Auckland Mayor Phil Goff has today announced plans to raise rates by 5 per cent next year.

In his "mayoral proposal" for a new 10 year budget Goff said the one-off increase of 5 per cent from July next year would be followed by rate rises of 3.5 per cent thereafter.

The Recovery Budget as he is calling it, is a response to a $1 billion hole in the budget over four years from the impact of Covid-19 while trying to maintain and renew community assets and respond to climate change.

In a press statement, Goff was silent on whether households and businesses will also face higher water bills, which sources said could rise by 8 per cent.

"This Recovery Budget aims to meet the challenges posed by Covid-19 and the massive financial impact it has had on the city, while ensuring that the burden on ratepayers is kept as low and fair as possible.

"This not a slash and burn budget but it's also not the budget we had hoped to put out at the start of the year. We have to accept that Covid has changed our financial landscape and change our plans accordingly.

"However, we will strive to deliver the essential services that Aucklanders rely on and maintain the critical investments in the infrastructure our city needs, and which will play a vital role in stimulating economic recovery."

Goff said the budget would involve:

• Locking in savings of at least $90 million each year for the next three years
• Selling surplus properties to invest in critical infrastructure
• Temporarily increasing borrowing for the first three years, thereafter, returning to the current level
• Retaining the long-term commitment to a 3.5 per cent rates increase. To respond to the Covid-19 crisis, this proposal includes a one-off rates increase of 5 per cent to be introduced for the next financial year only, before returning to 3.5 per cent the following year

"Without a suite of measures to counter the $1 billion financial hole caused by Covid, our city will go backwards," said Goff.

"We don't want a city full of potholes and unkept parks, so we need to take more urgent action now.

"While not all Aucklanders will be thrilled with a one-off rates bump of $36, it is a one-off measure that amounts to less than 70 cents a week for the average property."

"This increase will allow us to do more in transport infrastructure including addressing road safety, further drought proof our city, continuing our response to climate change, protect our kauri trees and maintain our parks and sports fields."

The mayor said now is not the time to cut back on fixing our city's infrastructure.

"We have been catching up on decades of underinvestment through our previous 10-year Budget and were making significant progress on our infrastructure deficit. We cannot allow that momentum to be wasted."

To respond to climate change, Goff said "we are immediately stopping the purchase of diesel buses, enhancing tree planting and reducing black carbon in our city centre".

"I acknowledge that this budget will not be all things to all people. Many people would have liked to see us do more or, conversely, cut more. However, I believe we have found the right balance between ensuring our city is making the quickest possible recovery from Covid but also recognising that many Aucklanders are going through some incredibly tough times.

Last week, Goff polled councillors to read the mood on higher rates, water bills and other funding sources, like a targeted rate for climate change. He has also been pouring over the latest advice from finance officers before finalising today's proposal.