Auckland Council pays interest at $1 million per day

The Auckland Council 2013 Pre-election Report (PDF 477KB) makes for sobering reading. Especially Page 6.

Here, the CEO’s report lists the Council’s debt parameters including the fact that now, and over succeeding years Auckland’s borrowings amount to “Net interest on Council debt at 20% of annual rate revenues”.

councildebtNow that’s a lot of dosh and in understandable terms, given that current debt totals around $6 Billion, at a 5.75% interest rate this is an interest payment to the banks of just under $1 Million per day. Yes, every day.   

The table also makes a mockery of Len Brown’s claims to lower the rate of increase in rates…the table shows clearly that rates, and that is average rates i might add, are expected to rise by nearly 5% in each of the next three years.

This is the legacy of Len Brown. If you were running your household, paying interest only (no principal) at 20% ($1 in every $5) of your basic income each year and with such large daily lumps of interest would you be planning huge future capital expenditures and a doubling of the debt?

Perhaps the five Mayoral candidates might make Council debt an issue this October. I sure would.

 


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  • Euan Ross-Taylor
  • mark

    Auckland bonds look like a pretty tasty short.

  • Mr_Blobby

    Councils are like out of control communist states that need to be reined in quickly.

    Come on central Government.

    Scrap Council rates, replace it with per capita funding.

    Tell Councils that they have to live within there means.

    Ban Councils from borrowing to fund projects. Force them to plan better for infrastructure projects.

    Clearly define the responsibilities of Councils, not allow atry farty social engineering projects, like social housing, funding commercial social events.

    Say no to Councils that get into trouble and require legislation to fix up there transgressions, like illegal rates grabs.

    At the moment we are well on the way to becoming the Worlds most expensive city not the most livable.

    LBIAFC

    • Bunswalla

      I think it’s just because now that there’s a Super City i.e. only one Council instead of 20, a MONOPOLY situation now exists. These are never good, apparently.

      • Mr_Blobby

        Yes Councils by there nature are MONOPOLIES and this is not good.

        Without controls. They can spend and borrow without limit and simply pass it onto the rate payers. How many businesses in a competitive industry just pull a price out of thin air and say that is what you have to pay, or these are our extortionate terms and conditions.

        Auckland Council in particular, but by no means alone, need to brought under control, quickly.

        Under the old Council structure you had no say either they just set a price.

        • AnonWgtn

          Can go like Detroit today – BANKRUPT – US 5th largest city.

  • The other Neil

    They are actually paying $732k per day, but lets not quibble over that. The bigger issue is that they are outspending income. This is not a problem if at some point you stop spending and pay down debt, but councils don’t seem to have an appetite to stop. SO rates will rise.

    • Mr_Blobby

      I conservatively estimate that you could halve the size of Auckland Council and still easily provide the basic services.

      6-8000 employees for a city of 1 million, come on.

      • Never in the dark…..

        If one looks at the Detroit story @euan_rt:disqus alluded to, Detroit employs about 10,000 staff for a (decreasing) population of ±4.2 million.

        Push the rates too far and people will start abandoning Auckland too.

        • TomTom

          Detroit proper actually has about 700,000 people. The metro area is about 4 million.

          • Never in the dark…..

            10k+ employee count includes the greater Metro Detroit. The city itself seems top heavy at ±6.5k though.

          • TomTom

            Yes, but counting all of the employees of the suburbs is a ridiculous thing to do in the context of Auckland OR the bankruptcy of Detroit proper. You can’t say that the Detroit metro has so many staff, and therefore this was one of the contributing causes of the bankruptcy.

            Metro Detroit was growing to the 2000 census, and sometimes in the decade after, started shrinking. In 12 years, it has lost about 150,000 people. I think that’s probably attributable to the GFC where everyone realised just how shit the motor industry was and people started moving to centres with better job prospects.

            Further, I’m not sure you can compare staff counts between NZ cities and American ones. Remember that the cities there actually in some cases have to take on more responsibilities but in other cases have shedded responsibilities. For example, the school system is the responsibility of cities and counties – therefore councils would have to pay teachers. Same goes for police departments and so on.
            Another example is to look at some Texan cities like Houston where there are no zoning controls – therefore cities do not need staff to sort all that shit out so can potentially appear to have a smaller wage burden.

            However, I agree that the Super council probably hasn’t made the necessary cull yet to solidfy similar/competing positions and jobs for efficiency and output (since we haven’t heard the Greens screaming about it…) and that’s kind of a fail since that was one of the purported benefits of the Supercity

          • Never in the dark…..

            Tom, what I was trying to highlight is that the employment burden for greater Detroit is roughly 1 person per 400 citizens whereas greater Auckland employs roughly 1 person per 175 citizens.

            Which I think helps with the illustration of this thread and the short bow that Euan was drawing.

            Detroit should be a major wake up call.

      • andrew carrot

        Local Government NZ estimates that there are 25,000 council employees in NZ. 8K for Akd. and 17,000 for the rest.

  • rightoverlabour

    If they got rid of all those parking wardens…. Why do we as rate payers have to fund these parasites….

    • Jax

      In my experience they are the lower end of the gene pool with the key traits of lack of common-sense and aggressiveness. As such id imagine they are more than self funding with all the tickets they hand out.

    • Never in the dark…..

      Unfortunately in the past (pre Super City), the the parking infringement take more than justified their existence. I stand to be corrected, but at one point it was close to $12m p/a for Auckland on it’s own..

      • Phil T Tipp

        +1 and lolz. Thank you.

  • DavidW

    And of course the debt does not include the significant sums that have been sucked out of the infrastructure depreciation accounts (which unlike commercial business have to be funded annually) free of interest and never declared as borrowings as it is internal. No-one really knows how much is involved as it vanishes in the accounts.

    • Clever Harry

      Bingo! You hit the nail on the head there!
      Council don’t have to declare internal borrowing. They can take money from one part of the ledger – say capital income – and loan it to another part of the ledger to prop up shortfalls in cash derived from say rates. Rather than repay the loan they let it continue to turn over as short term loans and snowball it into a future date when the responsible parties are dead or long gone. It’s a simple trick with A backside like a fat opera singer!

  • ratesarerevolting

    Len brown is a fucking cunt !

    • Phil T Tipp

      ♫ ♬

  • cows4me

    It’s an easy fix just change Auckland’s name into Oakland and save all the grief.

  • Never in the dark…..

    Cam for Mayor!!

    Loopy Len is a tosser who needs tossing.

    • Rat

      I agree, Cameron should stand for Mayor.I’m happy to stump up with the $200 fee or what ever it is.

  • sheppy

    In a business the lot of them would be sacked for economic mismanagement.
    Wasn’t there something like a local government bill that was passed by parliament a while ago to rein in the wasteful councils?
    Come in National it’s time to tackle the wasteful, PC, idiotic councils

  • Gobsmacked

    Council are outspending income.
    That reinforces the Policy Parrot position that they are spending capital derived depreciation.
    A firm cap on what a Council can do with capital derived income must be made.
    Make them set aside cash in a sinking fund like any body corporate must do.
    Plus that $2b wage cost per year looks a trite large….

  • Clever Harry

    Fuck me sideways! That’s insane numbers. They can’t ever recover from that unless the reign in spending. Sack them all and set up corporate management of the city, tendered every 10 years to the lowest bidder like we do with some of our prisons.

    • Mr_Blobby

      Sideways and every other way.

      Don’t expect any help from DonKey his last attempt just made it worse.

  • Caulderwood

    The Council is spending as much as it earns on wages. Do they need so many staff? It’s obvious the cost is unsustainable.
    The National Government needs to step in and sack them ASaP.

  • philbest

    This debt would make some sense if it had been borrowed for spending on new infrastructure, but I suspect it is straight-out operating inefficiency that is the problem.

  • Shannon K

    If Auckland Council owes $7billion then it will be some $10-11 billion if it includes borrowing to build the tunnel to nowhere up Albert St. Combined with internal debt it must be close to or perhaps exceeding debt limits? Does anyone know?

  • LBIAFC

    If National sit on their hands and let Auckland Council continue to be out of control on spending it will find itself piking up the tab in 10 years for an insolvent local government that has spent the cash on frivolous electioneering stunts and political trinkets. Then the rest of te country will be funding Auckland’s balls up. No wonder people south of the Bombay Hills hate Aucklanders. They can smell the money being burned as they work their farms and milk the cows.

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