Yesterday Mayor Phil Goff released his proposal for rates in Auckland for the 2017/18 financial year, which starts on 1 July 2017. The proposal includes several things related to some of the issues we talk about that I thought I’d cover off. Firstly, though the high-level stuff.
The Mayor is proposing a 2.5% general rates increase to honour his campaign promise on rates. But given how much investment Auckland needs, especially in infrastructure that is simply not enough and so he’s also proposing a couple of new ways to raise revenue, this includes:
- Raising up to $30 million from a new visitor levy to replace ratepayer funding currently spent on attracting visitors and supporting major events.
- Introducing a targeted rate for new large-scale developments to pay for major new infrastructure, increase Auckland’s housing supply and discourage land-banking
- Government support to implement a regional fuel tax to help close the $400m gap in transport infrastructure funding identified by central government and Auckland Council under the Auckland Transport Alignment Project
- Bidding for a significant share of the Government’s Housing Infrastructure Fund
The infrastructure fund mentioned at the end is the $1 billion contestable fund that can only be used to build infrastructure for greenfield developments and is only open to applications from Auckland, Christchurch, Hamilton, Queenstown and, Tauranga. It was already assumed that Auckland would get the vast bulk of that $1 billion available. While it’s only for greenfield infrastructure, I guess it means it could just free up other council resources that can be used for non-greenfield infrastructure.
The proposed visitor levy is unsurprisingly already being opposed by the tourism industry. The paper says the council can’t levy a specific bed tax but can do something to the same effect by charging a targeted levy on accommodation providers and say indicative analysis suggests it would add $6-10 to the cost of a nights stay in a 4-5 star hotel.
While mentioned above, the discussion of fuel taxes, as an eventual replacement for the Interim Transport Levy, is only that the mayor wants to have the discussion so definitely nothing will be changing on this in the next year or two, especially given the government has been hostile to the idea. It seems a bit silly to me to then go and replace the Interim Transport Levy. While it was only ever meant to be temporary it feels like it has been effective and was also a good way for the council to ensure the funding went to areas they really wanted focused on, like public transport and cycling infrastructure. Does this also suggest that Goff won’t push for actual road pricing and stick with an easier and likely less effective fuel tax option?
The one area I did find particularly relevant to some of the discussions we’ve had is around the targeted rate for large-scale developments. Essentially for the same reason the government’s infrastructure fund exists, Auckland is expected to add about 110,000 homes to its urban edges in the coming decades and it’s going to cost a huge amount to pay for the council’s share, potentially up to $10 billion just for transport. And all of this while a lot of new or upgraded infrastructure is needed in the existing urban area too. The infrastructure needed has been the subject of the Transport for Future Urban Growth (TFUG) work. For example, here is the preferred transport network for the South showing just the major infrastructure planned.
The proposal would see a targeted rate applied to an area that is expected to developed that would help fund the infrastructure needed to service that area. The council say this has a number of advantages, including:
- increasing land holding costs, thereby weakening the incentives for landbanking
- reducing the reliance on existing ratepayers across Auckland to subsidise new housing developments
- creating a closer link between the rates paid by landowners in a specific area and the uplift in the value of their land as a result of it being available for development
- establishing a more predictable and secure revenue stream for council
It seems like a fairly elegant part of the solution to the issue of how fund that expensive and large scale greenfield infrastructure but does so by effectively increasing the price of housing in these areas which is bound to be opposed by land owners and developers. It could however also be argued that it particularly benefits those who have pushed to restrict housing development options closer to the city as their actions have helped in pushing more development to the edges and now they might not have to share many of the costs.
In addition to the proposals for what will be charged, there was one other issue of relevance to the blog in the paper under the title of other budget changes. These are potential changes that the council say don’t meet the significant and materiality thresholds but are likely to have high public interest. The item is titled Mass Transit Network.
An expanded and well-connected mass transit network is at the heart of Auckland Transport’s plans for supporting growth in existing urban and future urban areas. Auckland Transport has indicated the intention to accelerate planning and design works on routes and the most optimal mode, whether it be bus or light rail. It has also indicated the opportunity for early acquisition of strategically important properties. The debt impact is projected to be approximately $40 million in 2017/18.
Speeding up the process for these big PT projects would certainly be welcome.
What do you think of the Mayors proposals?