Council Costs Blowout

7 March 2023. Auckland Council is facing unexpected additional costs as a result of January’s weather bomb, then followed by Cyclone Gabrielle.  The cost to repair all of the damage is estimated to be $1.2 billion.

 

Capital costs form the largest part of the bill and is based on a like-for-like replacement of damaged assets. The estimate does not include any provision for enhanced infrastructure resilience or any acquisition of private properties impacted by these weather events.

 

The Council was already grabbling with how to plug a $295 million budget shortfall.

 

Just a few months into his new job the Mayor had put out for public consultation options on how he thought that budget shortfall might be filled by making internal savings and a 4.6% rate increase.

 

However, things have got considerably worse since then. Add into the storm damage costs, the announcement that the City Rail Link now requires an additional $1 billion to complete it and Council’s share of that 50/50 partnership with the Crown is $500 million.

 

When all added up, the Council was having to find $295 million in budget shortfall, but this has now skyrocketed to a staggering $2.5 billion for Aucklanders ratepayers and taxpayers.  

 

Government help is what is needed to bridge these massive numbers. But will it come?

 

To date the recovery package for Auckland’s storm damages remains unclear.

 

Mayor Wayne Brown accepts Auckland Council will have to pick up a share of the City Rail Link (CRL) project budget blowout, but says he will hold “tough” talks with the Government requesting it to pay for more than its 50 percent share because of Council’s mounting financial pressures.

 

The need for the extra money for the CRL is said to be the result of Covid. That is, time away from the CRL work site due to the lockdown rules, delays in materials due to international shipping supply chain slowdowns, inflation and increasing labour costs are all said to have escalated the project’s costs.

 

The builders of the CRL say they have had to endure two level four lockdowns, 280 days of restricted working conditions [Covid traffic light system]. They also say they lost 3.2 million building hours through illness among staff as over 800 workers on the project caught Covid.

 

In total, due to Covid-19 lockdowns and lost time, the project’s new cost have increased to $5.493 billion.

 

However, Transport Minister Michael Wood appeared to sink any hope that the Government would in fact help with the costs, announcing he wanted the payment arrangements to remain evenly split.

 

The revised completion date for the project’s stations and the supporting rail infrastructure is now November 2025.

 

The CRL should always have been a fully funded Central Government project. It is the only major rail project not to be centrally funded. It is the country’s largest infrastructure project ever undertaken. However, it will be very difficult for Mayor Brown to renegotiate any new terms.