9 Aug 2016

Risk all for fiscal: Auckland mayoral hopefuls play Russian roulette

11:20 am on 9 August 2016

Analysis - Auckland's leading mayoral contenders may have locked themselves into a game of fiscal-policy Russian roulette - there's no risk of death but high risk of embarrassment upon election.

Various denominations of coins

Money Photo: 123RF

The buzz phrase is fiscal policy, a key plank of each contender's pitch to voters, but the biggest headline in any candidate's fiscal policy is the average rate rise.

Phil Goff was the last of the "big four" to unveil his mix of capping rate rises, cost-cutting, and leaning on the government.

The problem could be the council is potentially already ahead of all four of them in the fiscal policy stakes.

John Palino leads the pack, pledging a 10 percent cut over three years. Mr Goff would cap rises at 2.5 percent, Vic Crone at 2 percent, and Mark Thomas has a multi-choice policy allowing ratepayers to select a freeze, a 2 percent rise or a 4 percent rise.

After three years, Mr Palino's plan would leave the council with $175m a year less to spend, compared with a continuation of this year's 2.5 percent.

The Goff plan is status quo, Ms Crone's would cut $7m in revenue, while Mr Thomas' would range from a $35m cut under the freeze option, to a $21m boost under a 4 percent rise.

But the candidates' boldest calls are in how much they believe they can trim from the council's budget.

This is where the greatest risk lies, in making a pledge that may prove challenging to deliver.

Most of the candidates' talk at public meetings focuses on the waste within the council, and each has anecdotes of hair-curling inefficiency.

Mr Goff is working with former deputy secretary of Treasury David Wood, and believes cuts of 4-6 percent can be made in the operating budgets, building up to savings of $72m a year.

Ms Crone has pledged $500 million over the next eight years of $62.5 million a year. Mr Palino has not committed to a figure.

Mr Thomas, the only candidate to have spent time inside the council with six years on a local board, said he could find $35 million in the first year of next term.

All said their savings would come on top of whatever the council was currently cutting, and all but Mr Palino were working off the council's 2015-25 10-year budget, or Long Term Plan.

And there's the rub.

The Long Term Plan is a statutory requirement forcing councils to plan ahead, cost their known intentions and show how they will be paid for.

Beyond the third year, the numbers are a calculated and educated guess. The guess becomes more accurate as the years roll on.

As Year 1 gets debated in the annual budget process, the political consequence of mailing the end result to ratepayers in the form of a rates bill usually squeezes the rates rise even further.

In the 2012-22 plan, councillors pencilled in this year's average rate rise at 4.9 percent.

On the day, it became 2.5 percent - admittedly with a $114 per-household transport levy on top, due to run for one more year.

Looking ahead, the Long Term Plan forsees 3.5 percent annual rises - something which history tells is a pretty soft target for a political cost-cutting pledge.

The candidates' fiscal narratives are also predicated on the council not doing enough to reduce its use of ratepayers' hard-earned money.

Council chief executive Stephen Town said $70m had been saved in the past 7 months alone, in more efficient procurement of goods and services.

That's already a faster rate of saving than Mr Goff hopes to reach by the end of the next term, and more than the average $62.5 million annual cut to "back office waste" pledged by Ms Crone.

Mr Town said the efficiency drive continued, and was still focusing on big-bang savings, with smaller incremental savings a later priority.

Political pressure to use ratepayers' money as sparingly as possible is always a good thing.

There's clearly plenty more efficiency to be found within the council and it's cluster of agencies.

Whoever becomes the new mayor may have a hard job demonstrating that they, and not ongoing work by council management, can make a difference to council efficiency.

So the question remains - when the next mayor pulls the fiscal trigger, will they fire a silver bullet or a blank?