Once Goff opens Len’s books, the only answer will be higher rates, extra levies and more taxes

Matthew Hooton dares write what most Aucklanders really hoped wasn’t true

The former Labour leader, who is expected to win the mayoralty wearing National Party colours, will next week take the helm of another despised institution. According to Auckland Council’s own Citizens’ Insights Monitor, just 17% of Aucklanders trust the council to make the right decision on any given issue.

Worse, Mr Goff has won the position based on four fiscal promises that he knows perfectly well do not add up.

First, he has promised another $17-20 billion of infrastructure spending on top of the council’s existing estimate of $18.7 billion, for which it plans to borrow.

Second, Mr Goff has vowed not to jeopardise the council’s AA credit rating, which is under threat as debt to revenue reaches 200%, interest to revenue touches 15% and interest to rates approaches 25%. In practice, Mr Goff’s credit-rating commitment rules out any further increase in debt.

Third, Mr Goff has promised not to fund new infrastructure by selling “strategic” assets, including the $9 billion Watercare, the 22% stake the council still has in the mainly privately owned airport, and the waterfront land being used wastefully by council-owned Ports of Auckland.

Fourth and finally, Mr Goff has pledged that rates – which currently bring in just $1.5 billion a year anyway, less than half of the council’s revenue – will not rise by more than an average of 2.5% a year.

To some degree Auckland’s mayoralty is a bit of a hospital pass.  Len Brown has shackled the city to a sufficient number of long term money draining black holes that any new mayor is going to need central government help to get around the rules that are hemming any kind of creative consolidation in.  

Because Auckland’s population growth is largely caused by Wellington, Mr Goff and Auckland Council have a point when they say central government should cough up the money to support the new suburbs and transport links that are required.

But, either to his credit or just through realpolitik, Mr Goff made sure before the election to make clear he does want to look at new ways of raising revenue. His two main ideas directly target the causes of Auckland rapidly becoming dysfunctional: Vancouver’s policy of taxing foreigners buying houses and Singapore’s electronic road pricing (ERP) system.

It goes without saying that Mr Key’s government – the laziest and most visionless in nearly 50 years despite the Wellington bureaucracy reaching record levels – immediately ruled out taxing foreigners buying houses and claimed it would take a decade of policy work to study electronic road pricing.

The true motivation for the government’s inertia seems to be concerns that a property tax may anger foreign governments and immigrant political donors and that an ERP might upset Auckland voters – but both fears may be overstated. […]

Moreover, if Mr Key will not agree to empower Mr Goff to raise the revenue he needs to support the rising population his government is imposing on Auckland, then Finance Minister Bill English will have little leverage over the mayor when negotiating how the cost of major projects will be shared.

It would hardly play well in provincial New Zealand next year for Mr Key to say the government had turned down proposals by the Auckland mayor for Aucklanders to pay for new infrastructure and had decided taxpayers in Northland, Tauranga, New Plymouth and Timaru should pay for it instead.

Hooton’s put his finger on the real problem.  No matter the mayor of Auckland, the legacy left by its first mayor will be felt for generations.  Of New Zealanders.  Not just Aucklanders.

People have been asking what Len Brown’s legacy will be, and some think it will be his dogged pursuit of the Rail Loop.  I think it will be for spending all of Auckland’s money and borrowing up to the limit leaving nothing for the next generation or two other than make mayor cuts or fart around the status quo.

 

– Matthew Hooton, NBR


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