Auckland Council will approve a buy out package for hundreds of uninhabitable properties and other storm-related costs well in excess of $1 billion today that will ultimately be paid for by borrowing and future rates rises, the Herald understands.

Auckland Mayor Wayne Brown and Finance Minister Grant Robertson sealed the deal on Tuesday.

Councillors were briefed on the details yesterday and are expected to approve it behind closed doors at today’s governing body meeting.

The council has been anxious to reach a deal with the Government as early as possible to provide certainty for people in desperate situations to get on with their lives.

The Herald understands the buy out deal is the same 50/50 cost-sharing approach reached between Hawke’s Bay councils and the Government earlier this month.

The Hawke’s Bay region also received $203 million towards flood protection, and $260m for roading and bridge repairs.

The council may also cap the voluntary buy outs, which could affect clifftop Auckland homes, some of which are worth more than $10m.

To pay for its share of the buy out scheme and other costs when the council’s finances are in a dire state heading into a new 10-year budget, it is understood the plan is to borrow hundreds of millions of dollars covered by extra rate rises over the next couple of years.

Government and council contributions will be net of any insurance proceeds.

It is unclear how the council will value properties, whether it will apply a discount, and how it will treat insured and uninsured properties.

With councillors expected to sign off the storm recovery package today, the council will begin the process next month of consulting property owners whose lives have been in limbo for months.

The package will include Government money for road repairs. Photo / Alex Burton

Auckland is also expected to receive Government funding for road and bridge repairs, as well as a substantial contribution towards the council’s Making Space for Water initiative that includes buying up properties in flood-prone areas, taking out stormwater pipes, and recreating the original streams.

Category 3 homes in sites identified for “daylighting streams” will be purchased as part of the buy out programme, but the bill for purchasing other properties will be met by the council.

Areas identified for this storm resilience initiative include the Wairau Creek on the North Shore, the Waimoko, Opanuku, and Porters streams in West Auckland, Cox’s Creek in Grey Lynn, and Haranaia Creek and Te Ararata Greenway in Māngere.

When the Government first announced it was working with councils on a buy out scheme, Labour MP for Te Atatū Phil Twyford called it a win for home owners in his electorate.

Some West Aucklanders, he said, have been battling repeated flooding for years and for whom he has been asking for a buy out scheme.

Robertson, who is also the Cyclone Recovery Minister, has said category 3 houses are defined as “not safe to live in because of the unacceptable risk of future flooding and loss of life.

“Homes in these areas should not be rebuilt on their current sites.”

The Government announced on June 1 that owners of category 3 residential properties impacted by Cyclone Gabrielle and the Auckland floods would be offered a buy out option.

It said at the time those buy outs would be split between councils and the Government, a different stance to what followed the Christchurch earthquake, when the Government covered the full bill to buy out red-zoned houses.

In June, Auckland Deputy Mayor Desley Simpson estimated a $1 billion price tag for the buy out of about 700 Category 3 properties deemed unsafe to live in following the January 27 floods and Cyclone Gabrielle.

“If you say it’s 400 [Auckland homes] times $1.2 million, give-or-take just like the average house price, you’re talking half a billion dollars,” Simpson said.

“This could cost us a lot. We don’t know what the split is between the taxpayer, the ratepayer and the homeowner themselves.”

The largest cluster of affected homes is in the West Auckland suburbs of Rānui, Swanson, and Henderson. There are other clusters in Milford, Māngere, and the West Coast communities of Piha, Karekare, and Muriwai.

Also in June, Robertson said the Government has a “ballpark” figure that the buy outs could cost $1b.

Robertson has previously stated, “we know that with climate change there will be more severe weather events like this in the future” and a cost-sharing arrangement will councils would be “the basis for all future events of this type”.

The council could put a cap on payouts, affecting expensive clifftop homes. Photo / Alex Burton

‘I will be hoping it’s at least CV’

When the Herald spoke to red-stickered property owner Luci Harrison in June, after the Government and council announced a buy out scheme was in the works, she remained concerned about how much she would be offered for her house if she was bought out.

Her Parnell property was damaged after land from a council-owned reserve behind it slipped and ate away at the ground her house stood on.

“It’s a logical solution to do what they’re doing. But it all depends on the value of what the buy outs are,” Harrison told the Herald.

“Whether they’re at the rateable value or whether they are a value that has been independently evaluated - that’s going to be interesting to see what they come up with. I will be hoping it’s at least CV, which would be good. At least CV or market value.”

Last month, Aucklanders whose homes were left uninhabitable from the storms were also given rates relief for this year.

Waitakere Ranges Local Board chairman Greg Presland said at the time these residents were early “guinea pigs” for climate change and full rates relief will give them some hope.

The cost of the rates relief will be between $1.2m and $3m.

Bernard Orsman is an Auckland-based reporter who has been covering local government and transport since 1998. He joined the Herald in 1990 and worked in the parliamentary press gallery for six years.