Have Your Say for the Council Annual Budget: Why I went with the 3.5% Rates Rise

Need investment not delays and penny-pinching

 

The Annual Plan 2017/2018 (annual Council budget document) is now out for consultation until March 27. If you wish to give your input to Rates, new revenue raising mechanisms, and Local Board priorities then head over to: Annual Budget 2017/2018.

 

From Shape Auckland:

Closing date:27/03/2017

Area:Auckland wide

Contact: annualbudget@aucklandcouncil.govt.nz

Share this consultation

  • About the budget
  • Key issues on the budget
  • Local board priorities
  • Documents and tools
  • Have your say on the budget

Once every three years, we are required to adopt a long-term plan (10-year budget), and in the intervening years an annual plan, otherwise known as an Annual Budget.

The annual budget includes a Local Board Agreement for each of our 21 local boards.

Consultation on the budget this year contains a range of topics, including proposed new targeted rates, as well as a range of options for rates rises.

Consultation on the 2017/2018 Annual Budget opens online from 4pm Friday 24 February until 4pm Monday 27 March 2017.

When you have clicked through the sections above, read the documents, and are ready to comment, use the online feedback form.

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Source: Auckland Council

 

I have already filled in my submission for the Annual Plan in general as well as priorities for both Otara-Papatoetoe and Papakura Local Boards.

 

3.5% Rates rise

This Annual Plan is unusual in the fact you can select which Rates rise option you would prefer and why.

From Shape Auckland:

Part two: What we want your feedback on

Issues 1: Rates increase

Based on an assumption of further success in keeping costs low, we had previously projected that an average rates increase of 3.5 per cent would be needed for 2017/2018 to deliver our planned investments and services.

The latest review of our budgets has identified additional savings (primarily related to inflation, interest costs and the timing of capital projects) that will allow us to deliver the same things for about $15 million less. This $15 million of savings could be used to reduce the rates increase for 2017/2018 from 3.5 per cent to 2.5 per cent. Any further revenue reductions would put our AA Standard and Poor’s credit rating at risk, result in higher interest costs in the future and require decisions about reducing investment or services.

Options

Option A: Retain the previously planned 3.5 per cent average rates increase

  • residential rates would increase by an average of $1.55 per week
  • council rates revenue would increase by $53 million next year
  • we could deliver everything we currently have planned and invest more money in things like transport, walking and cycling infrastructure and sport field development.

Option B: Use the identified savings to reduce the average rates increase to 2.5 per cent.

  • residential rates would increase by an average of $1.10 per week*
  • council rates revenue would increase by $38 million next year
  • we could deliver everything we currently have planned.

Option C: Reduce some investments or services to achieve rates increase

  • residential rates would increase by an average of 90 cents per week*
  • council rates revenue would increase by $30 million next year
  • we would be unable to deliver our currently planned investments and services without putting our AA Standard and Poor’s credit rating at risk. A credit rating downgrade would result in higher borrowing costs, reputational damage and reduce access to debt markets
  • decisions would be needed about which investments or services will be reduced.

In 2017/2018 we are planning to spend $1.4 billion on building new assets to support Auckland’s rapid growth and deal with existing problems like traffic congestion. We will also spend $2.4 billion delivering a wide range of day-to-day services to Aucklanders. While inflation is one driver of our budgets, the bigger issue is the pressure of population growth and the additional assets and expanded services that this brings.

To keep rates as affordable as possible, we have been working hard to deliver these assets and services at the lowest possible cost. As shown in the following graph, our record for keeping costs down compares favourably with the other major growth centres in New Zealand.

Source: Auckland Council

 

Core operating expenditure, annual growth rate from 2012 to 2016 is 1.8 per cent for Auckland Council compared to 4.2 per cent for other major growth centres (excluding Christchurch).

The council seeks to balance its budget every year. In broad terms, we use rates, fees and charges (revenue) to pay for the services we deliver and we borrow money (debt) to pay for the assets we build. For example, we would borrow money to build a new swimming pool and we would use rates and/or entry fees to pay for the day-to-day running of the pool. In addition to balancing our budget each year, a key constraint we have is the need to ensure that the revenue we receive each year is high enough to support the debt we have taken on to finance the new assets we are building.

Source: Auckland Council

 

Where your rates go

Transport – $38 for each $100 of rates is spent on transport this includes $20 for building and maintaining roads and footpaths to support a growing and more active Auckland.

Parks, community and lifestyle – $27 for each $100 of rates is spent on parks, communities and lifestyle, this includes $7 for libraries and other community and arts facilities, community, arts and cultural grants, events and programmes.

Environmental management and regulation – $16 for each $100 of rates is spent on environmental management and regulation this includes $5 for a stormwater network that protects homes from flooding, $7 for rubbish and recycling services and $4 for regulatory activities including consenting and enforcement.

Auckland development – $8 for each $100 of rates is spent on Auckland development this includes $7 for area planning, town centre investment and police development and $1 for developing our waterfront.

Economic and cultural development – $6 for each $100 of rates is spent on economic and cultural development this includes $3 for major arts and sporting venues, the Auckland Zoo and the Auckland Art Gallery.

Governance and support – $5 for each $100 of rates is spent on governance and support this includes supporting 170 elected representatives making decisions for Auckland, grants to museums, and other regional facilities and amenities.

Water supply and wastewater – $0 for each $100 of rates is spent on Water supply and wastewater. This is funded through direct charges to provide a network for drinking water provision and wastewater collection and processing.

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Source: http://www.aucklandcouncil.govt.nz/EN/planspoliciesprojects/plansstrategies/annual_plan/Documents/annualbudgetconsultation.htm

 

Ultimately I chose the 3.5% Rates increase option which is offset when the Transport Levy disappears. Before someone from the Ratepayers Onion quips we own our own home so we pay Rates directly. We also use both car and rail so we know what the transport system is like as well.

So rather than have an allergic reaction to some increased taxation to speed up investment in transit, libraries and parks with a booming City I chose the 3.5% Rates increase option rather than procrastinate as the Auckland Isthmus did for decades (and now playing major catch up). As I see it increased taxation now to get some more parks, parks renewed, more rail stations, more trains and more bus lanes means I pay less later on in either playing catch up investment or through health costs in not having the park and transit networks available.

 

In terms of Greenfield developments:

Issue 4: Paying for housing infrastructure

All houses require roads, drains, water supply and sewerage. The council currently invests billions of dollars to provide for a growing Auckland, but this is not enough to keep up with the unprecedented demand for housing. We need new ways to pay for all the costs involved in unlocking more land for houses, without the need for large increases in general rates.

Options

Option A: Continue to only rely on existing growth changes

  • the council will continue to rely only on existing growth charges such as development contributions and Watercare’s infrastructure growth charges
  • because these charges are not applied while land is held as bare land, they do not provide an incentive for landowners to release their land for housing
  • if the council uses general rates to fund new critical infrastructure for houses, then ratepayers across Auckland will pay higher rates to subsidise these new developments.

Option B: Change our funding policy to allow for the use of targeted rates, alongside existing growth charges, to fund infrastructure for new houses

  • provides another tool (that we would use alongside development contributions and infrastructure growth charges) to help fund some critical infrastructure to enable more houses to be built sooner
  • can be implemented quickly in response to a specific development proposal
  • can provide an incentive for developers to convert land into built homes faster
  • consistent with recommendation from the Productivity Commission for councils to make greater use of this tool
  • each specific development would require full consultation with affected parties before implementation.

Option C: Rely on existing tools for now and request central government to provide new growth charges for growth infrastructure

  • legislation could be changed to allow a range of funding tools for housing infrastructure such as those used overseas (See section 2.4 of the supporting information). Key examples include:
    • Municipal Utility District bonds
    • tax increment financing
    • value capture mechanisms
  • a common feature is better alignment between who pays for infrastructure and who benefits from it, both in terms of improved services and increases in the value of land
  • legislative change and implementation would likely be complex and time consuming. Would take some time before this could start to make a difference to houses on the ground.

Our preferred option

Our preference is to act now to change our funding policy to allow for growth infrastructure targeted rates so those who benefit from the infrastructure, including those who get the resulting increase in their land values, help to pay for it, rather than the ratepayers across Auckland. We will also look to work closely with central government on possible new funding tools for the future, but we can’t afford to just wait until these are implemented.

This policy change would provide another tool that can be used to overcome critical barriers to getting more houses built right now, while also providing an incentive for developers to actually release land rather than land bank.

At this stage, we would just amend our Revenue and Financing policy.

If this policy is amended, it would give us the capacity to look at introducing a specific targeted rate by working in partnership with key landowners as part of a comprehensive development agreement. Before any decisions are made on proceeding with a targeted rate, a detailed proposal would be developed for the council to consider and full consultation with affected parties would be undertaken.

Source: Auckland Council

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Source: http://www.aucklandcouncil.govt.nz/EN/planspoliciesprojects/plansstrategies/annual_plan/Documents/annualbudgetconsultation.htm

 

While I would rather have the Government stop pissing around and stump the cash for infrastructure as they do in the Australian States I did select the Council’s preferred option.

Why?

  1. 55,000 new homes in the Southern Future Urban Zone to come on stream at an accelerated rate
  2. Need for Pukekohe Electrification and three new rail stations at a cost of $125m
  3. More bus lanes
  4. Southern Interceptor (sewer line) needing replacement at ~$700m

 

The growth is coming down this way and we need the capital to invest unless we want to be caught short as Auckland constantly is.

 

So what do you think and more to the point to not forget to submit.

No submission = not much grounds to complain later

 

budget

 

 

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