Long-term Plan 20182028 Rates issues Agenda for todays workshop 1. - - PowerPoint PPT Presentation

Long-term Plan 2018–2028 Rates issues

Agenda for today’s workshop

• 1. Introduction
• 2. Revaluation and transition – (Valuer-General on 21 November)
• 3. Infrastructure funding
• Transport funding
• Water quality targeted rate
• Environment targeted rate
• Development contributions
• Infrastructure/growth targeted rates
• 4. Other rating policy issues
• Waste management targeted rate for food waste collection - Papakura
• Application of APTR to online sector
• Governance framework review – local targeted rate pilot
• Local targeted rates – local board project funding
• Other rates issues

Process reminder

Mayor’s intent Infrastructure funding Infrastructure investment Other budget items Revaluations & rating policy Local board projects & funding Mayor’s proposal Trade offs & prioritisation process 26 September 18 October Today 6 November 30 November 7 September

• Local Board One

Initiatives

• Regional community

& culture programmes

• Environmental

programmes

• Funding scenarios
• Funding levers

Links to other workstreams

Agree consultation items Adopt consultation document Submission process

Consideration

• f submissions

and budget items

Local Board advocacy Decision on final LTP content Adoption of LTP 11 December 7 February 28 Feb – 28 Mar May 17-18 May 31 May 27 June 2 November

Purpose for today’s workshop

• Understand and discuss choices and trade-offs for rating and

infrastructure funding issues

• Decisions on rating and infrastructure funding will be made in May

2018

High population growth

Auckland is growing fast. We need a plan for where and how people live and how they access jobs , facilities and services.

Greater environmental pressure

The natural environment is one of the most valued part of Auckland’s identity. The way we grow must protect, sustain and enhance our environment.

Key challenges over next 30 years

Sharing prosperity amongst all

Auckland’s success is dependent on how everyone fairly shares in Auckland’s prosperity.

Auckland Plan

30 years

Reviewed every 6 years it is the 30-year growth strategy for Auckland. A plan for Auckland, not just Council.

Plan for Auckland

Development Strategy

Timing and sequencing of how Auckland will grow and change over time

Outcomes we want in 2050

• Belonging and

participation

• Māori identity and

wellbeing

• Environment and cultural

heritage

• Homes and places
• Access and connectivity
• Opportunity and

prosperity

The pathway to achieve the outcomes we want in 30 years

Context | What are we planning for

Long-Term Plan

10 years

Reviewed every 3 years it is the 10-year budget of Council. Identifies Council’s investments to achieve Auckland Plan

• utcomes.

Plan for Auckland Council

Accelerate transport Housing & urban renewal Protect environment and respond to climate change

The immediate issues we will focus on

Inclusive city Funding for growth Water Quality in our harbours and streams Investment across the region

Financial framework

• XXX Infrastructure Funding
• Cash operating surplus
• Capital revenue
• Asset disposal
• Debt
• Partnerships

Operational Revenue

• Rates
• Fees & charges
• NZTA operating subsidies
• Dividends

Operational Costs

• Direct costs
• Interest
• Depreciation (non-cash)

Capital Costs

• Renewals
• Growth
• Service improvement

Funding tools Costs of providing services & assets Consequential

• pex

Debt to revenue <265% Cost recovery Cash surplus Capex Funding

Revaluation and transition

Revaluations 2017

• The revaluation is a mass appraisal valuation of 540,000 properties undertaken

for rates purposes

• The valuations are based on market sales as at 1 July 2017
• The valuations will take into account the Unitary Plan zonings
• The values must be approved by the Valuer-General before they are able to be

used for rating purposes

• 2017 Revaluation is due for publication in November 2017
• Property owners can object to their valuation
• The values will be used to assess rates from 1 July 2018
• Revaluation doesn’t impact on the total amount of rates collected by Auckland

Council

Revaluation

• Triennial revelation ensures equity
• Same value properties pay the same rates
• Properties pay a share of rates based on their valuation
• Increases in value don’t necessarily mean an increase in rates
• increases above average

rates increases above average

• increases below average

rates increases below average

• Relative business and residential farm/lifestyle movements insulated within

groups

Business 32.4 per cent of rates Residential and farm/lifestyle 67.6 per cent of rates

Revaluation

• Average rates change assuming:
• 2.5% general rates increase
• LTDS continues
• revaluation

Category

Ave general rates change

Business 1.5% Residential 2.5% Farm/lifestyle 9.5% Overall 2.5%

+2.5% Gen rates increase +0.5% LTDS

• 0.5% reval shift to farm/lifestyle

Rezoning – continue to be rated farm/lifestyle until developed

Revaluation

• 78% ratepayers changes within + or – 10% or $235 per year or $5 per week
• Some large increases reflect house builds on vacant land
• Some movements resulting from rezoning
• reflecting major wealth increases
• Unaudited preliminary data – requires VG sign-off
• Table shows impact of revaluation and general rates increase and LTDS

Category Percentage change in general rates

• 20%<
• 20% to
• 10%
• 10% to

2.5% 2.5% to 10% 10% to 20% >20% Residential 5,000 (1%) 16,200 (3%) 213,500 (45%) 155,600 (33%) 63,700 (13%) 19,300 (4%)

Revaluation and transition

• Caps on rates decreases cannot pay for caps on rates increases – requires

legislation change

• Unique circumstances of amalgamation provided for rates transition
• Option 1 – remit increases over 10 per cent until next revaluation for residential

and farm/lifestyle only

• average additional rates increase for all other res & farm ratepayers by 2.5%
• increases average rates until finished, cost reduces each year
• Option 2 – remit increases over 20 per cent for 2018/2019 for residential
• increases rates for all other ratepayers by further 0.6%
• 273,000 residential ratepayers with increases above average (2.5%)

No transition

• All changes occur in 2018/2019
• similar value property similar rates
• No cost to other ratepayers
• Rates postponement available to residential ratepayers
• Rate rebate available for low income ratepayers
• From 2019/2020 changes only driven by underlying rates increases (plus LTDS)
• No ongoing issues with increases in excess of headline rates increase

Infrastructure funding

Infrastructure funding options

• XXX

Current Capacity

$20b

Indicative Demand

$30b

10 year LTP capex programme

Increased Funding Prioritisation

Targeted rate and DC options to increase funding

• Transport:

an extension/replacement of the Interim Transport Levy

• Water quality: a regional rate to deliver improvements
• Environment:

a regional rate for environmental outcomes

• Housing:

Development contributions and targeted rates in specific development areas – beneficiary pays

• Open space:

Changes to DC prices to recover increase in investment

New targeted rates

New targeted rates

• Additional funding considered for:
• Transport (replaces ITL)
• Water Quality
• Natural Environment

1. Should ratepayers bear additional costs for increased investment?

• key question for consultation
• present project benefits relative to costs

2. Should this be funded from general rates or a targeted rate applied across the region?

• targeted rate provides for more transparent decision making (can only be used to fund

the projects it was raised for)

3. How should the rates requirement be shared across the region?

• Region wide targeted rates preferred to localised as everyone benefits

New targeted rates

4. How should the rates requirement be shared between the business and non- business ratepayer groups?

• Does one group receive more benefit or impose more costs in relevant service

areas?

• Are rates more affordable for some ratepayer groups?

5. How should the rates requirement be shared within the business and non- business ratepayer groups? − Fixed charge means higher value properties pay the same as lower value − Capital value means lower value properties pay less than higher value − Mix of fixed and capital value

Transport funding

Transport funding

• Earlier workshops highlighted significant gap in transport funding

capacity

• Interim Transport Levy expires this year – raised $60m p.a.
• Potential replacement by regional fuel tax
• Extension vs replacement
• extension – specific period awaiting road pricing
• replacement – permanent - could restructure burden sharing

Transport funding: issues

• Funds transport activities across the region
• Current ITL
• $114 residential and $183 business
• AP 16/17 feedback - higher business share – 43% for and 38% against
• Businesses place more demand on transport system

‒ larger businesses tend to place more cost on transport system

• Businesses have tax advantages

Water Quality Targeted Rate

Water Quality Targeted Rate

• Auckland’s water ways are polluted

− many are unsafe after storm events − some beaches and streams are permanently closed

• Caused by

− run-off from roads and impermeable surfaces (buildings, driveways, carparks, hard landscaping) − overflows from combined stormwater/waste water services − ageing/unmaintained onsite waste water systems (septic tanks etc) − livestock and fertiliser runoff

• $400 million over ten years to deliver following projects ($40m p.a.)

− stormwater upgrades in the Western Isthmus − infrastructure for stormwater contaminant removal across the region − rehabilitation of urban and rural streams − regional septic tank monitoring

• Alongside this Watercare will be upgrading its waste water network in the Western

Isthmus

Water Quality Targeted Rate

• Stormwater/Water quality currently general rate funded
• Large additional investment in central area

‒ brings up to standard already funded elsewhere

• Other investment spread throughout the region
• Investment results in increased water quality across the region
• everyone benefits
• Businesses contribute to higher stormwater run off due to higher impervious

surface areas

• Not technically or economically feasible to charge on impervious surface area
• Businesses have tax advantages

Natural Environment Targeted Rate

Natural Environment Targeted Rate

• Auckland’s natural environment in decline:

‒ native plants, birds, and reptiles nationally threatened ‒ shore and sea birds face extinction ‒ Kauri dieback – risk of extinction ‒ exotic plant species crowding out native species ‒ weediest city in the world – cost economy an estimated $1.2bn a year in reduced animal production

Scenario: B: PROTECTED AND ENHANCED PRIORITY AREAS AND SPECIES C: SLOWED DECLINE Total spend $453 million $220 million Additional funding rate requirement $356 million $123 million

• Environmental Management currently general rate funded
• Investment spread throughout the region
• Enhanced environmental outcomes benefit everyone
• Scenario B -rural possum control boosts farm animal productivity
• estimated 8% ($29m) of rate requirement supports private benefit
• consider options for targeted rate to rural beneficiaries (analysis to be

completed)

• Scenario C – benefits fully regional
• Businesses have tax advantages

Natural Environment Targeted Rate

Development Contribution

Overview

• Purpose of development contributions
• Recover the planned cost of growth
• Growth pays for growth i.e. developers
• Alternative is that the costs would fall on current and future rate payers
• Policy issues

Policy and planning

Define service standards and identify delivery gaps Forecast scale and location of growth

Projects / LTP

• identify capital projects to maintain service

standards and meet needs of growth

Project Process Flow

DCs

• price based on the planned

growth projects contained in the LTP

Rates

Fund benefits to existing properties (renewals and service level improvements)

Activities to be funded by development contributions

Class Activity Activity description Reserves Reserves – Acquisition Land acquisition for public open space of all types from small local parks to large regional parks Reserves – Development Development and improvement of local parks, local sports parks and other local open space areas (in some cases this may include playgrounds and public toilets) Network infrastructure Stormwater Development and improvement of network infrastructure, flood protection and control works including man-made and natural assets Transport Development and improvement for the transport network including, walkways and cycle ways, public car parking facilities, public transport facilities and routes of all forms Community infrastructure Community Infrastructure Development and improvement of local community halls, community centres, playgrounds, and public toilets

Areas of Benefit

• There are three regional breakdowns of activities:
• Auckland Wide
• everyone is included as benefiting
• Sub-Regional
• medium sized areas of benefit
• Local
• small areas of benefit
• 26 funding areas for Parks and Community Infrastructure (including Auckland

Wide)

• 35 Stormwater funding areas
• 5 Transport funding areas (including Auckland wide)
• Development Contributions are assessed by location
• ensures developers pay based on the costs in their area

How DCs are Calculated

• Development contributions can only fund the ‘growth’ proportion of a project or

programme of works

• Each project or programme of works is therefore assessed for:

– Level of Service (what improvement it provides existing residents) – Renewal (what part, if any, is a renewal of existing infrastructure) – Growth (what proportion is for new development)

• The Growth level makes up the contribution charge

Project Example

• $50 million Stormwater Project
• Assess who benefits from project - 50% growth
• Development contributions will fund $25 million of the project
• The $25 million is then split into the funding area(s) of benefit
• Each funding area is proportioned a number of potential growth units (HUEs) for

the LTP – e.g. 10,000 HUEs

• The project will then split the total cost between this projected total to get a per

HUE charge

• $25,000,000 / 10,000
• $2,500 per HUE

Development contributions changes

1. Investing more: more spend = increased price 2. Concern about parks investment: pricing tools 3. Other issues

• 1. Investing more
• Increased investment will mean higher price

− Average − Some greenfields

Development Contributions

• 2. Concern about parks investment: pricing tools
• Additional parks driven by planning and limited by borrowing
• choice of pricing tool doesn’t impact on parks investment
• moving to 7.5% of land value without increasing investment means

early developers pay more later developers free ride

• Reserve price calculation – just a tool
• limited to 7.5% of land value
• current DC equivalent to 3.5 - 4.0% of land value
• need to be able to forecast land values of new developments over

10 years to forecast revenue levels

• additional cost of valuations for charging

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Development Contributions

• 3. Other issues
• Additional transport funding areas

− better link to location of payment − improved price signalling − more equitable

• Demand factors – retirement villages
• Payment timing

Next Steps

• Consultation on development contributions policy separate from LTP

but aligned to budgets − Report February 2018 − Consultation March 2018

Growth infrastructure targeted rates

Growth infrastructure targeted rates

• Possible growth targeted rates
• Still awaiting information to support decision making
• Require quality information on cost and distribution of benefits
• Can consult later but must be implemented as part of LTP
• Whenuapai and Redhills – potential link to Housing Infrastructure Fund and

coordination of developers collector road investment

Other rating policy issues

Other rates policy

• Amendments and refinements to existing policies

− Address service expansion − Ensure equity − Implement new policies − Legislative reviews

Waste Management and Minimisation Plan

Food waste collection Pay as you throw refuse

• WMMP – adopted in 2012 - standardised
• Inorganic - annual on property collection
• Recycling – fortnightly bin collection
• Next steps
• Food waste collection (urban residential)
• Papakura 2018/19, region wide 20/21
• Refuse – kerbside bins
• Pay as you throw refuse (to be introduced to ACC, MCC 20/21)
• Funding consultation
• Targeted rate for food waste collection - $67 incl. GST
• Pay as you throw bin tags - $3.80

Ratepayer cost impact of food waste collection incl GST Service 2017/2018 Papakura, North Shore, Waitakere, Franklin, Rodney 2017/2018 Auckland, Manukau Future waste collection Base service (recycling and inorganic) $102 $102 $108 Standard refuse targeted rate n/a $1171 n/a Food waste n/a n/a $67 Total Rates $102 $219 $175 Refuse – pay as you throw Bags 17/18 and bin tags from 18/19 $1352 n/a $893 Total cost $237 $219 $264

[1] Ratepayers can request a larger bin for an additional rates charge of $55 per annum. [2] This is the current average cost per household which uses the council’s bag pick up service [3] Expected cost based on the change in refuse disposal in the food waste pilot area on the North Shore.

Food waste collection Pay as you throw refuse

Change in rates

• +$73 - Papakura, North Shore, Waitakere, Franklin, Rodney
• $44 - Auckland, Manukau

Net change in total cost

• +$27 - Papakura, North Shore, Waitakere, Franklin, Rodney
• +$45 - Auckland, Manukau

Food waste collection Pay as you throw refuse

• Targeted rates preferred to general rates
• beneficiaries and drivers of cost pay
• consistent with funding of recycling and inorganic collections
• General rates
• reflects wider community benefit of reduced waste to landfill but

businesses and farm/lifestyle pay for a service they don’t receive

• User pays
• Appropriate for refuse to incentivise reduction in waste
• Inappropriate for food waste as would discourage use of service

Accommodation Provider Targeted Rate

Applying APTR to online providers

• Traditional accommodation providers pay business and APTR rates, online

providers pay residential rates and no APTR

• APTR funds 50 per cent of ATEEDs visitor attraction and major events
• Budget 2018/2019 ? ($13.45m for 2017/2018)
• Treating online providers as business doesn’t add revenue
• reduces burden on traditional providers and other businesses
• Issues impacting on APTR 2018/2019
• Online providers added?
• Remissions policy
• New hotels opening

Applying APTR to online providers

• Different websites eg: Airbnb, Bookabach
• Different service offerings - onsite host and entire residences
• Airbnb 2017 data shows
• listings increased from 7,075 to 18,010 over 12 months
• $82m revenue (11% of traditional sector)
• $47m or 6% of traditional sector for providers who have been listed for at

least 12 months

• 400,000 nights booked pa (affordability)
• 1,260,000 nights available pa (intention)
• 32% average occupancy

Applying APTR to online providers

• Other councils
• Rotorua: <100 days = residential, > 100 days = business
• Queenstown: < 28 days = residential, 28-90 days = mixed use (25-35%

increase), >180 days = business

• Issues
• Operating as business = APTR (zones A&B only) + business general rates

(region wide)

• Onsite host vs entire residence
• Owners intention and affordability of rates
• Hard to identify from available information
• Governance representation

Applying APTR to online providers

• Officers recommend treat online providers as business for rating purposes
• entire residences only - onsite hosts excluded
• differentials based on booked days pa
• Low (<28 days) – 100% residential
• Med (28 to 90/180 days) – mixed use (25%-50% business)
• High (>90/180 days) – 100% business
• Some tidy up work for existing serviced apartments
• Next steps
• targeted consultation with affected parties as part of LTP
• workshop on identification approaches (early 2018)

Local Rates Pilot

Optional local rates pilot

• “officers report back to the governing body with further advice on the merits and

implications of running an optional pilot for local rates through the 2018- 2028 Long-term Plan process”

• Running a pilot would require an amendment to the LBFP
• managed through consultation on LTP
• Options:

A) Local rates solely for LB’s in pilot – equity issues B) Local rates for all LB’s – communications issues

Optional local rates pilot

Rates impact

Local board Option A Option B Franklin 17% 4% Manurewa 20% 5% Rodney 19% 5% Waiheke 35% 20% Other LB's

• 3%
• 1%

Optional local rates pilot

• Other issues:

− additional cost for officer support – not yet determined − mitigation or rates impact − phase over 3 years − continue to fund some costs from general rates – dilutes link to decision making − LTP timing doesn’t allow engagement with LB’s on pilot options − LBs should given opportunity to have their views considered − Impacts on LDI allocation and LDI transition mechanism − Duration of pilot and what happens when it finishes

• Officers recommend GB rule out a local rates pilot due to equity and

communications issues

• If GB wish to procced, suggest progress as part of AP 2019/2020

Other rating matters

Local targeted rates

• 2 possible local board targeted rates
• Still awaiting information to support decision making
• Require quality information on cost and distribution of benefits
• Can consult later but must be implemented as part of LTP
• Rodney transport – support from local board plan process
• Franklin – sports field development

Review of remissions

• Review of remission and postponement policy

− transfer to grants with 3 year guarantee (or till sale) − primary impacts − community and sports clubs − natural heritage average − administered by GB or LBs if they wish − Reporting (LBs first, Dec, then GB Feb)

• New remission for APTR

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