Auckland Council Annual Plan Submission

To: Auckland Council Governing Body and

Waitemāta Local Board

Auckland Council

Private Bag 92300

Auckland 1142

 

SUBMISSION TO THE DRAFT ANNUAL BUDGET 2017/18

 

Introduction

 

Heart of the City Business Association welcomes the opportunity to make this submission to the Auckland Council draft Annual Budget 2017/18. 

 

Heart of the City delivers the City Centre’s Business Improvement District (or ‘BID’) programme. 

 

This is both an inspiring and challenging time. On the one hand, significant investment in the city centre is a sign of confidence, which will lead to a much improved city centre in five years’ time. On the other hand, construction creates challenges for business, particularly those in close proximity to the works.

 

The city centre contributes significantly to Auckland’s and indeed, New Zealand’s economic output, creating nearly 20% of Auckland’s GDP (equivalent to Otago or the Bay of Plenty).  Heart of the City’s goal is to ensure the cumulative impact of change in the city centre is positive overall as it reshapes.  We will continue to support business and continue to promote the city as vibrant and exciting as the city transforms.

 

The funding for our initiatives comes from BID targeted rates, which businesses within the city centre have agreed to. In addition, CBD businesses help fund the development and revitalisation of the CBD through the $20M annual City Centre Targeted Rate.

 

As an incorporated society, Heart of the City is independent of Auckland Council and we are primarily accountable to our members.

 

Feedback

 

Your Consultation Document, Tahua ā-Tau – Annual Budget 2017/2018, seeks feedback on five main issues: (1) rates increases; (2) rating stability; (3) paying for tourism promotion; (4) paying for housing infrastructure; and (5) paying Council staff a living wage. In addition, to giving feedback on these matters, we will also give feedback on other proposed changes and the plans of the Waitemata Local Board.

 

(1) Rates Increases

 

Your Consultation Document notes that Council had previously projected an average rates increase of 3.5 per cent for 2017/2018. However, additional savings (primarily related to inflation, interest costs and the timing of capital projects) will allow delivery of the same activities for about $15 million less. This could be used to reduce the rates increase from 3.5 per cent to 2.5 per cent. There is also an option of only a 2.0 per cent rates increase. With regard to the Uniform Annual General Charge (UAGC), Council proposes this remain at a proportion of 13.4% of the general rate (and rise to $408, $404 or $402 if rates rise to 3.5%, 2.5% or 2.0%).

 

Our feedback is that there is insufficient clarity about what trade-offs are involved between the three options for general rates increases and the pause in the business differential.  Businesses need a fair and transparent approach to rates.

 

At the outset, we would have to say that your Consultation Document is not especially clear about what trade-offs are involved between the three options for general rates increases and the pause in the business differential.

 

Your Consultation Document (page 6) says that Council can deliver everything it has currently planned for a 2.5% general rates increase because you have identified $15M additional savings (primarily related to inflation, interest costs and the timing of capital projects).

 

However, coincidentally, we understand that the ‘pause’ you are suggesting to lowering the business differential will generate revenues around the level of a 1% general rates increase (or around $15M).

 

In terms of the savings, we believe there are more savings available to the Council than $15M.  As Council acknowledges, inflation rates and interest costs are forecast to remain low. The timing (or delays) in capital projects will produce savings this year. In addition, the cost index for local authorities has also been forecast to remain low. ² Furthermore, the Long Term Plan identified a range of other savings available to the Council (efficiency savings, disposal of non-strategic surplus assets, return on investments and partnering). ³ We also hold the view that cost savings could be found from across the Auckland Council Group through more integration, coordination and fewer silos within the various management structures. We would like to see more attention paid to realising these efficiencies and savings in the Annual Budget.

 

For the CBD, you will be aware that businesses make a significant contribution towards funding the development and revitalisation of the city centre through the City Centre Targeted Rate. It is estimated this will produce around $20.9M from businesses for the 2017/18 year. ⁴ The City Centre Targeted Rate has been instrumental in delivering projects such as the Myers Park upgrade, the Freyberg Place upgrade and the planned upgrade of the James Liston Hostel for emergency housing for rough sleepers and homeless people. We ask that you recognise this additional business contribution to the development and revitalisation of the CBD when considering rates increases overall.

_{1 Auckland Council Annual Budget 2017/2018 Supporting Information, page 6.}

_{2 Reserve Bank of New Zealand and BERL, Forecasts of Price Level Change Adjustors – 2015 Update: Note to Society of Local Government Managers (September 2015), page 15.}

_{3 http://www.aucklandcouncil.govt.nz/SiteCollectionDocuments/aboutcouncil/planspoliciespublications/ltp2015volume1.pdf}

_{4 http://www.shapeauckland.co.nz/media/1728/annualbudgetsupportinformation20172018.pdf (page 136).}

 

(2) Rating Stability

 

Your Consultation Document says that the Council considers that businesses should pay a greater share of rates than residential properties, but that the present share is too high and should be reduced gradually over time.  Council’s current policy is to achieve this by applying a higher than average rates increase to residential ratepayers each year, and a lower than average increase to business ratepayers. However, Council’s preferred option for this Annual Budget, to keep rates stable, is to pause the policy of gradually lowering business rates for one year. The Council also says that the reasons for the business differential are that businesses make more use of, or place more demands on, council services like transport and storm water, and are better able to afford rates as they can claim back GST and rates can be claimed as an expense against income.  

 

Our feedback is that the business rates reduction should continue without a pause. 

 

Auckland Council has already extended the period to reduce the differential between business and residential properties from 10 years to 20 years.  Currently, Auckland businesses pay 2.73 times more rates than other ratepayers do, or around $150 million more. (By comparison, Tauranga City Council has no business rates differential at all.) 

 

We do not accept the reasons given by Auckland Council that require businesses to pay significantly more rates.  Small to medium businesses make up the majority of businesses in Auckland’s CBD and businesses do not make more use of, or place more demands on, council services like transport and storm water when compared to residents.  Being able to claim back the GST on rates, or claim rates as an expense, does not justify the large business differential. The Shand Report on Funding Local Government recommended against rating differentials.

 

We also do not accept Council’s views that the variations in rates increases in recent years or the variations likely from future property revaluations will create instability such that the share of rates paid by businesses should not continue to be reduced. The Long Term Plan did not identify these issues, but instead projected that the business differential would continue to be reduced. As Auckland Council itself accepts, the present share of rates paid by businesses is too high and must be reduced over time.

 

Stability for the business ratepayer is about certainty.  Acting contrary to the agreed strategy will add cost to business and undermine confidence in Council.

 

Comparative analysis of a residential and business property of equal value $770K shows that pausing the differential reduction would mean the increase to the business ratepayer is five times more than the increase paid by the residential ratepayer if the differential is not paused.  What amounts to a small saving for the residential ratepayer has a much more significant impact on the business ratepayer.

 

Also of concern is the statement in the November 2016 Mayoral Proposal that the intention is to resume the business differential reduction when the replacement for the Interim Transport Levy is implemented in 2018 “as any replacement is expected to shift more of the burden of incremental transport investment onto business”. 

 

The business sector is a driver of economic growth and employment and any assumption by Council that costs can be arbitrarily passed on to business is extremely concerning.

(3) Paying for tourism promotion

 

Your Consultation Document says that the council currently spends around $30 million of general rates each year on tourism promotion and major events, which you say provides significant benefits to accommodation providers such as hotels and motels. To continue to support Auckland’s rapid tourism growth while keeping rates fair and affordable, Council is proposing to fund tourism promotion costs from a targeted rate on accommodation providers. If this new approach is approved, Council would create a new group including industry representatives to provide direction on how the money is spent.

 

Our feedback is that the visitor levy should not be introduced.  

Imposing an unplanned and unfair burden on commercial accommodation providers to fund tourism promotion may save each ratepayer $46 per year, but it will add tens, in some cases hundreds of thousands of dollars of costs to each provider, and have negative repercussions in the city centre and across the region.

 

We appreciate the challenges to infrastructure because of tourism growth.  However, we do not believe that raising costs for businesses in this sector is the appropriate way to address the cost of tourism promotion.   

 

Firstly, asking one sector that earns about 10% of the tourism spend, to pay the full cost of tourism promotion is plainly unfair.

 

Secondly, imposing rate increases from 150% to 300% will have a massive impact in the city centre (with some increases well in excess of $500K per annum on top of current rates and levies) and across the region.   This contradicts the Council’s view that there should be rates stability. 

 

While the impact will vary depending on circumstances, it will be significant and property owners will be given very little notice to manage this change (bearing in mind that the property owner will be charged and this may not be the accommodation provider).

 

Despite the growth in tourism, this is a competitive market and many will not be able to pass on costs (eg room rates are often contracted well in advance), which will put pressure on margins, jobs, wages and potentially viability. 

 

For those who do pass the costs on, it will impact New Zealanders as well as international tourists, as many providers have New Zealand businesses and residents as their core customer base.

 

Concerns have been raised about the impact on the tourism industry as a whole and feedback indicates it will impact on desire to invest. 

 

Furthermore, we believe the Annual Budget year is not the right time in the planning cycle to hold a discussion on a significant new policy and rating instrument. This is more properly a discussion left for the Long Term Plan.  Heart of the City would welcome the opportunity to participate in such discussions on behalf of our business members.

 

Nonetheless, we do believe that the pressure on infrastructure from increasing tourist numbers warrants urgent attention. As this is an issue that extends beyond Auckland, we support discussions with central government on a national approach to addressing this issue.

 

(4) Paying for housing infrastructure

 

Your Consultation Document says that Council needs new ways to pay for all the costs involved in unlocking additional land for houses, such as roads, drains, water supply and sewerage, without the need for large increases in general rates. At this stage, the proposal is to amend Council’s Revenue and Financing policy to allow Council to introduce a specific targeted rate in partnership with key landowners as part of a comprehensive development agreement.

 

Our feedback is that this proposal is not suitable for an Annual Budget but should properly be a discussion left for the Long Term Plan.

 

We have concerns from the information provided that this proposal has not been well developed nor properly explained to the community. While the Consultation Document frames the proposal in one way, the Supporting Information frames it differently.

 

In particular, there is discussion in the Supporting Information of overseas approaches (such as municipal utility districts, tax incremental financing and value capture mechanisms) that cannot currently be implemented by Council without central government legislation.

 

Again, we appreciate the importance of infrastructure to support growth but we believe the Annual Budget is not the right time in the planning cycle to hold a discussion on a significant new policy and rating instrument. This is more properly a discussion left for the Long Term Plan.   Heart of the City would welcome the opportunity to participate in such discussions on behalf of our business members.

 

(5) Paying Council staff a living wage

 

Your Consultation Document says that a living wage is the income necessary to provide workers and their families with the basic necessities of life. It is currently $19.80 per hour and may increase to around $20.20 per hour in 2017/2018. At present around 2,200 staff employed by the council and its substantive council-controlled organisations (CCOs) earn less than $20.20 per hour. The proposal is to introduce a living wage for Council staff without the need for higher rate increases.

 

Our feedback is that the Living Wage is more properly an issue for management and not the elected members of Auckland Council.

 

We note that the legislation establishing the Auckland Council clearly separates the roles of governance and management.

 

The Mayor and elected representatives have a governance role. It is the Chief Executive who is responsible for the employment and management of staff.

 

Although the Local Government Act requires the council to be a “good employer” and provides for the Council to adopt a Remuneration and Employment policy, we believe the level of remuneration and employment conditions of staff falls within the ambit of the Chief Executive, not the elected members of the Council.⁵

 _{5 Local Government Act 2002, clause 36A, Schedule 7.}

As outlined in the section above on rates, our attention is firmly focused on the cost effectiveness and efficiency of Council services. 

 

(6) BID targeted rates

 

Heart of the City is directly accountable and responsible to its members for the amount of our BID targeted rate and how it is expended.

 

Our feedback is that we support the level of the Heart of the City BID targeted rate set out in the Annual Budget.

 

We support the Heart of the City BID targeted rate identified in the Annual Budget. This targeted rate was discussed and agreed to at the Heart of the City members’ Annual General Meeting. We will use these funds to improve the city centre business environment and attract customers in a way that is directly accountable to our members.

 

(7) Other Changes

 

Mass transit network

 

Your Consultation Document says that Auckland continues to face serious transport access issues involving the city centre, the inner suburbs, the Airport and the South. As the population and demand for public transport increases, the number of buses and cars from those areas, which are not served by rail, will cause significant congestion and affect economic growth. Auckland Transport (AT) continues its work to determine an effective public transport solution to this issue. In 2017/2018, $40 million is budgeted for AT to progress this work. This includes • A budget of $10 million to progress investigations and design of mass transit options for Auckland’s important gateway corridors; • A further $30 million to advance opportunities for route protection and early acquisition of strategically important land.

 

Our feedback is that we would like further information on this proposal.

 

Our feedback is that there is insufficient information on what is being proposed to provide an adequate response and we would like further information. We would also like to engage with the Council and Auckland Transport on the solutions being considered under these budgets, especially any solutions affecting transport within the city centre and particularly Queen Street.  

 

SkyPath Implementation

 

Your Consultation Document says that the SkyPath is a pathway attachment to the Auckland Harbour Bridge that completes a missing link in the walking and cycling network across the Waitematā Harbour. The project would be structured as a hybrid public private partnership (PPP). The private sector would fund (by pedestrian and cyclist user charges) the construction and operation of SkyPath. On 28 July 2016, the Governing Body agreed to proceed with the SkyPath project and make a budget provision in the Annual Budget 2017/2018 and the Long-term Plan 2018-2028. This includes • $7.2 million additional capital expenditure in 2017/2018 for ancillary projects at the landings at each end of the SkyPath; and • the provision of a revenue underwrite from 2019/2020, if required, as part of the Long-term Plan 2018-2028.

 

Our feedback is that we support Skypath Implementation.

 

Our feedback is that we support Skypath as the link in the walking and cycling infrastructure across the Waitemata Harbour.

 

Collaborations on reducing homelessness

 

Your Consultation Document says that Auckland faces a significant challenge in relation to homelessness. The council will look to play a coordinating role bringing together central government agencies like Housing New Zealand, Ministry of Social Development, District Health Boards and Police with non-governmental organisations (NGOs) and private businesses to support the homeless and groups representing the homeless. A budget of $500,000 is proposed for this.

 

Our feedback is that we support collaborations on ending homelessness and improved safety in the city centre.

 

Our feedback is that we support the Council playing a coordinating role in bringing together central government agencies like Housing New Zealand, Ministry of Social Development, District Health Boards and Police with non-governmental organisations (NGOs) and private businesses to support the homeless and groups representing the homeless in an effort to end homelessness. You will also be aware that through the Auckland City Centre Advisory Board, we recently supported funding of $2M for the James Liston Hostel as a commitment from business in addressing homelessness.

 

We also support efforts to improve safety in the city centre, through the City Watch programme to enforce the Public Safety and Nuisance bylaw and greater collaboration between the agencies identified above.

 

 

 

(8) Waitemata Local Board – Key Priorities and proposals

 

In its key priorities for 2017/18, the Waitemata Local Board says it is planning to continue the following priorities: • Central City Library refurbishment • Continued delivery of streetscape improvement projects from the Newmarket Laneways Plan • Progress the Grey Lynn Park multi-purpose facility • Continue the Myers Park upgrade • Renewal of existing assets such as community facilities. The Board is also proposing the following • Complete development plans for Meola Reef Reserve and Western Springs Lakeside Park • Increase the budget for the ecological restoration of Waipapa Stream • Digitisation of the Heritage Foreshore Trail interpretative signage • Commence scoping, design and community engagement for the Newmarket Youth Space • Name two public open spaces that are currently unnamed at Freemans Bay and St Marys Bay and consider renaming Wairangi Wharf Reserve • Defer the installation of solar heating for the Parnell Baths until the renewal of the facility is complete.

 

Our feedback is that we support Waitemata Local Board – Key Priorities and Proposals that will benefit the city centre, notably the Central City Library refurbishment, the Myers Park upgrade and Digitisation of the Heritage Foreshore Trail interpretative signage.

 

(9) Waitemata Local Board – Advocacy Initiatives

 

The Board says that a key role of the local board is to advocate for initiatives that the local board may not have decision-making responsibilities or funding for in this annual plan, but recognise the value it will add to the local community. Key advocacy areas for the Waitemata Local Board are set out below with our responses. As an overall comment, we would also like to say that we would be pleased to participate in discussions with the local board about any of the advocacy initiatives of relevance to Heart of the City:

 

Board Advocacy Point	Our Feedback
Housing solution for homeless people Deliver short term housing solutions for homeless people	We support the Board’s advocacy on this issue. Heart of the City supports the Housing First approach and has supported the City Centre targeted rate contribution to the upgrade of the James Liston Hostel.  We also recognize that further short-term steps are required in the interim.
Auckland Cycle Network Completion of the Auckland Cycle Network. The completion of the Auckland cycling network will provide improved cycle infrastructure through safe, connected, dedicated cycle ways. The Auckland Plan includes a target of completing the Auckland Cycle Network by 2030.	Heart of the City continues to promote improved accessibility in and around the City Centre.
Built Heritage Acquisition Fund Support an effective built heritage acquisition fund to help save at risk buildings or other built features that have heritage merit from destruction by neglect, by purchase, short term hold or sale	We support the Board’s advocacy on this issue. Heart of the City has consistently supported a range of initiatives to preserve the City Centre’s heritage buildings and has regular contact with the owners of heritage buildings.
Restoration and protection of the St James Theatre Council provides support to the Auckland Notable Properties Trust in the restoration and protection of St James Theatre.	We support the Board’s advocacy on this issue. We have actively supported the restoration of the St James Theatre as part of the city’s arts and culture heritage.
Central and Waterfront Interceptor Complete the Central and Waterfront Interceptors at the earliest opportunity.	As New Zealand’s largest business district, it is essential that Auckland city centre has reliable infrastructure and utilities.
Localised wastewater and storm water solutions Develop and deliver localised solutions for all four catchments (Meola Reef, Grey Lynn, City Centre and Parnell/Newmarket) prior to the completion of the Central Interceptor and the Waterfront Interceptor to minimise the issue of wastewater overflows and to advocate for solutions to reduce storm water ingress and removal from wastewater network in the Waitematā Local Board area.	We support the Board’s advocacy on this issue.  As New Zealand’s largest business district, it is essential that Auckland city centre has reliable infrastructure and utilities.
Light Rail Develop light rail within the isthmus.	Heart of the City continues to promote improved accessibility in and around the City Centre.  However, we are concerned about the lack of information on what is being planned.  As the central transport hub for the region, the development of new transport infrastructure has both short and long-term effects for the city centre.  Our experience of the construction of the CRL has been that early and well-resourced development response planning is essential to avoid negative effects on business
City Centre 30km per hour Zone Auckland Transport to implement the city centre 30km per hour speed zone (as described in the City Centre Masterplan) and the Wynyard Quarter slower speed zone.	The introduction of 30kph speed limit in Queen Street has been effective in improving the amenity of the street.  We propose to seek feedback from our membership on the extension of this zone.
Additional Auckland Harbour Crossing Auckland Transport to design the Additional Harbour Crossing incorporating dedicated rapid public transport connections.	Heart of the City continues to promote improved accessibility in and around the City Centre.  As the central transport hub for the region, the development of new transport infrastructure has both short and long-term effects for the city centre.  Our experience of the construction of the CRL has been that early and well-resourced development response planning is essential to avoid negative effects on business.

 

 

 

The Association wishes to be heard at any hearings relating to the Auckland Council Annual Plan.

 

 

 

Yours sincerely,

Viv Beck

Chief Executive

Heart of the City Business Association