Auckland Council's ongoing budget hole rises to $325m

Auckland Council says its budget gap for the coming financial year has increased to $325 million, up from $295m.

Councillors attended a closed-door workshop on Wednesday morning to receive a budget update, ahead of approving the annual budget next month.

Council chief financial officer Peter Gudsell said the increase was due to recent severe weather events, along with rising inflation-related costs which had pushed up council's costs over the past six months.

"We've seen cost increases reflect inflation levels in a number of areas," he said.

"These increases are particularly affecting the price of utilities such as electricity, and impacting the cost of asset renewals, meaning a rise in the amount of money we need to set aside for depreciation."

The council's budget has also been impacted by the storms earlier this year with a one-off storm related cost of $50m - including a proposed $20 million annual storm response fund that would cover costs such as higher insurance premiums.

Gudsell said the storm costs included extra repairs and maintenance to Auckland Council and Auckland Transport assets due to storm damage, and the establishment of the Tāmaki Makaurau Recovery Coordination Office.

"While these costs do not add to the ongoing operating shortfall, they will add to council's debt levels and therefore reduce the debt capacity that can be utilised to manage other costs."

The scenarios to address the budget gap involved a complete or partial sell-down of the council's $2 billion stake in Auckland Airport, cutting running costs from between $80m-130m, and rate rises between 3.5 percent and 7 percent.

Most people who gave feedback on the proposed annual budget supported selling at least some airport shares to boost revenue, but wanted fewer funding cuts.

Mayor Wayne Brown earlier pledged not to cover the shortfall with double digit rate rises.

Gudsell said the shortfall would require trade-offs.

"Different trade-offs have different consequences, and this now needs to be considered as part of the process to set the budget."

The budget has been sent for public consultation, and final decisions will be made following an updated Mayoral Proposal.

The final annual budget will be adopted on 29 June, taking effect from 1 July 2023.

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