay more than $20,000 (GST incl). For the most impacted sectors, 94 per cent of accommodation properties will be under the cap along with 86 per cent of retail/restaurant properties. This may favour some large businesses who own multiple properties over those with one large value property. However, it isn’t administratively practical to determine ownership reliably for complex corporate structures so capping per ratepayer was rejected.

40. A cap of $20,000 (GST incl) will focus the support on small and medium businesses. Compared to smaller businesses, large businesses are more likely to have greater:

asset bases

diversity of income streams

potential to cut costs

access to finance and alternative funding e.g. share issues

access to financial and legal advice.

41. This does not mean that all large businesses will be able to weather the effects of the current crisis without assistance. Larger businesses particularly in the hospitality, accommodation and travel industries will likely face severe disruption in the short to medium term, regardless of size.

42. To support these businesses the council could allow for postponement in the case of severe financial hardship. However, this option was rejected because of the cost to council of the higher potential value of postponement and the administrative challenges in determining severe financial hardship for large businesses. The owners of these properties would still be able to postpone the first $20,000 (GST incl) of their rates and up to $5,000 (GST incl) of their deferred fourth quarter rates instalment for 2019/2020.

Financial stress test

43. Council proposes that all business and farm properties be able to postpone their rates if they are financially stressed. Possible tests of financial stress include:

have or are a recipient of the government’s wage subsidy

deferral of tax payments

receipt of a government guaranteed business loan

reduction in income of 30 per cent year on year.

Commercial landlords

44. Many small and medium businesses are tenants and are required to pay the rates under their lease. However, the council’s relationship is with the landlord as ratepayer. The landlord is ultimately liable for payment of the rates. Commercial landlords in financial stress are eligible under the conditions for business properties above.

45. Council considered either requiring commercial landlords in financial stress, and/or allowing those not in financial stress, to apply for postponement if they were passing the benefits on to their tenants. However, commercial landlords have a long-term interest in the viability of their tenants and therefore should take the first responsibility for managing the economic challenges.

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Not-for-profit organisations

46. Many not-for-profit community organisations may also be struggling as their donor pool is impacted by a contracting economy. Key fund-raising activity may also have been curtailed by the restrictions on activity during Alert Levels 3 and 4. Rates postponement should also be available to these groups given their important role in supporting communities and bringing people together.

47. Not-for-profit organisations’ properties will be assessed under the criteria above based on the rating classification for the property, or part of the property, for which the application is made. However, given that many not-for-profit community organisations do not have robust financial positions, applications for properties classified as residential will not need to have a mortgage to qualify.

Qualifying conditions

48. Allowing ratepayers to postpone their rates imposes costs on the council and presents risks to council, the ratepayer and other lenders.

Statutory land charge

49. The proposed scheme does not require a statutory land charge (SLC) to be placed on the title of a property postponing rates but reserves the right to do so. The council will record the outstanding rates under this scheme on any requested Land Information Memorandum (LIM). However, unlike placing a SLC on the title and because LIMs are not sought in every case, this does not guarantee that lenders and potential buyers will be aware of the outstanding rates. To increase the chances that lenders and buyers are aware of this element of our new postponement scheme we will communicate with all the relevant institutions (realtors, lawyers and lenders) and their professional bodies.

50. Our current remission policy requires a SLC to be placed on the title for a property on which rates have been postponed. Placing a SLC on the title does not materially improve the council’s security of payment in the majority of cases as rates are a charge on the land by statute. On the sale of the land rates would almost invariably be required to be fully cleared by the buyer from the proceeds of sale. However, a SLC prevents further registration against the title without the consent of the council. This also ensures that other lenders whose debt is secured against the property and potential buyers are aware of the outstanding rates. This additional security may be useful in certain circumstances. The placement and removal of a SLC costs $165 plus staff time.

Postponement fee

51. The proposed postponement scheme provides for the addition of a postponement fee to cover the council’s interest and administration costs. This will ensure that the costs of the support are borne by postponing ratepayers and only those who need the additional time to pay take up the offer.

52. The council will incur costs associated with additional borrowing to replace the delayed receipt of the cash from rates deferral. The interest cost would add around $50 to the postponed rates for the average residential ratepayer in the first year and an additional $100 if the ratepayer does not repay until 30 June 2022. If the council were to require a statutory land charge, as discussed above, for a one-year postponement the postponement fee would be around $200 or 8 per cent of average residential rates. If the council were to meet these costs for residential ratepayers, the cost would be around $160,000 for every 1,000 postponing ratepayers.

Other terms and conditions

53. The other terms and conditions that can be used to address these issues are discussed in the table below.

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Condition Proposal Comment

Level of postponement Full or partial at ratepayer’s discretion

Provides time for all ratepayers to recover their financial position

Allows ratepayers discretion to set payment period to suit their circumstances

Allows ratepayers to spread repayment over a year

Repayment In full at end of postponement period or

Up to 30 June 2022

Early termination Early termination at ratepayer’s discretion

At sale

Allows ratepayer to withdraw as their financial position changes or to effectively postpone for less than a year

Postponement not required if no longer owning

Equity requirement No minimum equity requirement Current policy requires ratepayer equity over 20 per cent (after postponed rates, mortgages and other encumbrances)

Current policy has no time limit so accumulated rates and compound interest may erode equity

Only 3 per cent of mortgage holders are in negative equity or have less than 10 per cent equity

One year’s of postponed rates is a very small proportion of property value

Forecast uptake 51. For the 2020/2021 year it has been assumed that $65 million of rates (but could be as high as $85

million) will be postponed under the proposed Rates postponement for ratepayers impacted by COVID-19 scheme. This means we will have less to spend on activities and projects until we receive the postponed rates.

52. This assumes that only the most impacted businesses, such as accommodation providers, will wish to continue to postpone their rates for the 2020/2021 year. Most businesses that deferred their rates for the fourth quarter will not seek to take up ongoing postponement and will seek to clear any outstanding balance during the next rating year. Some additional businesses may join the scheme, but most small and medium-sized businesses will not want to take on additional debt in what will still be an uncertain trading environment. Overall, we forecast up to 6,000 business ratepayers will apply for rates postponement of up to $78 million.

53. Historically residential ratepayers haven’t been attracted to rates postponement and we don’t expect this to change. While many residential ratepayers have taken out mortgage holidays, we aren’t forecasting this to translate into equivalent rates postponements. Mortgage repayments are much higher than rates obligations and accordingly mortgage holidays will address many ratepayers cash flow situations.

54. In addition, banks usually require mortgage holders to keep up with their rates payments. Over the next six months most financially stressed ratepayers will have determined whether they can meet their mortgage repayments and rates and have resolved their financial situation going forward. As a result, the council will continue to receive the rates for these properties. Overall, we forecast between 3,000 and 5,000 residential ratepayers will apply for rates postponement of between $8 million and $13 million. However, we think the lower figure is more likely given forecasts of unemployment.

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National rates postponement scheme 55. Auckland Council along with other growth councils are promoting a national rates postponement scheme.

A terms of reference for this work is presently being prepared for consideration by the Department of Internal Affairs. A national postponement scheme financed with third party capital would eliminate cashflow risk to the council from a higher than expected volume of uptake of the postponement scheme proposed in this report.

Risks and mitigations 56. There are two risks associated with the adoption of the proposed rates postponement scheme. The first

is that the uptake of the scheme exceeds the forecasts above. This will be managed by monitoring the uptake of the scheme. If the scheme looks likely to exceed our forecasts the council can make amendments to the scheme to ensure it remains affordable. Any amendments would require consultation.

57. There is also the risk that some ratepayers not requiring assistance may apply for postponement to take advantage of the council’s relatively low interest rates. This will be managed by requiring applicants to declare that they are in financial difficulty and to provide evidence to support that claim. Council staff will review the evidence supplied by all applicants. In addition, we will undertake an in-depth audit of a sample of applicants.

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Section 3.1: Draft Rates Remission and Postponement Policy 2020

Policy purpose and overview The objective of this policy is to:

• provide ratepayers with some financial or other assistance where they might otherwise have difficulty meeting their obligations

• address circumstances where the rating system results in anomalies in the incidence of rates • support the achievement of broader council policy objectives.

The council’s remission and postponement policy is set out in three parts each containing a number of schemes.

Part 1 - Financial assistance and support

• remission of rates to top-up the rates rebate • remission for residents who occupy Papakāinga housing under a licence to occupy • remission of rates penalties • postponement of rates for residential properties • COVID-19 Rates postponement scheme • remission of accommodation provider targeted rate.

Part 2 - Addressing anomalies

• remission of rates for miscellaneous purposes • remission of uniform annual general charges and targeted rates levied as uniform annual charges on certain

rating units.

Part 3 - Other schemes

• postponement of rates for land described as Lot 2 DP 476554 or Lot 2 DP 510763.

Policy background Section 102(5) of the Local Government Act 2002 provides that a council may have a rates remission and postponement policy.

Full details and criteria for the remission and postponement schemes This section has the full details of each remission and postponement scheme, as well as outlining the objectives and criteria for each scheme.

Applications The ratepayer or ratepayer’s agent must apply to the council on the prescribed remission or postponement form. The application should show how the remission or postponement will support the objectives of the scheme and

Proposed amendments to the Rates Remission and Postponement Policy are highlighted in the blue call out boxes.

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how the property fits within the objectives. For the rates to be remitted or postponed, the council may require evidence each year, by way of declaration or statutory declaration, to confirm that the rating unit still complies with the conditions and criteria of the scheme. The council can apply for the remission or postponement on behalf of the ratepayer, provided the council is certain that the property meets all the criteria of the scheme. The council reserves the right to seek further information if it deems it necessary.

The remission or postponement will apply from the beginning of the rating period in which the application is approved and will not be backdated to prior years, unless otherwise stated in the scheme.

Part 1 - Financial assistance and support schemes

Remission of rates to top-up the rates rebate

Objectives The objective of this remission scheme is to enable the council to address the inequity that results from Auckland ratepayers being unable to include water and wastewater charges when applying for the central government’s rate rebate scheme. This scheme allows the council to remit the difference between its rates rebate top-up calculation and the government’s rates rebate scheme to include Watercare Services Limited’s and Veolia Water Limited’s (previously United Water Limited) water and wastewater charges in the calculation.

Conditions and criteria To be eligible for the top-up remission, the ratepayer must meet the following criteria:

1. be a residential ratepayer and reside on the property

2. have resided on the property at the beginning of the rating year (1 July)

3. be an individual, rather than an organisation or trust. The amount remitted will vary according to the:

a) ratepayer’s gross income, including any overseas income

b) amount of Auckland Council rates payable by the ratepayer

c) amount of water and wastewater charges payable by the ratepayer

d) number of children or other dependants that the ratepayer supports

e) maximum rebate and threshold limits set by central government under its rebate scheme.

Central government updates thresholds for its rates rebate scheme each year. The council’s extended rates rebate scheme is automatically updated for the new thresholds.

Remission for residents who occupy Papakāinga housing under a licence to occupy

Objectives This remission scheme allows council to remit the uniform annual general charge for residents of Papakāinga housing who would otherwise qualify for central government’s rate rebate scheme, except they occupy their property under a licence to occupy agreement.

The remission will be applied to the rates of the Papakāinga in which the applicant resides, where an agreement exists between the village operator and Auckland Council (see more below). The benefit of the rates remission will be passed to the resident.

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Conditions and criteria To be eligible for the licence to occupy remission, the applicant must meet the following criteria:

1. be a resident of Papakāinga housing under a licence to occupy agreement

2. reside in a unit or apartment that is identified by Auckland Council as a separately used or inhabited part of the Papakāinga housing to which a separate uniform annual general charge is applied

3. reside in Papakāinga housing that has entered into an agreement with Auckland Council to:

a) identify the rates for applicants to the scheme

b) pass the full benefit of any rates remission granted under this scheme to the successful applicant

4. have resided on the property at the beginning of the rating year (1 July)

5. be an individual, rather than an organisation or trust

6. only one application per unit or apartment will be accepted.

Granting of a remission will depend on:

1. the applicant’s gross household income, including any overseas income

2. the share of Auckland Council rates payable by the applicant to Papakāinga housing in which the applicant resides

3. the maximum rebate and threshold limits set by central government under its rebate scheme.

Central government updates thresholds for its rates rebate scheme each year. The council’s remission for residents of a “license to occupy” within Papakāinga housing is automatically updated for the new thresholds.

How to apply The management of Papakāinga housing accepted into the scheme will provide application forms to their residents.

Remission of rates penalties

Objectives The objective of this scheme is to enable the council to act fairly and reasonably in relation to penalties applied when rates have not been received by the due date.

Conditions and criteria Penalties on rates may be remitted when one or more of the following criteria are met.

1. The ratepayer has paid after the penalty date for no more than one instalment, but has not received a rates penalty remission under this policy within the past two years.

2. A new ratepayer for a rating unit has not received the rates instalment notice due to the notice of the sale or transfer of the rating unit not being received by the council prior to the issue of the instalment notice

3. The penalties incurred on the first instalment of each new financial year will be automatically remitted if the ratepayer pays the total amount of rates due for the year, excluding the penalty on the first instalment, but including any arrears owing at the beginning of the financial year, by the second instalment due date.

4. Where the ratepayer meets the payment conditions agreed with the council to resolve a rates arrears, the council can remit any part of the penalties already incurred in the current rating year, or yet to be incurred.

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The remission will apply from the beginning of the rating period in which the application is approved and will not be backdated to prior years.

Treatment of penalties on small overdue balances When a small balance is overdue, which it is uneconomical to collect, council officers may write off the balance in line with other council procedures. Penalties will not be applied in these circumstances.

Postponement of rates for residential properties

Objectives The objective of this scheme is to assist residential ratepayers who want to defer the payment of rates by using the equity in their property. This scheme also applies to those who may have financial difficulties or unusual circumstances, as long as they have the required equity in their property.

Criteria The ratepayer must meet the following criteria to be considered for rates postponement:

1. The ratepayer must be the current owner of the rating unit and owned the property for at least two years. 2. The rating unit must be used solely by the ratepayer as his or her residence. 3. The postponed rates will not exceed 80 per cent of the available equity in the property. The available equity

is the difference between the council’s valuation of the property (the capital value at the most recent triennial revaluation) and the value of any encumbrances against the property, including mortgages or loans, if the ratepayer has insured the property for its full value. Otherwise, the available equity will be the 80 per cent of council’s valuation of the land less any encumbrances against the property.

4. The ratepayer or the ratepayer’s authorised agent must apply to the council on the prescribed form.

Conditions 1. The council recommends that ratepayers considering postponing their rates seek advice from a financial

adviser on the financial impacts and appropriateness of postponing their rates. 2. The council will postpone payment of the residual rates (what is left after any optional payment) if the

ratepayer meets the above criteria. 3. The council may add a postponement fee each year to the postponed rates. The fee will cover the period

from when the rates were originally due to when they are paid. The fee will not exceed the council’s administrative and financial costs of the postponement.

4. The postponement will apply from the beginning of the rating year in which the application for postponement is made, although the council may backdate the postponement application, depending on the circumstances.

5. Once the postponed rates are equal to, or greater than, 80 per cent of the available equity in the property, no further rates will be postponed. Any postponement will apply until one of the situations listed below occurs, at which time the postponed rates (and any postponement fee) will be immediately payable:

a) the ratepayer’s death

b) the ratepayer no longer owns the rating unit

c) the ratepayer stops using the property as his or her residence

d) a date set by the council in a particular case.

6. All or part of the postponed rates may be paid at any time. 7. The applicant can choose to postpone the payment of a lesser amount of rates than the full amount that

they would be entitled to postpone under this policy. 8. Postponed rates will be registered as a statutory land charge on the rating unit’s title.

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9. For the rates to be postponed, the council will require evidence each year, by way of declaration or statutory declaration, of the ratepayer’s property insurance and the value of encumbrances against the property, including mortgages and loans.

Draft Rates postponement scheme for ratepayers impacted by COVID-19 Auckland Council proposes to amend it Rates Remission and Postponement Policy by inserting the following rates postponement scheme.

Postponement of rates for ratepayers impacted by COVID-19 Objectives The objective of this scheme is to provide ratepayers who are financially stressed as a result of the economic or health impacts of COVID-19 with assistance with rates that are required to be paid in the 2020/2021 year to allow them the time to reorganise and recover their financial position.

Criteria Postponement of rates under this policy is not available to:

a) Ministries and Departments of the public service, State-owned enterprises, Crown entities or utilities or

b) ratepayers already in arrears at 26 March 2020. The ratepayer must meet the following criteria. 1. The ratepayer must have owned the property for which the ratepayer seeks rates postponement as at 26

March 2020 unless the council is satisfied that the owner of a property purchased after this point has been impacted by the effects of COVID-19 that couldn’t have been reasonably foreseen before the purchase was entered into.

2. A ratepayer seeking postponement for a residential or lifestyle property must be in financial hardship in the

opinion of the council and: a) be a citizen or permanent resident of New Zealand

and b) have a mortgage on the property for which the rates are to be postponed

or c) be a charity or incorporated society:

• that is registered with the New Zealand Companies Office or the Department of Internal Affairs and

• that is physically located in New Zealand and

• the employees of which legally worked in New Zealand as at 26 March 2020. 3. A ratepayer seeking postponement for a business or farm property must be in financial hardship in the

opinion of the council and: a) be registered and operating in New Zealand which means that a business, charity or incorporated

society is: • registered with the New Zealand Companies Office or the Department of Internal Affairs

and • physically located in New Zealand

and • their employees (if any) legally work in New Zealand as at 26 March 2020.

4. Companies seeking postponement of rates for residential properties will be assessed under criteria 3 above.

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1.

Residential, farm, business and lifestyle property are identified based on the classification of the property in the council’s rating information database as at 30 June of the year preceding that in which the postponement is applied for.

The ratepayer or the ratepayer’s authorised agent must apply to the council on the prescribed form. The policy provides for the postponement of the obligation to pay rates in the 2020/2021 financial year. The council by resolution may extend the application of this policy to cover the rates for the 2021/2022 and subsequent years.

Conditions 1. The ratepayer acknowledges that council recommends that ratepayers considering postponing their

rates seek advice from a financial adviser on the financial impacts and appropriateness of postponing their rates.

2. Applications for postponement of rates under this scheme must be received by 31 December of the rating year for which the ratepayer seeks postponement.

3. The council will postpone payment of the residual rates (what is left after any optional payment) up to a maximum of $20,000 (GST incl.) per property in each rating year that the postponement is offered. In the 2020/2021 rating year the council will also postpone payment of up to $5,000 (GST incl.) per property of rates payments deferred `from the fourth quarter of 2019/2020.

4. The council may add a postponement fee for the rates for the 2020/2021 year and each of any subsequent year that the rates are postponed. The fee will cover the period from when the rates were originally due to when they are paid. A postponement fee may also apply from 1 September 2020 for any rates payments unpaid from the fourth quarter of 2019/2020. The fee will not exceed the council’s administrative and interest costs of the postponement.

5. The postponement will apply from the beginning of the rating year in which the application for

postponement is made, although the council may backdate the postponement application, depending on the circumstances.

6. Any postponement will apply until the earliest of the following, at which time the postponed rates (and

any postponement fee) will be immediately payable:

a) the ratepayer’s death for a residential property or the company owning the property ceases to trade; b) the ratepayer ceases to be the ratepayer for the rating unit; or

c) the last day of the rating year (30 June) immediately following the rating year for which rates have

been postponed.

7. The ratepayer may pay all or part of the postponed rates at any time prior to the circumstances set out in condition 6.

8. The applicant can choose to postpone the payment of a lesser amount of rates than the full amount that

they would be entitled to postpone under this policy. 9. The council may register the postponed rates as a statutory land charge on the rating unit’s title. 10. Ratepayers wishing to apply under this policy will be required to make a written application or

declaration and to supply such evidence as may be requested to verify that a postponement should be granted under this policy.

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Remission of accommodation provider targeted rate

Objectives The objective of this scheme is to promote fairness in the application of the Accommodation provider targeted rate by allowing the council to remit the rate in circumstances where it is equitable to do so.

Criteria and conditions The council may remit the accommodation provider targeted rate, where the application meets one of the following criteria:

1. The ratepayer owns no more than two rating units that attract the Accommodation provider targeted rate, and which are under contract to be used as serviced apartments, and where the applicant can demonstrate that they have

a) entered into a contractual arrangement regarding the use of the rating unit as commercial accommodation prior to 1 June 2017, or subsequently purchased a rating unit subject to such an arrangement that was unable to be renegotiated at time of purchase.

b) no contractual or relational/negotiating means of managing the additional costs of the rate

c) no ability to exit, terminate or renegotiate the contract prior to the start of the rating year in which remission is applied for.

2. Where the applicant has contracted some or all of their commercial accommodation capacity to Work and Income New Zealand or other central government agency for the purpose of emergency housing.

Amount of rate to be remitted For remissions granted under criterion 1 of this scheme:

• 100 per cent of the Accommodation provider targeted rate for the qualifying rating units in 20018/2019, with the proportion of rates remitted declining each year in equal steps until 2027/2028 when 10 per cent of the Accommodation provider targeted rate will be remitted. This remission scheme will expire on 30 June 2028.

• the amount of remission will be reduced on a proportional basis where the applicant is able to exit, terminate or renegotiate the contract during the rating year.

For remissions granted under criterion 2 of this scheme:

• A proportion of the Accommodation provider targeted rate calculated as follows:

Number of rooms or units under contract X number days under contract

Total number of rooms or units in motel or hotel X 365

Part 2 - Addressing anomalies in schemes

Remission of rates for miscellaneous purposes

Objectives The objective of this scheme is to enable the council to remit rates in circumstances that are not specifically covered by other schemes in the rates remission and postponement policy, but where the council considers it appropriate to do so.

Conditions and criteria The council may remit rates on a rating unit where it considers it just and equitable to do so because:

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1. There are special circumstances in relation to the rating unit, or the incidence of the rates (or a particular rate) assessed for the rating unit, which mean that the unit’s rates are disproportionate to those assessed for comparable rating units

2. The circumstances of the rating unit or the ratepayer are comparable to those where a remission may be granted under the council’s other rates remission policies, but are not actually covered by any of those policies

3. There are exceptional circumstances that the council believes that it is equitable to remit the rates. The council has the final discretion to decide whether to grant a rates remission under this policy.

Remission of uniform annual general charges and targeted rates levied as fixed charges on rating units

Objectives The objective of this scheme is to promote fairness in the application of rating by allowing the council to remit fixed charges in circumstances where it is equitable to do so.

Conditions and criteria The council may remit uniform annual general charges and targeted rates levied as fixed charges, where the application meets one of the following criteria:

1. The rating unit is used solely for vehicle parking in conjunction with a building on a rating unit in the same ownership, and no car parking is available on the main property.

2. The rating unit is used jointly with one or more units as a single farm or horticultural entity and the group of rating units would otherwise be treated as a single rating unit, except that:

a) the units are not strictly contiguous (for example, a farm run-off block). b) the occupier of all the rating units is the same but the occupier does not own the rating units or does

not own all the rating units. 3. The rating unit is Māori land used jointly with one or more Māori land units as a single entity and the group

of rating units would otherwise be treated as a single rating unit, except that: a) the units are not strictly contiguous b) the occupier of all the rating units is the same but the occupier does not own the rating units or does

not own all the rating units. 4. The rating unit is classed by the council in the zero-rated general rates differential category.

A remission will not apply to any rate that is levied for a:

a) separate residential dwelling or business located on the rating unit b) service actually provided to the rating unit.

Owners wishing to claim a remission under this policy may be required to make a written application or declaration and to supply such evidence as may be requested to verify that a remission should be granted under this policy.

Part 3 - Other schemes

Postponement of rates for land described as Lot 2 DP 476554 or Lot 2 DP 510763 (formerly the postponement of rates for sports clubs in the district of the former Manukau City Council)

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Objectives To provide continued relief for three years to the two rating units that had rates postponed under the former Auckland Council rates postponement scheme “Postponement of rates for sports clubs in the district of the former Manukau City Council”.

Postponement had previously been granted to sports clubs where the rateable value of land that was owned and used for sports was significantly attributable to potential residential development or subdivision. Postponement of rates will not be available to any other land under this scheme.

Conditions and criteria 1. For the purposes of this scheme

a) 'sports' means any organised outdoor sport but excludes horse or dog racing of any kind and 'sporting' has a corresponding meaning

b) to be eligible the land used for sports must not be less than 5 hectares and must be part of the land described as Lot 2 DP 476554 or Lot 2 DP 510763

2. The rates postponement value is to be determined: a) so as to exclude any potential value that, at the date of valuation, the rating unit may have for non-

sporting uses b) so as to preserve the uniformity and equitable relativity with comparable parcels of land within the

district of the former Manukau City Council and used for sporting purposes, the values of which do not contain any such potential value

3. There will be no right of objection to the rates postponement value determined under clause 2(a) and (b), except to the extent that it is proved that the rates postponement value does not preserve uniformity with existing District Valuation roll values for comparable rating units (used for sporting purposes) within the district of the former Manukau City Council having no potential value for non-sporting development.

4. Where a rates postponement value has been determined, the payment of rates will be deemed to have been postponed for the portion of the rates for any rating period of an amount equal to the difference between the amount of the rates for that period calculated according to the rateable value of the rating unit and the amount of the rates that would be payable for that period if the rates postponement value of the rating unit were its rateable value.

5. All rates whose payment has been postponed under this scheme will become due and payable immediately: a) on the rating unit ceasing to be used for sporting purposes b) where the ratepayer parts with possession of the rating unit or assigns or attempts to assign the rating

unit in any way or for any purpose other than the giving of security for funds intended to be used for the further development of the rating unit for sporting purposes

c) where the rating unit or part of the rating unit is developed for any purpose other than sports 6. The postponement will generally apply from the beginning of the rating period in which the rate

postponement value is determined. 7. Postponed rates will be registered as a statutory land charge on the title of the rating unit. 8. The council will add a postponement fee to the postponed rates for the period between the due date and the

date they are paid. This fee will not exceed an amount which covers the council's administration and financial costs (an annual interest rate to be set by the council).

9. No further rates may be postponed under this scheme after 30 June 2021.

Delegation of decision-making Decisions relating to the remission or postponement of rates payments will be made by council officers.

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Section Four: Suspending the Accommodation provider targeted rate


Section Four: Suspending the Accommodation provider targeted rate

The Accommodation Provider Targeted Rate (APTR) seeks to recover from accommodation providers a fair proportion of visitor attraction and major events spending by Auckland Tourism, Events and Economic Development (ATEED).

Restrictions on travel and mass gatherings due to COVID-19 are likely to remain in place for some time. We are therefore proposing to reduce spending on visitor attraction and major events that is funded by the APTR for the 2020/2021 year and suspend the rate for one year from 1 April 2020 to 31 March 2021.

Once travel restrictions are lifted investment in visitor attraction and major events will be key to revitalising the tourism sector, and the APTR would then resume to help fund this investment. If the disruption to this sector was to persist for much longer than anticipated, then there is an opportunity to review the situation ahead of 31 March 2021.

The suspension of the APTR in the current financial year (from 1 April 2020 to 30 June 2020) has been implemented by remitting the fourth quarter (May) instalment of APTR for the 2019/2020 financial year. We applied this using our existing scheme for the remission of rates for miscellaneous purposes. The remitted rates were around $3.3 million. This will have no impact on our finances as ATEED have reduced their spending by this amount within the current financial year.

We are now proposing to reduce the APTR to one quarter of the currently forecast budget for 2020/2021. This will be invoiced in the fourth quarter rates instalment next year (May 2021). This has the effect of suspending the rate until 31 March 2021 and resuming it for the final quarter of the financial year. If, following public consultation, this proposal is agreed then the ATPR will be reduced by $10.7 million and ATEED’s budget for visitor attraction and major events activities will be reduced by this same amount.

This approach preserves the purpose and the intention of the APTR and is cashflow neutral for the council. It does have a revenue impact on the debt-to-revenue ratio limiting our ability to borrow by around $28 million.

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Section Five: Business Improvement Districts


Section Five: Business Improvements Districts

Proposed new Central Park Business Association Business Improvement District

We have decided to set a targeted rate for the new Central Park Henderson BID subject to further engagement with affected businesses after their ballot was affected by COVID-19 and narrowly failed to get the vote return

usually required. The BID will provide local advocacy, a collective voice and promote economic growth in the Central Park Henderson area.

BID Policy

Business Improvement Districts (BIDs) support local business areas to help attract new business and customers. Auckland currently has 48 BIDs.

Our BID Policy requires a ballot of affected business owners in order to establish a BID and set a targeted rate. A successful ballot generally requires 25 per cent of ballots to be returned, and of those, over 51 per cent must be in support of the proposal. The Policy then requires the relevant local board to approve any new BID Programme and recommend the setting of a BID targeted rate to the governing body.

Central Park Henderson BID

The Central Park Henderson Business Association (CPHBA) proposes to establish a BID programme that includes the geographic area of Henderson within the Henderson-Massey Local Board boundary.

The Central Park Henderson BID will deliver activities to promote and grow the local business environment for the businesses located within the Central Park Henderson business community.

The CPHBA held a postal ballot of the business ratepayers located in the defined BID area between 28 February and 27 March 2020. The majority of votes, (64.42) per cent were in favour of the establishment of the BID. Unfortunately, due to COVID-19 the ballot process was unable to be completed and only 23.4 percent of the votes were returned. This is just short of the 25 per cent of vote returns required by Auckland Council’s BID Policy for a successful ballot.

Auckland Council’s BID Policy allows for exceptional or unexpected circumstances, for example, an earthquake or major extended business interruption, that impacts the voting and ballot process.

Council and the independent election services agent, who conducted the ballot, are satisfied that the COVID-19 virus is an exceptional or unexpected circumstance that has had an impact on the ballot. In these circumstances, acknowledging that the 25 per cent threshold was very close to being met, and with a clear majority of the returned votes in favour of the programme, the council proposes to proceed with the BID programme and the setting of a targeted rate.

In response to the economic impact of COVID-19 the original expenditure proposal to raise $500,000 has been reduced to $400,000. The BID targeted rate for this programme will mean on average a BID rateable property will pay approximately $392.00 + GST per annum rather than the originally proposed $490.00 + GST. This will still allow investment in:

crime prevention programmes

business development and support (post COVID-19)

marketing and promotion to attract shoppers, visitors and new businesses

local employment initiatives and new business development.

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Section Five: Business Improvement Districts


Changes to other Business Improvement District targeted rates

In response to COVID-19, the following BIDs, along with the proposed Central Park Henderson BID, have voted to decrease their grant budget for 2020/2021. The setting of the BID targeted rates for 2020/2021 will incorporate these changes.

BID Decrease in budget

Ellerslie 6%

Karangahape Road 5%

Mangere Town Centre 5%

Manukau Central 7%

New Lynn 4%

Newmarket 3%

North Harbour 3%

North West District 3%

Parnell 8%

Wiri 2%

As per request from the Warkworth Business Association, the fixed charge of the One Warkworth BID targeted rate is proposed to be set at $500 plus GST. This is consistent with the ballot documents.

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Section Six: Your rates for 2020/2021



How we set your rates Each year after considering your feedback we determine the level of services we are going to provide and how much revenue we will need. Our rates revenue requirement is determined by the amount of spending needed to fund our services less revenue we receive from other sources. Rates are then shared across all ratepayers primarily based on the capital value of their property and at different levels depending on how their property is used and its location.

Rates revenue requirement The council provides a wide range of infrastructure, facilities and services to Auckland residents and businesses. Some of these are funded by:

• payments from service users to visit our attractions like the zoo, tickets to travel on public transport and fees for building consents

• dividends from the investments we hold on your behalf like our shares in Auckland International Airport Limited and Ports of Auckland

• grants from the New Zealand Transport Agency and revenue from the regional fuel tax to help us build vital transport infrastructure and run your public transport

• targeted rates applied to all properties with revenue set aside for investment in specific activities like the water quality targeted rate.

• targeted rates for services provided to individual properties, such as waste collection

We fund the remainder of services with rates which usually provide around 40 per cent of our revenue.

General rates are used to fund council activities and services where:

• we can’t charge individuals who benefit, like roads and stormwater • there are no alternative funding sources (as identified above) • the council wishes to subsidise the activity due to its wider social benefits.

Targeted rates are used to fund services that benefit specific users or to provide additional transparency on how the rates are spent. Examples are:

• waste management rate for recycling and other services to households who are provided the services • water quality targeted rate we collect from all ratepayers to fund investment in improving the quality of

Auckland’s waterways.

Each year new properties are added to our rating base as land is subdivided and houses and buildings are constructed. This growth adds to our revenue as the new owners take up a share of the costs.

How we share out the general rates revenue requirement between property owners The full detail of all the rates discussed below is set out in our Funding Impact Statement in Section 6.1 of the Supporting Information.

Fixed charge for every property – Uniform annual general charge All properties pay a fixed charge called the Uniform Annual General Charge (UAGC). This ensures that every property makes a minimum contribution towards the city’s costs. We charge a UAGC for each separately used

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or inhabited part of a rating unit (SUIP), for example each shop in a shopping mall and both the main house and an attached minor dwelling/granny flat.

Every year we increase the UAGC by the average general rates increase. This ensures that the revenue raised through the UAGC remains around 13.4 per cent of the total general rates revenue. If we raise general rates by 3.5 per cent the UACG will be $439 and if the increases is 2.5 per cent the UAGC will be $435.

Value based general rate – cents in the dollar of capital value We share the remainder of the general rates requirement (after the revenue to be raised through the UAGC is deducted) amongst property owners based on capital value (the sum of land value and improvements). This is charged at different levels depending on how the property is used and where it is located. A property with a higher capital value will pay a greater share of the rates requirement than its lower value neighbour. We set a rate per dollar of capital value rate for each property based on where it is located and how it is used, see below. The value-based rate you pay is the sum of your property’s value times the rate in dollar rate.

For example, the general rates cents in the dollar for an urban residential property will be 0.00195421 per dollar of capital value for 2020/2021. A property with a capital value of $1,000,000 would pay a value based general rate of $1,954.21.

$1,000,000 times 0.00195421 = $1,954.21.

Location based rate Urban properties, both business and residential have greater access to council services than rural properties. We therefore charge rural business and rural residential properties 90 per cent of the value based general rate we set for urban business and urban residential properties. Farm/lifestyle properties are charged 80 per cent of the urban residential rate as they tend to be more remote and have less access to our services which are mainly located in the metropolitan areas.

For example, our farm/lifestyle rate for 2020/2021 is:

Urban residential rate 0.00195421 times 80 per cent = 0.00156337

Business rates and the Long-term differential strategy (LTDS) Properties used for business purposes place more demand on council services and are better able to afford rates in part because they can claim back GST and expense rates against income tax. The council has therefore decided to charge higher rates for business properties.

When Auckland Council was established in 2010 all the former councils charged business properties higher rates. While we consider business properties should pay more, we think the level of charges is too high and we are gradually reducing them over time. To lower them faster would mean much higher increases for residential and other properties which may not be affordable for some ratepayers.

Our long-term differential strategy (LTDS) is gradually reducing the share of our general rates requirement we collect from business properties from around 32 per cent in 2020/2021 to 25.8 per cent in 2037/2038.

Our current policy seeks to achieve this by applying a higher than average rates increase to residential ratepayers each year, and a lower than average increase to business ratepayers. The timing of the reduction is designed to see residential rates rise by no more than 0.5 per cent above the underlying general rates increase and business rates rise by no more than 1.0 per cent less than the general rates increase.

This year the rates for business properties will be 0.00541065 per dollar of capital value, subject to changes to property data until 30 June. A property used for business purposes with a capital value of $10,000,000 would pay $541,065 dollars in value based general rate.

$10,000,000 capital value time 0.00541065 = $541,065

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Universally applied targeted rates We have two targeted rates paid by all ratepayers, the natural environment targeted rate and water quality targeted rate. These rates apply universally and the revenue they raise is set aside for investments to improve the water quality in Auckland’s harbours and waterways and the quality of our natural environment.

When we set these rates, we planned to collect the same amount of the rate from existing ratepayers each year. The cents in the dollar remains constant each year. How much we collect only grows as new properties are built and join the city. For residential and farm/lifestyle properties the water quality targeted rate is set at 0.00006076 per dollar of capital value and the natural environment targeted rate is set at 0.00004326 per dollar of capital value.

The rate in the dollar for businesses for these rates was set so that we would collect 25.8 per cent of the revenue requirement from business properties in the first year we struck the rates, 2017/2018. We chose this share as it was as the target share of the general rate, we set out to achieve in 2037/2038 in our long-term differential strategy. This business rate stays the same each year. For residential and farm/lifestyle properties the water quality targeted rate is set at 0.00010677 per dollar of capital value and the natural environment targeted rate is set at 0.00007603 per dollar of capital value.

Service based targeted rates We also charge a fixed targeted rate to supply recycling and waste management services across the city and a fixed refuse rate for a weekly rubbish collection in the former Auckland City (ACC) and Manukau City Council (MCC) areas. For 2020/2021 this is proposed to be $141.03

The base service waste management targeted rate is charged to each SUIP or in the former ACC area per service available. The refuse targeted rate is charged per SUIP in the former MCC area and per service available in the former ACC area. For 2020/2021 this is proposed to be $141.60.

Other targeted rates We also have a range of other targeted rates that apply in some parts of the region or to some ratepayers. These rates cover only the cost of the services provided to these ratepayers. You can read about these rates in our Funding Impact Statement in Section 6.1 of this Supporting Information document.

How your rates are changing in 2020/2021

Value based rates and the Uniform Annual General Charge As part of this consultation we are proposing two different options for general rates for 2020/2021, 3.5 or 2.5 per cent. Decisions on the level of the general rates increase and other targeted rates will affect how much your rates will change.

This year the LTDS is moving to its next step. We are lowering the share of general rates we will collect from businesses from 32 per cent last year to 31.68 per cent this year. Because we are collecting less rates from businesses residential and farm/lifestyle ratepayers will have a general rate increase slightly higher than either 3.5 or 2.5 per cent.

However, as the growth of business properties was slower than growth in residential properties the changes in rates for these groups is less than the limits (+0.5 per cent for residential properties and -1.0 percent for business properties) we set when this policy (the long-term differential strategy) was established. The share of the general rates requirement we have shifted to residential ratepayers is spread over more properties meaning the additional increase is lower than we forecast.

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Water quality and Natural environment targeted rates The targeted rates for water quality and natural environment aren’t increasing.

Waste management rates After considering feedback from consultation undertaken earlier this year, we have decided, subject to further feedback, to raise our waste management rate across the city and our refuse rate for the former Auckland City Council and Manukau City Council areas.

The revenue we receive for recyclable materials is falling and our costs of providing the inorganic services are rising as more residents use the service. As a result, the cost of providing this core service has risen and we therefore intent to increase the base service waste management targeted to cover this subject to any further feedback.

We have also had to enter into a new contractual agreement for the collection of refuse in the former Auckland City Council (ACC) and Manukau City Council (MCC) areas to replace our previous long-term collection contract. The cost of the new contract has risen, and the refuse rate will also be increasing in these areas to cover the cost subject to any further feedback.

Other parts of the city pay for their refuse collection with $3.95 bin tags each time they put their rubbish out. If a resident in another part of the city put their refuse bin out 52 weeks a year the cost would be $205. If they put their bin out the average for these areas of 36 times per year they would pay $142 annually. On average, the cost of refuse collection for people in ACC and MCC would be comparable to those in other parts of the city.

Impact on the average ratepayer The following tables show how each of these rates changes will impact on the rates for the average value residential, business and farm/lifestyle property under each option for the general rates increase.

The tables show how each proposed change in rates impacts on the overall rates bill. It also shows why the change in overall rates is lower than the general rates increase.

The percentage change in rates for the combined average rates for ACC and MCC is lower as the average property values are higher. While the dollar amounts are higher, they are proportionately less.

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Residential Table 1 – Breakdown of rates increase 2020/2021 for the average value residential property in ACC and MCC.

Component of total rates increase

Measure of impact on overall rates increase

General rates increase option

2.5% 3.5%

Impact on overall rates increase

Combined impact of general rates, water quality targeted rate, and natural environment targeted rate

% increase 2.19% 3.06%

$ increase per year $64.69 $90.56

$ increase per week $1.24 $1.74

Long-term differential strategy (lowering business share of general rates)

% increase 0.31% 0.31%



Waste rates increase Base rate increase and refuse rate increase for ACC and MCC

% increase 1.07% 1.07%

$ increase per year $31.64 31.64


Overall rates increase % increase 3.57% 4.45%



Table 2 – Breakdown of rates increase 2020/2021 for the average value residential property in areas other than ACC and MCC.




2.5% 3.5%



% increase 2.28% 3.19%




% increase 0.32% 0.32%



Waste rates increase Base rate increase

% increase 0.79% 0.79%

$ increase per year 19.97 $19.97





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Business Table 3 – Breakdown of rates increase 2020/2021 for the average value business property in ACC and MCC.




2.5% 3.5%



% increase 2.39% 3.34%




% increase -0.72% -0.73%

$ increase per year -$134.81 -$136.52

$ increase per week -$2.59 -$2.63


% increase 0.17% 0.17%






Table 4 – Breakdown of rates increase 2020/2021 for the average value business property in areas other than ACC and MCC.




2.5% 3.5%



% increase 2.39% 3.35%




% increase -0.71% -0.72%

$ increase per year -$80.41 -$81.53

$ increase per week -$1.55 -$1.57


% increase 0.18% 0.18%






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Farm lifestyle

Table 5 – Breakdown of rates increase 2020/2021 for the average value farm/lifestyle property in ACC and MCC.




2.5% 3.5%



% increase 2.23% 3.12%




% increase 0.34% 0.34%




% increase 0.68% 0.68%






Table 6 – Breakdown of rates increase 2020/2021 for the average value farm/lifestyle property in areas other than ACC and MCC.




2.5% 3.5%



% increase 2.27% 3.18%




% increase 0.33% 0.33%




% increase 0.61% 0.61%






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Section Six: Your rates for 2020 6.1 Prospective funding impact statement


6.1: Prospective funding impact statement

Prospective consolidated funding impact statement

The prospective funding impact statement is based on the 3.5 per cent general rates increase option.



Annual Plan 2019/20

LTP 2020/21

Annual Plan 2020/21

Sources of operating funding:

General rates, UAGCs, rates penalties 1,653,885 1,752,213 1,743,938

Targeted rates 229,756 220,129 237,309

Subsidies and grants for operating purposes 320,573 305,689 397,007

Fees and charges 1,410,532 1,529,557 1,165,655

Interest and dividends from investments 70,564 70,930 8,186

Local authorities fuel tax, fines, infringement fees and other receipts 445,172 439,510 424,842

Total operating funding 4,130,482 4,318,028 3,976,937

Applications of operating funding:

Payments to staff and suppliers 2,821,770 2,744,272 2,899,866

Finance costs 452,575 562,389 437,692

Other operating funding applications 0 0 0

Total applications of operating funding 3,274,345 3,306,661 3,337,558

Surplus (deficit) of operating funding 856,137 1,011,367 639,379

Sources of capital funding:

Subsidies and grants for capital expenditure 516,821 475,320 293,588

Development and financial contributions 258,309 306,696 127,698

Increase (decrease) in debt 791,686 712,291 942,813

Gross proceeds from sale of assets 254,639 71,000 430,013

Lump sum contributions 0 0 0

Other dedicated capital funding 0 0 0

Total sources of capital funding 1,821,455 1,565,307 1,794,112

Application of capital funding:

Capital expenditure:

- to meet additional demand 886,522 774,944 616,444

- to improve the level of service 824,357 738,929 776,473

- to replace existing assets 760,462 600,823 497,403

Increase (decrease) in reserves 160,095 78,655 91,010

Increase (decrease) in investments 46,156 383,323 452,161

Total applications of capital funding 2,677,592 2,576,674 2,433,491

Surplus (deficit) of capital funding (856,137) (1,011,367) (639,379)

Funding balance 0 0 0

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Rating mechanism

This section sets out how the council sets its rates for 2020/2021. It explains the basis on which rating liability will be assessed. In addition, it covers the council’s early payment discount policy.

Background

The council’s general rate is made up of the Uniform Annual General Charge (UAGC) and the value-based general rate. Revenue from the general rate is used to fund the council activities that are deemed to generally and equally benefit Auckland and that part of activities that are not funded by other sources.

Rating base information

The following table sets out the forecast rating base for Auckland Council as at 30 June 2020.

Capital value ($) 756,192,014,512

Land value ($) 501,639,198,821

Rating units 579,613

Separately used or inhabited parts of a property 651,050

How the increase in the rate requirement is applied

The increase in the general rate requirement is split to maintain the proportion of the UAGC at around 13.4 per cent of the total general rate (UAGC plus value based general rates). This is achieved by applying the general rates increase to the UAGC and rounding to the nearest dollar.

Uniform annual general charge (UAGC) and other fixed rates

The UAGC is a fixed rate that is used to fund general council activities. The council will apply the UAGC to all rateable land in the region per separately used or inhabited part of a rating unit (SUIP). The definition of a separately used or inhabited part of a rating unit is set out in the following section.

Where two or more rating units are contiguous or separated only by a road, railway, drain, water race, river, or stream, are owned by the same person or persons, and are used jointly as a single unit, the ratepayer will be liable for only one uniform annual general charge.

The council will also set the following targeted rates which will have a fixed rate component:

Waste management targeted rate

part of some Business Improvement District targeted rates

City centre targeted rate for residential properties

Point Wells wastewater targeted rate

Jackson Crescent wastewater targeted rate

Riverhaven Drive targeted rate

Waitākere rural sewerage targeted rate

Ōtara-Papatoetoe swimming pool targeted rate

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Māngere-Ōtāhuhu swimming pool targeted rate

Rodney Local Board Transport targeted rate

Swimming/spa pool compliance targeted rates.

Funds raised by uniform fixed rates, which include the UAGC and any targeted rate set on a uniform fixed basis1, cannot exceed 30 per cent of total rates revenue sought by the council for the year (under Section 21 of Local Government (Rating) Act 2002).

A UAGC of $439 (including GST) will be applied per SUIP for 2020/2021. This is estimated to produce around $243.4 million (excluding GST) for 2020/2021.

The definition of a separately used or inhabited part of a rating unit

The council defines a separately used or inhabited part (SUIP) of a rating unit as ‘any part of a rating unit that is separately used or inhabited by the ratepayer, or by any other person having a right to use or inhabit that part by virtue of a tenancy, lease, licence or any other agreement’. For the purposes of this definition, parts of a rating unit will be treated as separately used if they come within different differential categories, which are based on use. An example would be a rating unit that has a shop on the ground floor (which would be rated as business) and a residence upstairs (rated as residential).

Rating units used for commercial accommodation purposes, such as motels and hotels, will be treated for rating purposes as having one separately used or inhabited part, unless there are multiple businesses within the rating unit or another rating differential applies. Examples of how this might apply in practice are as follows:

a business operating a motel on a rating unit will be treated for rating purposes as a single separately used or inhabited part. If that rating unit also includes a residential unit, in which the manager or owner resides, then the rating unit will be treated for rating purposes as having two separately used or inhabited parts

a hotel will be treated for rating purposes as a single separately used or inhabited part, irrespective of the number of rooms. If, on the premises, there is a florist business and a souvenir business, then the rating unit will be treated for rating purposes as having three separately used or inhabited parts.

A similar approach applies to universities, hospitals, rest homes and storage container businesses. Vacant land will be treated for rating purposes as having one separately used or inhabited part.

Rating units that have licence to occupy titles, such as some retirement villages or rest homes, will be treated as having a separately used or inhabited part for each part of the property covered by a licence to occupy.

The above definition applies for the purposes of the UAGC as well as any targeted rate which is set on a “per SUIP” basis.

Value-based general rate

The value-based general rate will apply to all rateable land in the region and will be assessed on capital value and is assessed by multiplying the capital value of a rating unit by the rate per dollar that applies to that ratepayer differential group.

Rates differentials

General and targeted rates can be charged on a differential basis. This means that a differential is applied to the rate or rates so that some ratepayers may pay more or less than others with the same value rating unit.

The differential for urban residential land is set at 1.00. Business land attracts higher rates differentials than residential land. Lower differentials are applied to rural, farm/lifestyle and no road access land.

1 Except rates set solely for water supply or sewerage disposal.

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The council defines its rates differential categories using location and the use to which the land is put. When determining the use to which the land is put, the council will consider information it holds concerning the actual use of the land, and the land use classification that council has determined applies to the property under the Rating Valuation Rules.

Where there is no actual use of the land (i.e. the land is vacant), the council considers the location of the land and the highest and best use of the land to determine the appropriate rates differential. Highest and best use is determined by the activities that are permitted, controlled, or discretionary for the area in which the land is situated, and the rules to which the land is subject under an operative district plan or regional plan under the Resource Management Act 1991.

The definition for each rates differential category is listed in the table below. For clarity, where different parts of a rating unit fall within different differential categories then rates will be assessed for each part according to its differential category. Each part will also be classified as being a separate SUIP (see definition above).

Rates differential definitions

Differential group

Definition

Urban business Land in the Urban Rating Area that is used for commercial, industrial, transport, utility or public communal – licensed purposes. Also includes any land that is used for community services, but which is used for commercial, or governmental purposes, or which is covered by a liquor licence. Also includes land in the Urban Rating Area, where a residence is let out on a short-term basis, via online web-based accommodation services that offer short-term rental accommodation via peer-to-peer online marketplace such as Airbnb and bookabach, for more than 180 nights in the 12 months ending 30 June of the previous financial year.

Urban residential Land in the Urban Rating Area that is used exclusively or almost exclusively, for residential purposes, and includes tenanted residential land, rest homes and geriatric hospitals. It excludes hotels, motels, serviced apartments, boarding houses and hostels.(1) Land used for community services and used by a not for profit ratepayer for the benefit of the community will be charged the residential rate (this does not include land covered by a liquor licence)

Rural business Land outside the Urban Rating Area that is used for commercial, industrial, transport, utility network(2), or public communal – licensed purposes. Also includes any land that is used for community services, but which is used for commercial, or governmental purposes, or which is covered by a liquor licence. Also includes land outside the Urban Rating Area where a residence is let out on a short-term basis, via online web-based accommodation services that offer short-term rental accommodation via peer-to-peer online marketplace such as Airbnb and Bookabach for more than 180 nights in the 12 months ending 30 June of the previous financial year.

Rural residential Land outside the Urban Rating Area that is used exclusively or almost exclusively for residential purposes, and includes tenanted residential land, rest homes and geriatric hospitals. It excludes hotels, motels, serviced apartments, boarding houses and hostels (1). Land used for community services and used by a not for profit ratepayer for the benefit of the community will be charged the residential rate (this does not include land covered by a liquor licence)

Farm and lifestyle

Any land that is used for lifestyle or rural industry purposes, excluding mineral extraction(3)

No road access Includes all land (irrespective of use) for which direct or indirect access by road is unavailable or provided for, and all land situated on the islands of Ihumoana, Kaikoura, Karamuramu, Kauwahia, Kawau, Little Barrier, Mokohinau, Motahaku, Motuketekete, Motutapu, Motuihe, Pakatoa, Pakihi, Ponui, Rabbit, Rakitu, Rangiahua, Rotoroa and The Noises

Zero-rated Includes land on all Hauraki Gulf islands and Manukau Harbour other than Waiheke, Great Barrier and the islands named in the definition of No road access. Also includes land used by religious organisations for:

housing for religious leaders which is onsite or adjacent to the place of religious worship

halls and gymnasiums used for community not-for-profit purposes

not-for-profit childcare for the benefit of the community

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Differential group

Definition

libraries

offices that are onsite and which exist for religious purposes

non-commercial op-shops operating from the same title

car parks serving multiple land uses but for which the primary purpose is for religious purposes.

Urban moderate-occupancy online accommodation provider

Land in the Urban Rating Area where a residence is let out on a short-term basis, via online web-based accommodation services that offer short-term rental accommodation via peer-to-peer online marketplace such as Airbnb and bookabach, for more than 135 nights and less than 181 nights in the 12 months ending 30 June of the previous financial year.

Rural moderate-occupancy online accommodation provider

Land outside the Urban Rating Area where a residence is let out on a short-term basis, via online web-based accommodation that offer short-term rental accommodation services via peer-to-peer online marketplace such as Airbnb and bookabach, for more than 135 nights and less than 181 nights in the 12 months ending 30 June of the previous financial year.

Urban medium-occupancy online accommodation provider

Land in the Urban Rating Area where a residence is let out on a short-term basis, via online web-based accommodation services that offer short-term rental accommodation via peer-to-peer online marketplace such as Airbnb and bookabach, for more than 28 nights and less than 136 nights in the 12 months ending 30 June of the previous financial year.

Rural medium-occupancy online accommodation provider

Land outside the Urban Rating Area where a residence is let out on a short-term basis, via online web-based accommodation services that offer short-term rental accommodation via peer-to-peer online marketplace such as Airbnb and bookabach, for more than 28 nights and less than 136 nights in the 12 months ending 30 June of the previous financial year.

Notes to table:

1. Hotels, motels, serviced apartments, boarding houses and hostels will be rated as business except when the land is used exclusively

or almost exclusively for residential purposes. Ratepayers must provide proof of long-term stay (at least 90 days) as at 30 June of the

previous financial year. Proof should be in the form of a residential tenancy agreement or similar documentation.

2. Utility networks are classed as rural business differential. However, all other utility rating units are categorised based on their land use

and location.

3. To be considered “lifestyle”, land must be in a rural or semi-rural area, must be predominantly used for residential purposes, must be

larger than an ordinary residential allotment, and must be used for some small-scale non-commercial rural activity.

4. The Urban Rating Area includes land in the Metropolitan Urban Limit (MUL2010 as defined in the Auckland Regional Policy Statement)

as well as land within Pukekohe township. It also includes around 400 properties outside these areas where the Urban Rating Area has

been extended in Pukekohe West (Franklin), East Tāmaki Heights (Howick), Takanini (Papakura), The Gardens (Manurewa), East

Tāmaki (Howick), Papatoetoe (Manukau). You can view a map of the Urban Rating Area at www.aucklandcouncil.govt.nz/rates or at

any Auckland Council library or service centre.

The long-term differential strategy

In 2020/2021 the business differential ratios will be set so that 31.68 per cent of general rates (UAGC and value-based general rate) come from businesses.

The table below sets out the rates differentials and rates in the dollar of capital value to be applied in 2020/2021. This is estimated to produce around $1,522.3 million (excluding GST) for 2020/2021.

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Value-based general rate differentials for 2020/2021

Property category Effective relative differential ratio for

general rate for 2020/2021

Rate in the dollar for 2020/2021 (including

GST) ($)

Share of value-based general rate

(excluding GST) ($)

Share of value-based general

rate (%)

Urban business 2.77 0.00541065 488,406,984 32.1%

Urban residential 1.00 0.00195421 857,754,376 56.3%

Rural business 2.49 0.00486958 47,942,420 3.1%

Rural residential 0.90 0.00175879 54,535,983 3.6%

Farm and lifestyle 0.80 0.00156337 71,631,387 4.7%

No road access 0.25 0.00048855 251,453 Less than 0.1%

Zero-rated(1) 0.00 0.00000000 0 0.0%


1.88 0.00368243 125,266 Less than 0.1%


1.70 0.00331418 24,384 Less than 0.1%


1.44 0.00281832 1,146,813 0.1%


1.30 0.00253649 520,876 Less than 0.1%

Note to table: 1. Zero-rated ratepayers are liable for the UAGC only, which is automatically remitted through the rate remission policy.

Rates for Watercare land and defence land will be assessed on land value as required under section 22 of the Local Government (Rating) Act 2002 and Section 73 of the Local Government (Auckland Council) Act 2009. These properties will pay a share of the value-based general rates requirement determined on their share of the city’s land value rather than a share of the city’s capital value as applies for other properties.

Targeted rates

The council does not have a lump sum contribution policy and will not invite lump sum contributions for any targeted rate. Unless otherwise stated, the targeted rates described below will be used as sources of funding for each year until 2027/2028.

Water Quality Targeted Rate

Background

The council is funding an additional investment from 2018/2019 to 2027/2028 to clean up Auckland’s waterways. The rate will fund expenditure within the following activities: Stormwater Management.

Activities to be funded

The Water Quality Targeted Rate (WQTR) will be used to help fund the capital costs of investment in cleaning up Auckland’s waterways.

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How the rate will be assessed

A differentiated targeted rate will be applied on the capital value of all rateable land except land categorised as zero-rated as defined for rating purposes. The business differential ratio will be set so that 25.8 per cent of the revenue requirement comes from businesses. A targeted rate of $0.00010677 (including GST) per dollar of capital value will be applied to all rateable land categorised as business (Urban business and Rural business) as defined for rating purposes, and $0.00006076 (including GST) per dollar of capital value to all rateable land not categorised as business (Urban residential, Rural residential, Farm and lifestyle, Urban moderate-occupancy online accommodation provider, Rural moderate-occupancy online accommodation provider, Urban medium-occupancy online accommodation provider, Rural medium-occupancy online accommodation provider, and No road access) as defined for rating purposes. This is estimated to produce around $42.3 million (excluding GST) for 2020/2021, $10.7 million from business and $31.6 million from non-business.

Natural Environment Targeted Rate

Background

The council is funding an additional investment from 2018/2019 to 2027/2028 to enhance Auckland’s natural environment. The rate will fund expenditure within the following activities: Regional environmental services.


The Natural Environment Targeted Rate (NETR) will be used to help fund the capital and operating costs of investment to deliver enhanced environmental outcomes.


A differentiated targeted rate will be applied on the capital value of all rateable land except land categorised as zero-rated as defined for rating purposes. The business differential ratio will be set so that 25.8 per cent of the revenue requirement comes from businesses. A targeted rate of $0.00007603 (including GST) per dollar of capital value will be applied to all rateable land categorised as business (Urban business and Rural business) as defined for rating purposes, and $0.00004326 (including GST) per dollar of capital value to all rateable land not categorised as business (Urban residential, Rural residential, Farm and lifestyle, Urban moderate-occupancy online accommodation provider, Rural moderate-occupancy online accommodation provider, Urban medium-occupancy online accommodation provider, Rural medium-occupancy online accommodation provider, and No road access) as defined for rating purposes. This is estimated to produce around $30.1 million (excluding GST) for 2020/2021, $7.6 million from business and $22.5 million from non-business.

Waste Management targeted rate

Background

The benefit of the provision of waste management services in public areas e.g. public litter bins is funded through the general rate. Privately generated waste is funded through a mixture of targeted rates and pay as you throw charges.

The refuse, recycling, inorganic collection and other waste management services in Auckland are being standardised under the Waste Management and Minimisation Plan (WMMP). The food scraps collection service is currently available in Papakura and some parts of Northcote, Milford and Takapuna. This is scheduled to be rolled out to the whole of urban Auckland from 2021/2022.

Solid waste targeted rates for 2020/2021 include:

a region-wide base rate to cover the cost of recycling, inorganic collection, resource recovery centres, the Hauraki Gulf Islands subsidy and other regional waste services

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a standard refuse rate will apply in the former Auckland City and the former Manukau City to fund refuse collection

an additional targeted rate for Papakura and parts of North Shore to cover the cost of the food scraps collection

additional rates may apply to properties that request additional recycling or refuse services.

Where user charges currently apply, these will continue.

The council is implementing the Auckland WMMP. Information on the plan can be found on the council’s website.


The targeted rate for waste management is used to fund refuse collection and disposal services (including the inorganic refuse collection), recycling, food scraps collection, waste transfer stations and resource recovery centres within the solid waste and environmental services activity.


For land outside of the district of the former Auckland City Council where a service is provided or available, the targeted rate for the base service and the standard refuse service (for the former Manukau City) and the food scraps service (for the former Papakura District and the previous food scraps trial area in Northcote, Milford and Takapuna), will be charged on a per SUIP basis. See the UAGC section prior for the council’s definition of a SUIP. The standard refuse service includes one 120 litre refuse bin (or equivalent).

For land within the district of the former Auckland City Council, the targeted rate for the base service and the standard refuse service will be charged based of the number and type of services supplied or available to each rating unit. For rating units made up of one SUIP, the council will provide one refuse collection service. For rating units made up of more than one SUIP, the council will provide the same service as was provided at 30 June 2019, unless otherwise informed by the owner of the rating unit (that is, at least one base service and one refuse collection service). Land which has an approved alternative service will be charged the waste service charge that excludes the approved alternative service or services. See sample properties at the end of this section for examples on how these apply.

For land within the former district of Auckland City and Manukau City, a large refuse rate will apply, on top of the standard refuse rate, if a 240 litre refuse bin is supplied instead of the standard 120 litre bin.

For all land across Auckland, an additional recycling rate will apply if an additional recycling service is supplied.

In the future, the waste management targeted rate may be adjusted to reflect changes in the nature of services and the costs of providing waste management services to reflect the implementation of the Auckland Waste Management and Minimisation Plan.

The following table sets out the waste management targeted rates to be applied in 2020/2021. This is estimated to produce around $106.7 million (excluding GST) for 2020/2021.

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Waste management targeted rates

Service Differential group Amount of targeted rate for 2020/2021 (including GST) $

Charging basis Share of targeted rate (excluding

GST) ($)

Base service Rating units in the former Auckland City

141.03 Per service available 20,322,456

Rating units in the former Franklin District, Manukau City, North Shore City, Papakura District, Rodney District and Waitākere City

141.03 Per SUIP 48,290,923

Base service excluding recycling

Rating units in the former Auckland City


Standard refuse Rating units in the former Auckland City


Rating units in the former Manukau City

141.60 Per SUIP 14,275,660

Large refuse Rating units in the former Auckland City and Manukau City

66.55 Per service available 862,216

Additional recycling All rating units 91.63 Per service available 135,517

Food scraps Rating units in the former Papakura District and the former food scraps trial area in Northcote, Milford and Takapuna

69.19 Per SUIP 1,262,651

For the avoidance of doubt, properties that opt out of one or more council services in the former Auckland City area will be rated as below:

land which has an approved alternative refuse service will be charged the base service rate ($141.03)

land which has an approved alternative recycling service will be charged the standard refuse rate ($141.60) plus the base service excluding recycling rate ($49.40)

land which has approved alternative refuse and recycling services will be charged the base service excluding recycling rate ($49.40).

Accommodation provider targeted rate

Background

Auckland Council, through Auckland Tourism, Events, and Economic Development (ATEED), has a strong focus on developing Auckland’s visitor economy into a sustainable year-round industry, including working with industry partners such as Tourism New Zealand and Auckland International Airport Limited to attract high-value visitors, and facilitating the establishment of world-class attractions. The Auckland Convention Bureau team attracts business events which inject millions annually into the economy.

ATEED is also focused on continuing to expand Auckland as a world-leading events city through attracting, delivering and/or supporting an annual portfolio of more than 30 major events.

Due to COVID-19, ATEED’s visitor attraction and major events expenditure has been reduced. Once travel restrictions are lifted investment in visitor attraction and major events expenditure will be key to revitalising the tourism sector. For 2020/2021 the council proposes to set the accommodation provider targeted rate at a level that reflects ATEED’s reduced expenditure on visitor attraction and major events. The council is also proposing

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that the Accommodation provider targeted rate be invoiced in one instalment at the same time as the 4th quarter rates instalment due on 28 May 2021.


The Accommodation provider targeted rate will be used to help part fund the costs of visitor attraction, major events and destination and marketing which are part of council’s “economic growth and visitor economy” activity.


A differentiated targeted rate will be assessed on capital value and applied to all rateable land in Zones A and B defined as business, moderate-occupancy online accommodation provider, and medium-occupancy online accommodation provider for rating purposes operated as Tier one, two, three, four, five, or six accommodation. The capital value to which the targeted rate applies excludes the value of the portion not attributable to the provision of commercial accommodation.

The rate will be differentiated by provider type and by location as laid out below.

Provider type

The rate will be differentiated by provider type as described in the categories of accommodation below:

1. hotels

2. motels and motor inns

3. lodges

4. pub accommodation

5. serviced apartments

6. campgrounds, motor parks, and holiday parks

7. backpackers and short stay hostels

8. bed and breakfasts and homestays.

9. high-occupancy online accommodation provider (residences let out on a short-term basis, via online web-based accommodation services that offer short-term rental accommodation via peer-to-peer online marketplace such as Airbnb and bookabach, for more than 180 nights in the 12 months ending 30 June of the previous financial year)

10. moderate-occupancy online accommodation provider (residences let out on a short-term basis, via online web-based accommodation services that offer short-term rental accommodation via peer-to-peer online marketplace such as Airbnb and bookabach, for more than 135 nights and less than 181 nights in the 12 months ending 30 June of the previous financial year)

11. medium-occupancy online accommodation provider (residences let out on a short-term basis, via online web-based accommodation services that offer short-term rental accommodation via peer-to-peer online marketplace such as Airbnb and bookabach, for more than 28 nights and less than 136 nights in the 12 months ending 30 June of the previous financial year)

Long-stay residential accommodation is excluded from liability for the rate. Note that some motor inns, campgrounds, motor parks or holiday parks may be primarily long-stay accommodation and treated accordingly where appropriate supporting evidence can be provided. Additionally, any portion of commercial accommodation contracted for emergency housing by the Ministry of Social Development will be excluded from liability for the rate.

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Where an accommodation operator offers differing accommodation types from one establishment then the different parts should be treated according to their differential category use. For example, many campgrounds, motor parks, and holiday parks offer a mixture of self-contained units (similar to motels), cabins (similar to backpackers), and camp sites.

Provider types will be grouped into the following seven tiers:

Tier 1: hotels, serviced apartments and high-occupancy online accommodation providers*

Tier 2: motels and motor inns, lodges, pub accommodation, and serviced apartments and high-occupancy online accommodation providers not included in Tier 1

Tier 3: moderate-occupancy online accommodation providers that have characteristics similar to hotels (different to motels as described above)

Tier 4: moderate-occupancy online accommodation providers that have characteristics similar to motels (as described above)

Tier 5: medium-occupancy online accommodation providers that have characteristics similar to hotels (different to motels as described above)

Tier 6: medium-occupancy online accommodation providers that have characteristics similar to motels (as described above)

Tier 7: other accommodation providers such as backpackers, short stay hostels, bed and breakfasts, homestays and campgrounds.

* serviced apartments and high-occupancy online accommodation providers that have characteristics similar to motels (such as parking provided directly outside the apartment, managers accommodation on-site, buildings are 1 or 2 levels) will be classified as Tier 2 for the purposes of establishing liability for the Accommodation Provider targeted rate.

Location

The rate will also be differentiated by location as described in the zones below:

Zone A: accommodation providers located in local board areas of Albert-Eden, Devonport-Takapuna, Māngere-Ōtāhuhu, Maungakiekie-Tāmaki, Ōrākei, Waitematā.

Zone B: accommodation providers located in local board areas of Henderson-Massey, Hibiscus and Bays, Howick, Kaipātiki, Manurewa, Ōtara-Papatoetoe, Puketāpapa, Upper Harbour, Waiheke, Whau.

Zone C: accommodation providers located in local board areas of Franklin, Great Barrier, Papakura, Rodney and Waitākere Ranges.

Differential ratios

The table below sets out the differential ratios that are applied to the differential categories described above for the Accommodation provider targeted rate:

Differential ratios

Provider type

Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6

Lo

cati

on

Zone A 1.0 0.6 0.50 0.30 0.25 0.15

Zone B 0.5 0.3 0.25 0.15 0.125 0.075

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The following table sets out the Accommodation provider targeted rate to be applied to the differential categories described above for 2020/2021. This is estimated to produce around $3.56 million (excluding GST) for 2020/2021.

Rate in the dollar to be based on the capital value of the portion of

the rating unit used for commercial accommodation (including GST) ($)

Provider type

Tier 1 Tier 2 Tier 3 Tier 4 Tier 5 Tier 6

Lo

cat

ion

Zone A 0.00149656 0.00089794 0.00074828 0.00044897 0.00037414 0.00022448

Zone B 0.00074828 0.00044897 0.00037414 0.00022448 0.00018707 0.00011224

Accommodation located in Zone C or used for Tier 7 purposes will not be liable for the Accommodation provider targeted rate.

City centre targeted rate

Background

The City Centre targeted rate is to help fund the development and revitalisation of the city centre. The rate applies to business and residential land in the City Centre area.


The City Centre redevelopment programme aims to enhance the city centre as a place to work, live, visit and do business. It achieves this by providing a high-quality urban environment, promoting the competitive advantages of the city centre as a business location, and promoting the city centre as a place for high-quality education, research and development. The programme intends to reinforce and promote the city centre as a centre for arts and culture, with a unique identity as the heart and soul of Auckland. The rate will fund expenditure within the following activities: Regional planning; Roads and footpaths; Local parks, sports and recreation.

The targeted rate will continue until 2024/2025 to cover capital and operating expenditure generated by the projects in the City Centre redevelopment programme. From 2016/2017, unspent funds from the targeted rate have been used to transition the depreciation and consequential operating costs of capital works to the general rate so that from 2019/2020 these costs will be entirely funded from general rates.


A differentiated targeted rate will be applied to business and residential land, as defined for rating purposes, in the city centre. You can view a map of the city centre area at www.aucklandcouncil.govt.nz/rates or at any Auckland Council library or service centre.

A rate in the dollar of $0.00130889 (including GST) of rateable capital value will be applied to urban business land in 2020/2021. This is estimated to produce around $22.0 million (excluding GST) for 2020/2021.

A fixed rate of $62.40 (including GST) per SUIP (see UAGC section prior for the council's definition of a SUIP) will be applied to urban residential, urban moderate-occupancy online accommodation provider, and urban medium-occupancy online accommodation provider land in 2020/2021. This is estimated to produce around $1.11 million (excluding GST) for 2020/2021.

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Rodney Local Board Transport Targeted Rate

Background

The council is funding additional transport investment to deliver improved transport outcomes in the Rodney Local Board area. The rate will fund expenditure within the following activities: Roads and footpaths and Public transport and travel demand management.


The Rodney Local Board Transport Targeted Rate (RLBTTR) will be used to help fund the capital and operating costs of additional transport investment and services.


The targeted rate will be applied as an amount per SUIP (see UAGC section prior for the council's definition of a SUIP) on all rateable land in the Rodney Local Board area except land categorised as zero-rated as defined for rating purposes. The amount of the targeted rate will be $150 (including GST) per SUIP. This is estimated to produce around $4.4 million (excluding GST) for 2020/2021.

Business Improvement District targeted rates

Background

Business Improvement Districts (BID) are areas within Auckland where local businesses have agreed to work together, with support from the council, to improve their business environment and attract new businesses and customers. The funding for these initiatives comes from BID targeted rates, which the businesses within a set boundary have voted and agreed to pay to fund BID projects and activities.


The main objectives of the BID programmes are to enhance the physical environment, promote business attraction, retention and development, and increase employment and local business investment in BID areas. The programmes may also involve activities intended to identify and reinforce the unique identity of a place and to promote that identity as part of its development. The rate will fund expenditure within the following activities: Local planning and development – locally driven initiatives, Local planning and development – asset based services.

How the rates will be assessed

The BID targeted rates will be applied to business land, as defined for rating purposes, that is located in defined areas in commercial centres outlined in the following table. For maps of the areas where the BID rates will apply, go to www.aucklandcouncil.govt.nz/rates.

The BID targeted rates will be assessed using a fixed rate and value-based rate on the capital value of the property. Each BID area may recommend to council that part of its budget be funded from a fixed rate of up to $575 (including GST) per rating unit. The remaining budget requirement will be funded from a value-based rate for each area and be applied as a rate in the dollar. There will be different rates for each BID programme.

The table below sets out the budgets and the rates for each BID area that the council will apply in 2020/2021. This is estimated to produce around $19.1 million (excluding GST) in targeted rates revenue for 2020/2021.

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Business Improvement Districts fixed rates per rating unit and rates in the dollar of capital value

BID area Amount of BID grant 2020/2021 (excluding

GST) ($)

Amount of BID targeted rate revenue

2020/2021 (excluding

GST) ($)

Amount to be funded by

fixed charge for 2020/2021

(excluding GST) ($)

Fixed rate per rating unit for

2020/2021 (including

GST) ($)


property value rate based on

the capital value of the

rating unit for 2020/2021 (excluding

GST) ($)

Rate in the dollar for

2020/2021 to be multiplied by the capital

value of the rating unit (including

GST) ($)

Avondale 154,000 155,453 0 0.00 155,453 0.00131130

Birkenhead 196,350 196,051 0 0.00 196,051 0.00091851

Blockhouse Bay 56,000 56,000 0 0.00 56,000 0.00139843

Browns Bay 150,000 146,849 0 0.00 146,849 0.00050876

Central Park Henderson

400,000 400,000 221,955 250.00 178,045 0.00009767

Devonport 120,000 120,320 17,826 250.00 102,494 0.00061255

Dominion Road 180,000 179,659 0 0.00 179,659 0.00052929

Ellerslie 162,000 163,513 0 0.00 163,513 0.00208930

Glen Eden 91,920 84,226 0 0.00 84,226 0.00091947

Glen Innes 166,000 164,382 0 0.00 164,382 0.00101503

Greater East Tāmaki 545,000 541,635 338,123 195.00 203,512 0.00003688

Heart of the City 4,782,614 4,849,357 0 0.00 4,849,357 0.00043524

Howick 170,848 169,162 0 0.00 169,162 0.00089628

Hunters Corner 126,590 126,735 0 0.00 126,735 0.00072865

Karangahape Road 435,428 428,863 0 0.00 428,863 0.00048347

Kingsland 231,000 232,098 0 0.00 232,098 0.00043017

Mairangi Bay 67,500 67,500 5,000 250.00 62,500 0.00136611

Māngere Bridge 28,800 28,800 0 0.00 28,800 0.00136493

Māngere East Village

6,100 6,100 0 0.00 6,100 0.00029693

Māngere Town 284,949 284,949 0 0.00 284,949 0.00401509

Manukau Central 510,000 500,832 0 0.00 500,832 0.00027912

Manurewa 157,000 156,759 0 0.00 156,759 0.00101439

Milford 145,000 144,999 0 0.00 144,999 0.00062758

Mt Eden Village 92,035 93,716 0 0.00 93,716 0.00061172

New Lynn 192,738 189,114 0 0.00 189,114 0.00057839

Newmarket 1,691,613 1,789,050 0 0.00 1,789,050 0.00067317

North Harbour 690,621 664,867 341,596 150.00 323,271 0.00008115

North West District 180,000 179,674 93,695 250.00 85,978 0.00018839

Northcote 120,000 118,333 0 0.00 118,333 0.00230206

Old Papatoetoe 100,692 101,509 0 0.00 101,509 0.00130465

One Warkworth 135,000 135,000 136,000 575.00 -1,000 -0.00000285

Onehunga 410,000 409,028 0 0.00 409,028 0.00111629

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BID area Amount of BID grant 2020/2021 (excluding

GST) ($)

Amount of BID targeted rate revenue

2020/2021 (excluding

GST) ($)


fixed charge for 2020/2021

(excluding GST) ($)

Fixed rate per rating unit for

2020/2021 (including

GST) ($)


property value rate based on

the capital value of the

rating unit for 2020/2021 (excluding

GST) ($)

Rate in the dollar for

2020/2021 to be multiplied by the capital

value of the rating unit (including

GST) ($)

Orewa 276,285 275,482 0 0.00 275,482 0.00102902

Ōtāhuhu 663,000 667,127 0 0.00 667,127 0.00072407

Ōtara 94,730 91,946 0 0.00 91,946 0.00154301

Panmure 443,896 447,631 0 0.00 447,631 0.00151001

Papakura 250,000 246,629 0 0.00 246,629 0.00071515

Parnell 855,000 839,934 0 0.00 839,934 0.00053210

Ponsonby 570,618 559,367 0 0.00 559,367 0.00070095

Pukekohe 462,000 458,229 0 0.00 458,229 0.00052137

Remuera 242,564 243,103 0 0.00 243,103 0.00112463

Rosebank 455,000 427,086 0 0.00 427,086 0.00036671

South Harbour 81,325 81,324 0 0.00 81,324 0.00044042

St Heliers 138,484 140,561 0 0.00 140,561 0.00108876

Takapuna 443,895 444,219 0 0.00 444,219 0.00040522

Te Atatu 102,000 102,463 0 0.00 102,463 0.00138900

Torbay 17,265 17,265 0 0.00 17,265 0.00101814

Uptown 317,000 314,756 0 0.00 314,756 0.00017691

Waiuku 135,025 134,092 0 0.00 134,092 0.00105119

Wiri 737,000 726,013 0 0.00 726,013 0.00021859

Total 19,672,920 19,101,757 1,154,195 17,947,563

Note to the table: Targeted rate amounts include surpluses and deficits (if any) carried over from 2018/2019 so may differ from grant amounts.

Business Improvement Districts fixed rate per property and rates in the dollar based on land value

Rates for Watercare land and defence land will be assessed on land value as required under section 22 of the Local Government (Rating) Act 2002 and Section 73 of the Local Government (Auckland Council) Act 2009. These properties will pay a share of the Business Improvement District value based rates requirement determined on their share of the BID areas land value rather than a share of the BID areas capital value as applies for other properties.

Māngere-Ōtāhuhu and Ōtara-Papatoetoe swimming pool targeted rates

Background

Auckland Council has a region-wide swimming pool pricing policy, whereby children 16 years and under have free access to swimming pool facilities and all adults are charged. These targeted rates fund free access to swimming pools for adults 17 years and over in the Māngere-Ōtāhuhu Local Board and Ōtara-Papatoetoe Local Board areas.

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To fund the cost of free adult entry to swimming pool facilities in the Māngere-Ōtāhuhu Local Board and Ōtara-Papatoetoe Local Board areas. The rate will fund expenditure within the following activity: Local parks sport and recreation – asset based services.


These local activity targeted rates apply to all residential, urban moderate-occupancy online accommodation provider, urban medium-occupancy online accommodation provider, rural moderate-occupancy online accommodation provider, and rural medium-occupancy online accommodation provider land, as defined for rating purposes that are located in the Māngere-Ōtāhuhu Local Board and Ōtara-Papatoetoe Local Board areas.

The local activity targeted rate will be assessed using a fixed rate applied to each SUIP (see UAGC section prior for the council's definition of a SUIP) of a residential, urban moderate-occupancy online accommodation provider, urban medium-occupancy online accommodation provider, rural moderate-occupancy online accommodation provider, and rural medium-occupancy online accommodation provider land, as defined for rating purposes, in the Māngere-Ōtāhuhu Local Board and Ōtara-Papatoetoe Local Board areas. There will be a different fixed rate for each local board area.

The following table sets out the local activity targeted rates that apply in 2020/2021 for the Māngere-Ōtāhuhu Local Board and Ōtara-Papatoetoe Local Board areas. This is estimated to produce around $1.2 million (excluding GST) for 2020/2021.

Local board area Local activity targeted rates

Fixed rate for each separately used or inhabited part of a rating unit for 2020/2021

(including GST) ($)

Revenue from the targeted rate (excluding GST) ($)

Māngere-Ōtāhuhu 33.07 556,861

Ōtara-Papatoetoe 31.41 598,576

Swimming/spa pool fencing compliance targeted rate

Background

All residential swimming pools and spa pools must be inspected once every three years to ensure compliance with the Building Act 2004 and the Building (Pools) Amendment Act 2016. Pools failing the first inspection require subsequent inspections until all defects have been remedied. Inspection can be carried out by either the council or an independently qualified pool inspector (IQPI).


To fund the costs of providing pool fence and barrier inspections and associated administrative costs. The rate will fund expenditure within the following activity: Regulatory services.


The pool fencing compliance targeted rate will apply to all rateable land on councils register of pool fence and barrier inspections. The rate will be assessed as a fixed rate per rating unit. The table below sets out the differentiated rates that apply based on whether the council is required to carry out a three-yearly inspection. Additional fees will be invoiced separately where subsequent inspections are required.

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Inspection service provided Fixed rate per rating unit for 2020/2021 (including GST)

Council inspection required $44

No council inspection required – successful inspection carried out by Independently Qualified Pool Inspector

$22

This is estimated to produce around $1.0 million (excluding GST) for 2020/2021.


The council has constructed Riverhaven Drive for the benefit of the rating units in the immediate area. The construction of the road and the payment of the rate have been agreed with the association representing the owners of the rating units. The Riverhaven Drive targeted rate is used to repay the council for the cost of the road, including interest costs. The rate will fund expenditure within the following activities: Local planning and development – locally driven initiatives, Roads and footpaths.

The targeted rate applies to the land which benefits from the construction of a road that provides access to the rating unit. The rate will apply until the cost of the project is recovered. In 2020/2021 the council will not charge interest on the financial assistance provided. From 2021/2022 the council will resume charging interest on the financial assistance provided. The ratepayer will repay the financial assistance and interest (if applicable) on a table mortgage basis. The council will calculate the level of the targeted rate each year to fund the interest (if applicable) and principal repayment required for that year. The targeted rate will apply for 25 years (2006/2007 to 2030/2031). The outstanding balance will reduce each year as the principal is repaid.

The council will apply a uniform rate of $7,531.46 (including GST) per rating unit for 2020/2021. This is estimated to produce around $52,000 (excluding GST) for 2020/2021.


The Waitākere rural sewerage targeted rate is set as a uniform charge on all rating units in the Non-Drainage Area of the former district of the Waitākere City Council that have certain types of on-site waste management systems. These are scheduled to be pumped out by the council within a three-yearly cycle, with funding provided through the targeted rate. The uniform charge is assessed in respect of each on site waste management system utilised in conjunction with the particular rating unit. The rate will fund expenditure within the following activities: Stormwater management.

The council is proposing to increase the Waitākere rural sewerage targeted rate to fully recover the costs of providing this service and limit the service to the Waitākere Ranges Local Board area. The proposed changes would apply from 1 July 2021.

A regional compliance programme will be put in place over the next two to three years to ensure on-site wastewater systems across the region are adequately maintained and inspected to minimise environmental risk. Implementation will be phased across Auckland, with Waitākere coming under the programme in 2019. An option under the proposed changes is to combine the pump-out service with an inspection service, including the appropriate level of rate to apply. The existing pump out service and targeted rate will continue until the current contract expires in June 2021.

For 2020/2021 the targeted rate will be a uniform charge of $200.91 (including GST) for each on-site waste management system utilised in conjunction with the rating unit. This is estimated to produce around $0.7 million (excluding GST) for 2020/2021.

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Retro-fit your home targeted rate

The Retro-fit Your Home targeted rate is set on land that has received financial assistance from Auckland Council for energy efficiency assessment, and the installation of clean heat, insulation, water conservation, mechanical extraction and fire place decommissioning in respect of the land. The rate will fund expenditure within the following activities: Regulatory services.

In 2020/2021 the council will not charge interest on the financial assistance provided. From 2021/2022 the council will resume charging interest on the financial assistance provided. The ratepayer will repay the financial assistance and interest (if applicable) on a table mortgage basis. The council will calculate the level of the targeted rate each year to fund the interest (if applicable) and principal repayment required for that year. The targeted rate will apply for nine years. The outstanding balance will reduce each year as the principal is repaid.

The targeted rate will apply as a rate in the dollar, which is multiplied against the ratepayer’s outstanding balance as at 30 June each year. The rate in the dollar is set at different levels for each year that the ratepayer has been repaying the financial assistance.

The following table sets out the Retro-fit Your Home targeted rate that the council will apply in 2020/2021. This is estimated to produce around $5.0 million (excluding GST) for 2020/2021.


Year of repayment Rate in the dollar for 2020/2021 to be multiplied by the ratepayers outstanding balance as at 30 June 2020 (including GST) ($)

1 0.11111111

2 0.12500000

3 0.14285714

4 0.16666667

5 0.20000000

6 0.25000000

7 0.33333333

8 0.50000000

9 1.00000000

Kumeu Huapai Riverhead wastewater targeted rate

The Kumeu Huapai Riverhead wastewater targeted rate is set on land that has received financial assistance from Auckland Council for the purchase and installation of equipment for pumping waste from the property to Watercare’s pressurised wastewater scheme. The rate will fund expenditure within the following activity: Organisational support.

In 2020/2021 the council will not charge interest on the financial assistance provided. From 2021/2022 the council will resume charging interest on the financial assistance provided. The ratepayer will repay the financial assistance and interest (if applicable) on a table mortgage basis. The council will calculate the level of the targeted rate each year to fund the interest (if applicable) and principal repayment required for that year. The targeted rate will apply for 15 years. The outstanding balance will reduce each year as the principal is repaid.


The following table sets out the Kumeu Huapai Riverhead wastewater targeted rate that council will apply in 2020/2021. This is estimated to produce around $4,400 (excluding GST) for 2020/2021.

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1 0.07666667

6 0.11500000

8 0.14375000

On-site wastewater systems (septic tank) upgrades targeted rate

The On-site wastewater systems (septic tank) upgrades targeted rate is set on land that has received financial assistance from Auckland Council for the replacement or upgrade of failing on-site wastewater systems (septic tanks) in the west coast lagoons (Piha, Te Henga and Karekare) and Little Oneroa (Waiheke Island) catchments. The rate will fund expenditure within the following activities: Regulatory services.

In 2020/2021 the council will not charge interest on the financial assistance provided. From 2021/2022 the council will resume charging interest on the financial assistance provided. The ratepayer will repay the financial assistance and interest (if applicable) on a table mortgage basis. The council will calculate the level of the targeted rate each year to fund the interest (if applicable) and principal repayment required for that year. The targeted rate will apply for 15 years. The outstanding balance will reduce each year as the principal is repaid.


The following table sets out the On-site wastewater systems (septic tank) upgrades targeted rate that the council will apply in 2020/2021. This is estimated to produce around $1,100 (excluding GST) for 2020/2021.



1 0.07666667

3 0.08846154

Clevedon wastewater and water connection targeted rate

The Clevedon wastewater and water connection targeted rate is set on land in Clevedon that has received financial assistance from Auckland Council to connect to Watercare’s reticulated wastewater and/or water system. The rate will fund expenditure within the following activity: Regulatory services.

The council will implement the targeted rate from 2021/2022. The ratepayer will repay the financial assistance and interest on a table mortgage basis. The council will calculate the level of the targeted rate each year to fund the interest and principal repayment required for that year. The targeted rate will apply for 15 years. The outstanding balance will reduce each year as the principal is repaid.



The Point Wells wastewater targeted rate is set on land that received financial assistance to connect to the pressure wastewater collection (PWC) scheme in the Point Wells area. The rate will fund expenditure within the following activity: Organisational support.

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In 2020/2021 the council will not charge interest on the financial assistance provided. From 2021/2022 the council will resume charging interest on the financial assistance provided. The ratepayer will repay the financial assistance and interest (if applicable) on a table mortgage basis. The council will calculate the level of the targeted rate each year to fund the interest (if applicable) and principal repayment required for that year according to the amount of assistance provided. The targeted rate will apply for 15 years (2009/2010 to 2023/2024). The outstanding balance will reduce each year as the principal is repaid.

The following table sets out the Point Wells wastewater targeted rate that council will apply in 2020/2021. This is estimated to produce around $13,700 (excluding GST) for 2020/2021.


Total assistance provided Amount of targeted rate per rating unit for 2020/2021 (including GST) ($)

$8,000 $630.20

$8,500 $669.58

$9,000 $708.97

$9,500 $748.35

$10,000 $787.75


The Jackson Crescent wastewater targeted rate is set on the rating unit that received financial assistance to connect to the pressure wastewater collection (PWC) scheme in Jackson Crescent, Martins Bay area. The rate will fund expenditure within the following activity: Organisational support.

In 2020/2021 the council will not charge interest on the financial assistance provided. From 2021/2022 the council will resume charging interest on the financial assistance provided. The ratepayer will repay the financial assistance and interest (if applicable) on a table mortgage basis. The council will calculate the level of the targeted rate each year to fund the interest (if applicable) and principal repayment required for that year. The targeted rate will apply for 15 years (2009/2010 to 2023/2024). The outstanding balance will reduce each year as the principal is repaid.

The council will apply a uniform rate of $568.80 (including GST) per rating unit in 2020/2021. This is estimated to produce $495 (excluding GST) for 2020/2021.

Rates payable by instalment

All rates except the Accommodation Provider Targeted Rate will be payable by four equal instalments due on:

Instalment 1: 31 August 2020

Instalment 2: 30 November 2020

Instalment 3: 26 February 2021

Instalment 4: 28 May 2021.

The Accommodation provider targeted rate will be payable in one instalment due on 28 May 2021.

It is council policy that any payments received will be applied to the oldest outstanding rates before being applied to the current rates.

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Penalties on rates not paid by the due date

The council will apply a penalty of 10 per cent of the amount of rates assessed under each instalment in the 2020/2021 financial year that are unpaid after the due date of each instalment. Any penalty will be applied to unpaid rates on the day following the due date of the instalment.

A further 10 per cent penalty calculated on former years’ rate arrears to be added on the first business day of the new financial year (or five working days after the rates resolution is adopted, whichever is the later) and then again six months later. Early payment discount policy

Objectives

The council encourages ratepayers to pay their rates in full by the date that their first instalment is due by providing a discount.

Conditions and criteria

Ratepayers will qualify for the discount if their rates are paid in full, together with any outstanding prior years’ rates and penalties, by 5.00pm on the day their first rates instalment for the new financial year is due.

Delegation of decision-making

Decisions about applying the discount will be made by staff in accordance with the Chief Executive’s delegation register.

Review process

The council will set the rate of discount that ratepayers are eligible for on an annual basis. The discount will be set to return to those ratepayers making an early payment the interest cost saving to the council. The interest cost saving will be set based on the council’s short term cost of borrowing for the financial year in which the discount will apply. In making this forecast the council will take into account current market interest rate forecasts provided by financial institutions. The reviewed discount rate will be adopted by a council resolution at the same time as other rates-related decisions are made as part of its annual plan or long-term plan decision making process.

If the council wants to make any significant change to the discount policy, it must consult with the public.

Discount in 2020/2021

The discount is 0.15 per cent for 2020/2021.

Sample properties

The following section is intended to provide examples of the individual rates for 2020/2021.The following targeted rates are not shown:

Business improvement district targeted rates





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Clevedon wastewater and water connection targeted rate.

For more information on these and other rates please see the relevant section of the Rating mechanism.

General rates, Water Quality Targeted Rate and Natural Environment Targeted Rate

The table below shows indicative rates (general rate, Water Quality Targeted Rate, and Natural Environment Targeted Rate) for fully rateable rating units with one SUIP at different values for each of the main differential categories. An extra UAGC charge should be added for each extra SUIP the rating unit has.

Differential category

Capital value ($)

UAGC (including

GST) ($)

General rate (including GST)

($)

Water quality targeted rate

(including GST) ($)

Natural Environment targeted rate

(including GST)

Total rates (including GST)

($)

Urban - business 500,000 439 2,705 53 38 3,236

1,500,000 439 8,116 160 114 8,829

3,000,000 439 16,232 320 228 17,219

10,000,000 439 54,107 1,068 760 56,374

Urban - residential

500,000 439 977 30 22 1,468

750,000 439 1,466 46 32 1,983

1,000,000 439 1,954 61 43 2,497

1,500,000 439 2,931 91 65 3,526

Rural - business 500,000 439 2,435 53 38 2,965

1,500,000 439 7,304 160 114 8,018

3,000,000 439 14,609 320 228 15,596

10,000,000 439 48,696 1,068 760 50,963

Rural - residential 500,000 439 879 30 22 1,370

750,000 439 1,319 46 32 1,836

1,000,000 439 1,759 61 43 2,302

1,500,000 439 2,638 91 65 3,233

Farm/lifestyle 500,000 439 782 30 22 1,273

1,500,000 439 2,345 91 65 2,940

3,000,000 439 4,690 182 130 5,441

10,000,000 439 15,634 608 433 17,113


500,000 439 1,841 30 22 2,332

750,000 439 2,762 46 32 3,279

1,000,000 439 3,682 61 43 4,225

1,500,000 439 5,524 91 65 6,119


500,000 439 1,657 30 22 2,148

750,000 439 2,486 46 32 3,003

1,000,000 439 3,314 61 43 3,857

1,500,000 439 4,971 91 65 5,566


500,000 439 1,409 30 22 1,900

750,000 439 2,114 46 32 2,631

1,000,000 439 2,818 61 43 3,361

1,500,000 439 4,227 91 65 4,823

500,000 439 1,268 30 22 1,759

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Differential category

Capital value ($)

UAGC (including

GST) ($)

General rate (including GST)

($)

Water quality targeted rate

(including GST) ($)

Natural Environment targeted rate

(including GST)

Total rates (including GST)

($)


750,000 439 1,902 46 32 2,419

1,000,000 439 2,536 61 43 3,080

1,500,000 439 3,805 91 65 4,400

The following tables contain indicative values for the most common targeted rates. If a rating unit is liable for one of these, then the value shown should be added to the general rates, water quality targeted rate, and natural environment targeted rate figure from the table above to determine the total rates liability.

Waste management targeted rate

Most rating units are liable for waste management targeted rates. These vary depending on the former council area that the property is located.

Former council area Service Total amount of charges (including GST) ($)

Number of waste management charges

1 2 3 5 10

Auckland City Full service (base service plus standard refuse service)

283 565 848 1,413 2,826

Opt out of refuse 141 282 423 705 1,410

Opt out of recycling 191 382 573 955 1,910

Opt out of both refuse and recycling

49 99 148 247 494

Additional recycling 92 183 275 458 916

Manukau City Full service (base service plus standard refuse service)

283 565 848 1,413 2,826

Papakura District, North Shore City, Waitākere City, Franklin District and Rodney District

Base service 141 282 423 705 1,410

Papakura District and the former food scrap trial area in North Shore

Food scraps 69 138 208 346 692


Some rating units that provide visitor accommodation are liable for the Accommodation provider targeted rate.

Rating units in Zone A that provide visitor accommodation

Capital value

Zone A – Tier 1 rate






(including GST) ($)

(including GST) ($)

(including GST) ($)

(including GST) ($)

(including GST) ($)

(including GST) ($)

500,000 748 449 374 224 187 112

1,500,000 2,245 1,347 1,122 673 561 337

3,000,000 4,490 2,694 2,245 1,347 1,122 673

10,000,000 14,966 8,979 7,483 4,490 3,741 2,245

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Rating units in Zone B that provide visitor accommodation

Capital value

Zone B – Tier 1 rate






(including GST) ($)

(including GST) ($)

(including GST) ($)

(including GST) ($)

(including GST) ($)

(including GST) ($)

500,000 374 224 187 112 94 56

1,500,000 1,122 673 561 337 281 168

3,000,000 2,245 1,347 1,122 673 561 337

10,000,000 7,483 4,490 3,741 2,245 1,871 1,122

City centre targeted rate

All rating units in the City Centre are liable for the City Centre targeted rate.

Business rating units located in the city centre area

Capital value Rate (including GST) ($)

500,000 654

1,500,000 1,963

3,000,000 3,927

10,000,000 13,089

Residential rating units located in the city centre area

Number of separately used or inhabited parts Rate (including GST) ($)

1 62

2 125

3 187

5 312

10 624

Rodney Local Board Transport Targeted Rate

Rating units in the Rodney local board area are liable for the Rodney Local Board Transport Targeted Rate.

Total targeted rate amount (including GST) ($)

Number of separately used or inhabited parts 1 2 3 5 10

Rate amount $150 $300 $450 $750 $1,500

Swimming pool targeted rates

Residential rating units in Māngere-Ōtāhuhu and Ōtara-Papatoetoe local board areas are liable for Swimming Pool targeted rates.

Residential rating units located in


Number of separately used or inhabited parts

1 2 3 5 10

Māngere-Ōtāhuhu 33 66 99 165 331

Ōtara-Papatoetoe 31 63 94 157 314

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Some residential rating units not connected to the wastewater system in the former Waitākere City area are liable for the Waitākere Rural Sewerage targeted rate.

Residential rating units located in


Number of septic tanks pumped out once every 3 years

1 2 3 5 10

Former Waitākere City that have septic tanks pumped out by council 201 402 603 1,005 2,009

Swimming/spa pool fencing compliance

Rating units on council’s register of pool fence and barrier inspections are liable for the Swimming/spa pool fencing compliance targeted rate.

Inspection service provided Total targeted rate amount (including GST) ($) for the rating unit

Council inspection required 44

No council inspection required – successful inspection carried out by Independently Qualified Pool Inspector

22


Ratepayers who have taken advantage of the Retro-fit Your Home scheme repay the financial assistance provided via a targeted rate.

Category Outstanding balance at beginning of 2020/2021 ($)

1,500 2,000 2,500 3,500

Rate for 1st year of repayment (including GST) ($) 167 222 278 389

Rate for 2nd year of repayment (including GST) ($) 188 250 313 438

Rate for 3rd year of repayment (including GST) ($) 214 286 357 500

Rate for 4th year of repayment (including GST) ($) 250 333 417 583



Rate for 7th year of repayment (including GST) ($) 500 667 833 1,167

Rate for 8th year of repayment (including GST) ($) 750 1,000 1,250 1,750

Rate for 9th year of repayment (including GST) ($) 1,500 2,000 2,500 3,500

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Ratepayers who have taken advantage of the Kumeu Huapai Riverhead wastewater scheme repay the financial assistance provided via a targeted rate.

Category Outstanding balance at beginning of 2020/2021 ($)

5,000 7,000 9,000 11,000

Rate for 1st year of repayment (including GST) ($) 383 537 690 843

Rate for 6th year of repayment (including GST) ($) 575 805 1,035 1,265

Rate for 8th year of repayment (including GST) ($) 719 1,006 1,294 1,581

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