Debt dominates budget debate

Mayor Wayne Brown has passed his first Auckland Council budget. Included in it is good news confirming funding to fix the Hill Street intersection, along with more than doubling the money for maintaining the rural unsealed roading network.

To the Mayor’s credit, he has listened to the feedback from Aucklanders and restored funding to several services he had originally planned to cut – this includes funding the Citizen Advice Bureaux, along with funding the local boards so they can continue to support their communities.

At the heart of his budget was the plan to help fix Auckland by reducing council’s $12.3 billion debt – Auckland’s debt costs ratepayers $1.5 million per day in interest repayments.

To find money to pay off a chunk of this debt, the Mayor proposed to sell all of the council-owned shares held in the Auckland Airport. During the public feedback period, over 66 per cent of Rodney’s residents and ratepayers supported a full, or partial sale of the airport shares. Selling the shares would have paid off $2.2 billion of debt while simultaneously reducing interest repayments by over $100 million a year.

The counter argument put up against his proposal was that the dividend payments from those shares returned $40 million per year to Auckland Council. The Mayor argued that overall, ratepayers would be $60 million better off a year by saving $100 million a year in interest repayments rather than earning $40 million a year from the shares.

However, when it came time to vote, the Mayor was politically outnumbered with the majority of councillors not agreeing to sell all of the shares. They, instead, did not want to sell any shares, and for council to borrow more, and to put up the rates. This was exactly what Wayne Brown was trying to avoid to keep his election promise to “fix Auckland”.

Eventually a compromise was reached through selling less than half the airport shares. This means both council’s debt and the interest cost repayments will not be significantly reduced. Taking on even more debt, and ballooning out Auckland Council’s debt even further, was not the prudent thing to do, the Mayor argued. Taking on more debt was just kicking the can down the road to fix Auckland.

In the debating chamber I fully supported the Mayor, aligning my vote with his. Taking on more debt has been an historical approach taken by previous mayors. Wayne Brown wanted to take a different approach by cutting costs and keeping rate increases under the rate of inflation.

Next year, the Mayor has signalled he will continue to take a hard line on cutting wasteful spending, to further empower the local boards’ decision-making abilities, and to bring council-controlled organisations under control, by focusing them on delivering for the people of Auckland.