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 7 September 26 September 18 October Today 2 November 6 November 30 November Mayor s intent Infrastructure funding Infrastructure investment Other budget items Revaluations & rating policy Local board projects & funding Trade offs & prioritisation process Mayor s proposal Links to other workstreams Funding scenarios Funding levers Regional community & culture programmes Environmental programmes Local Board One Initiatives 11 December 7 February 28 Feb 28 Mar May 17-18 May 31 May 27 June Agree consultation items Adopt consultation document Submission process Consideration of submissions and budget items Local Board advocacy Decision on final LTP content Adoption of LTP
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
Context What are we planning for Plan for Auckland Council Long-Term Plan 10 years Plan for Auckland Auckland Plan 30 years Key challenges over next 30 years Reviewed every 3 years it is the 10-year budget of Council. Identifies Council s investments to achieve Auckland Plan outcomes. The immediate issues we will focus on Reviewed every 6 years it is the 30-year growth strategy for Auckland. A plan for Auckland, not just Council. The pathway to achieve the outcomes we want in 30 years 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. Accelerate transport Housing & urban renewal Funding for growth Outcomes we want in 2050 Belonging and participation Māori identity and wellbeing Environment and cultural heritage Sharing prosperity amongst all Auckland s success is dependent on how everyone fairly shares in Auckland s prosperity. 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. Inclusive city Water Quality in our harbours and streams Investment across the region Protect environment and respond to climate change Development Strategy Timing and sequencing of how Auckland will grow and change over time Homes and places Access and connectivity Opportunity and prosperity
Financial framework XXX Infrastructure Funding Cash operating surplus Capital revenue Asset disposal Debt Partnerships Debt to revenue <265% Cash surplus Operational Revenue Rates Fees & charges NZTA operating subsidies Dividends Funding tools Capex Funding Cost recovery Capital Costs Renewals Growth Service improvement Consequential opex Operational Costs Direct costs Interest Depreciation (non-cash) Costs of providing services & assets
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 o increases above average o increases below average rates increases above 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: o 2.5% general rates increase o LTDS continues o revaluation Category Ave general rates change Business 1.5% +2.5% Gen rates increase +0.5% LTDS -0.5% reval shift to farm/lifestyle Residential 2.5% Farm/lifestyle 9.5% Overall 2.5% Rezoning continue to be rated farm/lifestyle until developed
Revaluation Unaudited preliminary data requires VG sign-off Table shows impact of revaluation and general rates increase and LTDS Percentage change in general rates Category -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%) 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 o reflecting major wealth increases
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 o 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 10 year LTP capex programme Increased Funding Prioritisation Indicative Demand $30b 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 nonbusiness 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 nonbusiness 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 o $114 residential and $183 business o 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 o 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
Natural Environment Targeted Rate 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 o estimated 8% ($29m) of rate requirement supports private benefit o consider options for targeted rate to rural beneficiaries (analysis to be completed) Scenario C benefits fully regional Businesses have tax advantages
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
Project Process Flow Rates Fund benefits to existing properties (renewals and service level improvements) 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 DCs - price based on the planned growth projects contained in the LTP
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 Network infrastructure Stormwater playgrounds and public toilets) Development and improvement of network infrastructure, flood protection and control works including man-made and natural assets Community infrastructure Transport Community Infrastructure Development and improvement for the transport network including, walkways and cycle ways, public car parking facilities, public transport facilities and routes of all forms Development and improvement of local community halls, community centres, playgrounds, and public toilets
Areas of Benefit There are three regional breakdowns of activities: o Auckland Wide o Sub-Regional o Local - everyone is included as benefiting - medium sized areas of benefit - 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 o 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 36
Development Contributions 3. Other issues o Additional transport funding areas better link to location of payment improved price signalling more equitable o Demand factors retirement villages o Payment timing Next Steps o 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) o 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
Food waste collection Pay as you throw refuse Service Ratepayer cost impact of food waste collection incl GST 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 $117 1 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 $135 2 n/a $89 3 Total cost $237 $219 $264 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 [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 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) o $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 57