Challenging Auckland Council Growth Assumptions

I argue in this posting that rather than accept the Auckland Plan's growth assumptions as the basis and rationale for what Auckland Council does this term - these need to be challenged now.

The Mayor's direction setting paper for Auckland Council's review of its Long Term Plan was considered by Council's Budget Committee in March this year. The Mayor's paper calls for a major review of council activities, and that papers prepared in that major review are to be considered by Councillors in the build up to the draft long term plan. The mayor has indicated that he will consider officer reports that respond to his direction, and prepare from them his Long Term Plan Proposal in August this year, which it is planned Councillors will consider and adopt - as the Draft Long Term Plan - in December 2014.

That would then go out for public consultation.

The Mayor's direction includes this text:

1. This is a full review of all our budgets not just new proposals and savings targets....
2. The assumptions... of legacy organisations (old councils) can no longer be the basis... we now have a new starting point being the Auckland Plan...
3. There is no public appetite for large increases in rates or debt.... new programmes and projects will need to be funded by reviewing their relative priority against existing programmes and projects....
4. This exercise needs to be coordinated across Council and CCOs. In particular aligning our assumptions about growth, and infrastructure development to support that growth.... in a coherent manner that enables us to develop an integrated 10 year plan and budget... (bold added)

There is some general text about the Auckland Plan being the starting point, but there is this, in the Mayor's direction, about some "high level financial modelling":

....there will need to be a revisiting and updating of our assumptions around such issues as growth, interest rates, revenue from alternative funding mechanisms....

The mayor also asks for some work on PPPs. I will leave any critique of PPPs for another time. When will councillors understand the message that PPPs are just another "something for nothing" magic wand that is very high risk? Look no further than the Kaipara District Council and EcoCare.

I want to concentrate here on what the Auckland Plan means or requires, as it stands, as a "starting point" for the Council's Long Term Plan.

The Auckland Plan

This is what the Auckland Plan states:

A-1, S5: We are committed to shaping our growth to
support Aucklanders, rather than allowing growth to shape our
lives in an unmanaged way.

A-1, s37: Many Aucklanders still value the egalitarian principles that
our city and country were founded upon. However, in recent
years there has been an alarming growth in inequality and
the concentration of highly deprived communities in some
parts of Auckland. Addressing inequalities is a major focus of
the Auckland Plan. Nevertheless, we still view ourselves as
a classless society, and have a degree of access to decision
makers and figures of authority that is often not possible in
larger cities.

A-1, s 55 : Auckland’s population has grown steadily and is projected
to continue to do so throughout the period covered by this
plan. The impacts of this growth on the provision
of public services, infrastructure and our rural and urban
environments must be carefully managed, to enhance what we
value about Auckland.

A-1 Box B.2: Statistics New Zealand models three scenarios for the future
of Auckland’s population – high, medium and low growth.
Given Auckland’s history of rapid population growth,
Auckland Council believes it is prudent to base its future
planning on the high-growth scenario, and unless otherwise
stated, this model is used throughout the Auckland Plan.
The high-growth model projects a population of 2.5 million
in 2041.

A-1, 89: Further, by adopting a ‘place-based’ approach, the
Development Strategy focuses on delivering quality outcomes
by aligning investment in areas of change where the majority
of growth will occur. (Bold added)

It is unclear how the Council proposes to address inequalities as a major focus. However, the implications of the growth assumptions are summarised in a range of graphics and diagrams, and the overall Auckland Plan is that Auckland council needs to plan for (unsure exactly what "plan" entails at this stage, that's what will be coming in the Long Term Plan):

• between 280,000 and 240,000 new homes built within the Rural Urban Boundary between 2012 and 2041
• between 120,000 and 160,000 new homes built outside the Rural Urban Boundary between 2012 and 2041

The Auckland Plan continues. The graphic below shows the impact of this in terms of a massive increase in building consent and construction rates, and the text explains....

A-1, 108: Aucklanders have said they want Auckland to build on its strengths and ensure growth and change is well planned and of a high quality*. They seek a quality compact model of growth that prevents excessive expansion into our rural hinterland.

A-1, 156: These figures indicate the approximate scale of growth
needed to implement the Auckland Plan. These numbers
may be refined following more detailed implementation planning. They only apply to ‘urban dwellings’ (i.e. dwellings in rural villages, country living, and other rural areas are not included). The figures show the intention for 70% of growth to occur within the baseline 2010 MUL, and the possibility of needing 40% of new dwellings outside the baseline 2010 MUL.

Auckland Economic Development Plan
 
And then we get to the Economic Development part of the Auckland Plan, which is inextricably bound to the Population Growth assumptions. In the Economic Strategy, we have Strategic Direction 6, which includes these two targets:

1.  Improve Auckland’s OECD ranking
of cities (GDP per capita) of 69th
place in 2011 by 20 places by 2031

2.  Increase annual average real GDP growth from 3% p.a. in
the last decade to 5% p.a. for the next 30 years

369_ Measured internationally, Auckland’s performance is
relatively poor: it is ranked 69th out of 85 metro regions in the
Organisation for Economic Co-operation and Development
(OECD) in terms of GDP per capita. New Zealand’s economic
performance has declined relative to other OECD countries
in terms of GDP per capita to its position at 21st, but has
stabilised at around 80% of the OECD median.

370_ Auckland’s relative size is a disadvantage, because
the scale of cities affects output per capita and levels of
productivity.

The graphic to the left is from the OECD's report which compares 78 metro regions. It is a slightly earlier version than used in the Auckland Plan - but that has little effect on what I write here.... take a look at the graphic.... look for Auckland.... you will find it right at the bottom. It is the smallest city region in the sample.

The 400+ page report that is wrapped around the data contains a number of points that seem to get ignored in the excitement of growth:

At first sight, the relationship between population size and income is not a straightforward one. One of the most important features claimed for urban economies, including metro-regions, is their capacity to concentrate population that nurtures the development of a pooled labour market, as well as human and physical capital, income and infrastructure besides cultural and recreational amenities. However, an initial look at the data for OECD metro-regions does not support this argument; if anything, there is a slight negative association between the size of a metro-region and the income of its inhabitants. (Pg. 50)

In fact, bigger may mean richer until congestion reaches a certain level. It can be argued that in mega-cities, income is affected by population size, probably as diseconomies of scale and congestion costs appear. Congestion costs seem to outweigh centripetal forces after a certain critical value that can be regarded as a threshold.(Pg. 51)

Although most metro-regions appear to be characterised by high concentrations of wealth and employment associated with leading sectors and the focal points of their national economies, they also tend to concentrate a high number of unemployed residents. (pg 76)

The point being made in the OECD report about competitiveness of city regions is that it is NOT necessarily the case that bigger means more GDP/capita. The selective use of the OECD data in the Auckland Plan is all part of an unquestioning push for growth at all costs - especially if many of the costs (eg growth related infrastructure) can be born by Auckland Council and the ratepayer.

Another player in this discussion is Central Government. It is looking closely at how Auckland can become part of New Zealand's economic "growth engine" (alongside the dairy industry and the earthquake recovery industry). Ministry of Economic Development has produced a report exploring Auckland and which investigates a number of economic development indicators. It takes OECD data and applies its own local knowledge. This graph for example: "Auckland had a relatively high average annual population growth rate between 2005 and 2010, at 1.6 percent. Between 2002 and 2007, Auckland had the third highest average annual population growth rate of the sample of 78 OECD metropolitan regions."

And in relation to this graphic: "Auckland has one of the highest proportions of its population comprised of overseas-born residents, just behind Toronto and Vancouver."

Concluding Remarks

The seeds of the Auckland Plan are beginning to take root in the Long Term Plan. This is a problem because the Auckland Plan assumes and presumes that all growth in Auckland is good growth, and that it is going to be good for us all. But is it? Is bigger necessarily better? (The OECD analysis raises important questions about this - notably for Auckland with its peculiar congestion problems stemming from unusual geography). And even if it is, what is the justification for Auckland Council budgeting and raising rates to build the infrastructure apparently needed for all the new houses, and in effect subsidising growth. The Auckland Plan growth assumptions: high population growth scenario and 5% compound GDP growth are driving Council policies and budgets that will be ruinous.