City of Melbourne Council has taken a $100 million hit to its bottom line as a result of COVID-19, which has plunged it into the red for the first time in 30 years.
The City on Tuesday unveiled its draft Annual Plan and Budget , which includes a $50 million COVID recovery package and targets $33 million in cost savings within the organisation.
Lord Mayor Sally Capp described it as “a recovery budget”.
She said COVID-19 has had a combined impact of more than $100 million on Council’s 2020-21 draft budget, contributing to an underlying deficit of $57.4 million, and warned that rebuilding Melbourne’s economy will take time and effort.
“The COVID-19 pandemic has hit our city hard. Business and retail have been severely impacted, tourist visitation has plummeted, and international students are doing it tough,” she said.
“This year, for the first time in more than 30 years, the budget will have a deficit. We are deliberately investing in our community now so we can support businesses and deliver infrastructure and stimulus as a platform for recovery.”
The $630 million budget also includes a $168 million infrastructure spend, $41 million for transport and $32 million for climate action.
The draft also contains $18.9 million in residential and commercial rate relief and small business grants, $17 million for the arts and creative sector and $19 million for major events and festivals.
Council has targeted $33 million in savings on contractors, consultants and administration and allocated $6 million for cleaning in public spaces.
“We are investing $6 million in extra cleaning across our public areas to improve safety and bolster community confidence as more people return to our streets, laneways and parks,” Cr Capp said.
Council has budgeted for a $28 million, or 33 per cent, drop in parking fee revenue from last year, with parking fine revenue expected to more than halve, dropping to $16 million.
City of Melbourne isn’t alone in weathering a COVID-related budget blow.
Coronavirus costs Newcastle $18 million
In NSW, City of Newcastle Council estimates the coronavirus will cost it $18 million in lost income by the end of June and contribute to an $8.33 million deficit.
Council’s March Quarterly Budget Review Statement forecasts revenue will fall by $17,849 million compared to three months ago.
The closure of a waste management centre, Civic Theatre and holiday park have all had an impact, as well as reduced dividends from Newcastle Airport.
However CEO Jeremy Bath says the organisation’s long-term financial sustainability remains sound.
“Our focus over the remainder of this year and next year will be to carefully manage our finances in order to respond to COVID-19, as well as fund projects aimed at supporting the local economy.”
Council will pursue an historic $100 million capital works program to provide economic stimulus, he said.
Drop in GDP predicted
It comes as new analysis suggests that LGAs hit by bushfires and COVID restrictions could experience GDP declines of up to almost 23 per cent.
The May 4 report by SGS Economics and Planning says bushfire-affected East Gippsland could see GDP for 2019-20 decline by $1.466 billion.
Meanwhile LGAs like Augusta-Margarget River in WA, Douglas in Queensland and Byron in NSW are likely to experience between 11 and 15 per cent decline in GDP as a result in the shutdown in tourism.
LGAs where major airports are located have also been hit hard by Covid-19 restrictions, with Hume’s GDP taking a 13.3 per cent hit ($11.8 billion) because of reduced operations at Melbourne Airport.
Melbourne, Sydney and Perth CBDs are likely to see larger declines in GDP than the national average of 6.7 per cent, SGS says, because of the loss of tourism spending and closures of restaurants, cafes and bars.
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