City Rail Link: How to find $500 million in a week

Monday, 6 May 2019

Auckland's City Rail Link could cost a lot more than the original estimate of $3.4 billion.

OPINION: The seeming ability of Auckland Council executives to find $500 million in a week provides valuable household budgeting tips we can all use.

The context was the long-awaited update of the forecasted cost of Auckland's previously $3.4 billion underground rail project, the City Rail Link.

After major design changes, inflation and the construction sector turning into a 'sellers' market', the five-year-old cost forecast got bumped up by $1 billion when unveiled in mid-April.

On April 12, the project company wrote to equal partners Auckland Council and the Government to to tell them their half shares had just got more costly.

With the initial section of City Rail Link largely built under the Britomart rail station, there is no going back on the project

* Auckland councillors OK passing extra $500 million CRL cost to ratepayers

* City Rail Link - Should hindsight trump vision to get Auckland better connected?

$700 million has already been spent on the first section of the City Rail Link.

* Auckland City Rail Link project cost rises to $4.4 billion**

I have helpfully translated the council's half-billion dollar plan into everyday budgetary advice:

City Rail Link chief executive Sean Sweeney broke the news to the council and government about the $1 billion price rise last month.

DON'T SIT AROUND WAITING FOR A FINANCIAL DISASTER

Council finance officials had been tracking falling global interest rates for about a year and, as a big borrower, already had their eye on $120 million that could be saved over five years by re-negotiating cheaper loans.

In a household, it'd be like having a floating mortgage, or a mortgage ripe for renewal, when rates are falling. Grab the moment.

DOES THE 'RAINY DAY' JAR REALLY NEED TO BE THAT BIG?

The council had been keeping $100 million in a piggy bank, just in case the really unexpected happened.

It decided half of that would be enough and, if the worst happened, it could get an overdraft from the bank temporarily.

So if you've got a piggy bank of savings, but a bill that needs paying, it's OK to raid the piggy and replenish it later.

YOUR REGULAR BILLS MIGHT FALL

The council has to budget for big, long-term commitments, such as the contracts that deliver the city's bus services for up to 12 years.

When it looked closely, it realised those costs wouldn't be as big as the rough guess in the budget. Saving: $130 million.

If you've allowed $200 a month for your winter power bill, or you haven't checked whether your internet plan is still good value, you might be able to reduce your real power use and find your internet provider hasn't told you there's a better, cheaper plan.

RENT OUT THE GARAGE

The council has for years been toying with the future of the four big downtown car park buildings it owns and operates.

Letting someone else buy that business while retaining ownership of the bricks and mortar is expected to easily deliver $100 million.

You can't sell your garage to your neighbour, but if it's empty, maybe you can rent it to someone in your street? There's no time like the future.

The council expects to be able to delay $100 million of its cost-share by getting the Government to pay more of its share early.

A bit like a no payments-for-two-years car deal – though proceed with caution – you haven't got ratepayers to fall back on it you get it wrong.

LET PEOPLE BELIEVE THE DREAM

Mayor Phil Goff, with senior councillors at his side, told media officials had been given the task once the bad news was clear, and a week later the solution was unveiled.

Just quietly, the half-billion dollar wonder week was already in the bag before it started.

DON'T OVER-EGG IT

The mayor's office tried to spin the line that meeting the extra $500 million bill had not cost ratepayers any extra because rates and total borrowings had not gone up.

Don't tell friends and family that the new, big, flat-screen television was free – be honest and say you'd quietly saved up for it and given up on the hope of a future holiday in Fiji.