Archive | Finance

Infrastructure funding requires most scrutiny in mayoral budget

Auckland Council moves forward on Monday with approval for public consultation of the mayor’s budget & long-term plan proposals, as altered in a committee meeting then signed off by the council’s governing body on Monday afternoon.

The documents still have some way to go before being implemented, which will happen on 1 July 2018, days after the final council signoff.

The mayor, Phil Goff, unveiled his proposals a week ago and the detail is all contained in the agenda for Monday’s finance & performance committee.

I’ve entered the many links below, including:

  • the proposals for improving water quality – forever underbudgeted
  • how he proposes to tax non-hotel short-term accommodation providers
  • a proposal to eliminate Auckland Council Investments Ltd, one of the council-controlled organisations devised when then-Act Party leader Rodney Hide, as local government minister, looked for ways to separate council & policy from commercial business management
  • waste management service charges, and
  • finance growth infrastructure.

Auckland Council Investments (ACIL) owns Ports of Auckland Ltd on behalf of the council, and also holds the council’s 22.3% shareholding in Auckland International Airport Ltd. Mr Goff says in his proposal the council could save $1 million/year of opex, but would first need to clarify port company & council roles.

Growth infrastructure funding requires careful scrutiny

The most startling event in all of this comes under the low-key title of “finance growth infrastructure”.

A better system than the old one-off local authority bond issues came in 2009, when the Local Government Funding Agency was formed, and it now has billions of dollars of bonds listed on the NZX to support activity by various councils.

Even so, Auckland Council has been hamstrung for the last 2 years after getting perilously close to its debt ceiling, but with no solution in sight to mounting infrastructure requirements.

The previous government helped out with its Housing Infrastructure Fund, but that never looked like an ongoing, considered solution.

In the mayor’s proposal now, the specific example given for support through the infrastructure partnership model (with the Government) is Watercare’s $1.1 billion Central Interceptor wastewater project, which would facilitate isthmus intensification while also reducing overflows into the harbours.

As with some other mayoral proposals, targeted rates are a preferred option. Making land more useable is one reason for a targeted rate, but making the harbours cleaner redirects the benefits.

This makes it critical that Auckland residents examine how & why funding should be provided, and whether people targeted with project-specific rates will have an option to contest imposition of both the bill & the project.

Agenda items, Auckland Council finance & performance committee, Monday 11 December at 9.30am, Town Hall:
9, 10-year budget 2018-2028 – process overview
Attachments
10-year Budget 2018-2028 – roadmap
10, 10-year budget 2018-28 – mayoral proposal items for consultation
Attachments
Mayoral proposal – 20-year budget 2018-28
Transport funding
Transition policy [published separately]
Water quality improvements programme
Natural environment initiatives & funding
Rating of online accommodation providers
Auckland Council Investments Ltd review
11, 10-year budget 2018-28 – other matters for consideration
Attachments
Waste management service changes
Regulatory fees & charges
Land advisory fees & charges
Business improvement districts (bids)
Rodney Local Board transport targeted rate
Panuku programme options
City centre timing & 2021 events
Non-strategic asset sales
Coastal management
Financing growth infrastructure
12, Local rates pilot

Attribution: Council committee agenda.

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Goff focuses on infrastructure – traffic, housing, and including water quality

Auckland mayor Phil Goff unveiled his proposed 10-year budget yesterday to a mostly welcoming council chamber.

He’s focused on increasing infrastructure spending to ease traffic congestion, improving housing affordability and cleaning up water quality in streams and on beaches.

The average rates increase would be 2.5% for each of the next 2 years, rising to 3.5% for the following 2 years.

“This 10-year budget will see Auckland Council’s transport infrastructure spend increase to $11 billion over the next decade. The investment is critical to ensure our city, with increasing population and cars on the road, doesn’t grind to a halt.

“We’re working with Government to introduce a fairer revenue source in the form of the regional fuel tax. This means we can remove the $114 interim transport levy, which doesn’t raise enough money and is unfair in how it impacts on retired folks and others who make less use of our roads.

“Accelerating investment in our transport network is critical to address congestion and to allow the development of brownfield & greenfield sites to increase the supply of housing.”

The budget proposal will go through 2 council workshops before approval on 11 December of the document to go out to consultation. The consultation period will run from 28 February-28 March, the final budget will be endorsed by the council at the end of June and it will come into effect on 1 July 2018.

Link: Auckland Council’s 10-year budget proposal

Attribution: Council committee meeting & council release.

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Council valuation shows outer suburbs hit harder this time

Outer suburbs have captured more of the rise in Auckland’s property values in the latest 3-yearly valuation, dated 1 July and released (in broad terms) yesterday.

As it’s the value movement compared to what’s happening in other suburbs that determines whether the share of rates rises or falls, that means it’s the outer suburbs that are more likely to face higher rates increases.

That’s in contrast to the 2014 valuation, when residents in central suburbs were up in arms at facing a bigger increase in rates bills because their property values had taken a hike.

Property owners will receive their valuation notices from Auckland Council in the mail or via email from next Monday, 20 November.

The average rise in Auckland property values across all market sectors since 2014 was 45%. For residential it was 46%, commercial 43%, industrial 47%, lifestyle properties 57%, rural 35%.

Auckland Council chief economist David Norman said the rise in residential values reflected at least 3 things: “First, Auckland’s strong population growth over the last 3years has not been matched by increases in the number of new houses being built, and this has pushed prices up. Second, record low interest rates have allowed people to bid up prices to secure somewhere to live because housing has been in short supply. And third, the unitary plan has added a lot of value to properties that can now carry higher intensity residential development than before.”

Mr Norman said the largest movements in the outer suburbs appeared to be a result of higher demand in areas where property was less expensive.

Local board areas with the largest movements – an average over 45% – are in Waiheke, Otara-Papatoetoe, Papakura, Mangere-Otahuhu, Manurewa, Henderson-Massey, Maungakiekie-Tamaki, Franklin, Howick, Rodney & Upper Harbour.

Movements within the remaining boards ranged between 11-44%.

The rates impact

Auckland Council head of rates Debbie Acott said a big increase in property value wouldn’t necessarily mean a corresponding increase in rates: “We expected to see an increase in valuations since the last revaluation in 2014, so movements in the 40-50% bracket really aren’t a surprise.

“Generally speaking, the values in Auckland’s outer suburbs appear to be catching up with the 2014 revaluation.

“Areas that increased the most in the last revaluation – by & large central Auckland – are now moving roughly along the average. Those that didn’t last time – mainly outer Auckland – are the ones with the highest increases this time.

“Property valuations are used to help us work out everyone’s share of rates – they don’t mean that we collect any more money. However, we won’t know the impact of this revaluation on rates until we agree our next budget in 2018.

“Because of Auckland’s dynamic property market, and valuations only capturing a moment in time, they should not to be viewed as current market value.”

The council revalued 549,000 properties, including every piece of land except roads & waterways.

Individual property data will be available from next Monday, 20 November, at the Auckland Council website.

Before valuations are finalised, they have to be approved by the Valuer-general, who’s responsible for authorising rating valuations for the Government.

Auckland Council uses capital value, or CV, as its rating valuation method, measuring the likely price the property would have sold for on 1 July 2017. The new values will be used to help set rates for the 3-year rating period beginning on 1 July 2018.

The council didn’t mention it, but many people refer to the council valuation as CV as if it’s a valuation that’s updated outside the rating valuation process.

Links:
Individual property data
Indicative residential average change in capital value since last revaluation
Notes to indicative residential average change

Earlier stories:
29 June 2015: 2% get big rates hike, 22% get cut
25 June 2015: Council approves rates, transport levy & long-term plan after 2 close shaves
23 June 2015: Flurry of targeted rates will distort rates bills
19 November 2014: Council will recommend end to rates caps, but the vote was close
8 November 2014: Brewer pushes for higher uniform charge in rates bill
6 November 2014: 3.5% average Auckland rates rise now proposed
20 August 2014: Auckland valuations used as rates basis rise average 33% in 3 years

Attribution: Council release.

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Council accounts show revenue & assets up, net debt below forecast

Auckland Council released its unaudited financial results for the June year to the NZX yesterday (because the council has listed debt securities), with more detail to come in 4 weeks.

The deputy auditor-general will complete the audit and issue an audit opinion on 28 September.

Group highlights include:

  • Revenue up 11% ($424 million) to $4.129 billion, ($3.705 billion in 2016), including
    • Rates $1.641 billion ($1.564 billion)
    • Fees & user charges $1.193 billion ($1.083 billion)
  • Operating surplus $340 million before gains & losses ($250 million)
  • Net debt (after cash on hand) up $486 million to $7.969 billion, but $467 million lower than forecast
  • Surplus after tax $640 million ($231 million deficit)
  • Total assets up $2.7 billion to $47.36 billion ($44.68 billion)
  • Net assets $35.78 billion ($33.65 billion).

Auckland Council Group acting chief financial officer Matthew Walker said the group’s financial performance “shows it is balancing the need for prudent financial management with the investment required to address the growth challenges Auckland faces.

“As a successful & increasingly global city, Auckland’s population is growing rapidly. This continually adds to the demands on our transport, 3 waters & community infrastructure such as libraries & parks. Yet the group results show the council is on track to deliver its largest programme of investment ever over the next decade, based on the adopted 2015-25 long-term plan.

In the last year, the council group (including council-controlled organisations such as Auckland Transport & Watercare Services Ltd) delivered $1.66 billion of investment, including its share of the city rail link, now co-funded by Auckland Council & the Government.

Mr Walker said the council sold down part of its diversified financial assets portfolio in August 2016 and issued debt in $NZ, Euro, Norwegian kroner & $A. Meanwhile, it continued to raise debt through the Local Government Funding Agency. He said low interest rates had contributed to a lower cost of funds during the course of this financial year.

“The council maintained its credit ratings of AA (stable) from Standard & Poor’s, and Aa2 from Moody’s Investor Services, confirming our prudent fiscal management and strong debt-servicing capability. These continue to remain among the strongest credit ratings in New Zealand.

“The council has begun the development of its long-term plan 2018-28. While group debt is projected to reach $11.6 billion by 2025, it will remain at a prudent level relative to our income.
“The group’s asset base is expected to grow from $45 billion to $60 billion over that same period to 2025.”

Capex highlights:

  • $310 million on water & wastewater infrastructure
  • $200 million on parks, sports facilities, libraries, community centres & facilities
  • $430 million on roads & footpaths, and
  • $288 million on public transport.

Link: Auckland Council 30 June 2017 accounts (on NZX)

Attribution: Council accounts & release.

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Council agrees to sell rest of its financial asset portfolio

Auckland Council’s finance & performance committee agreed yesterday to sell the final $130 million in its diversified financial asset portfolio, but it’s a decision with potential adverse consequences.

The council sold $100 million of the portfolio in May 2016, will sell a further $100 million by the end of the June 2018 financial year and agreed yesterday to sell the balance by June 2018.

The council intends to use the proceeds solely to fund public transport & stormwater infrastructure.

However, turning liquidity to use in developing hard assets could take the council closer to a net debt:total revenue ratio of 270%, and at that point the council would face a ratings downgrade.

Council treasurer John Bishop said in his report a one-notch downgrade would cost $12 million/year in extra interest costs.

Committee chair Ross Clow said the decision to divest the portfolio would help tackle Auckland’s growth: “The fund was originally set up with the express purpose of funding infrastructure across the region when needed. Given the unprecedented challenges Auckland faces, divesting of the remainder of the portfolio and using it to help fund our infrastructure programme is a prudent & sensible financial decision.”

Mr Bishop said in his report the investment fund wasn’t regarded as a strategic asset, and divesting it would give the council the opportunity to repay debt to enable additional investment in infrastructure. “However, replacement liquidity may be required to meet treasury operating limits.”

The Auckland Regional Council established the portfolio, which originally contained its stakes in Ports of Auckland Ltd & Auckland International Airport Ltd, along with an investment portfolio of New Zealand & global equities, bonds & cash. It was used it to establish Infrastructure Auckland, providing seed funds for projects that included the Britomart Transport Centre and the Northern Busway.

It’s been managed recently by 8 external fund managers, with oversight from National Australia Bank subsidiary JANA Investment Advisers Pty Ltd.

Mr Bishop said in his report: “If the portfolio was liquidated to fund a wider Auckland or New Zealand event, it is likely that financial markets would also be negatively impacted. Therefore, when the funds are needed the most, there would be likely downward pressure on the value of the portfolio, meaning the portfolio is a less preferred form of liquidity when compared to cash or committed bank lines.

“Its specific investment objective was to achieve a net return exceeding the consumer price index plus 4% over rolling 10-year periods. JANA estimates an average annual 7% return over rolling 10-year periods. The portfolio has returned 9.1%/year since November 2010, in line with benchmark & ‘market’ returns. The return for the financial year to 31 March 2017 is 5.8%.”

Both EY & Cameron Partners identified the portfolio in their reviews of council funding in 2015 as a commercial rather than strategic asset, meaning continued ownership wasn’t required to ensure delivery of key services or outcomes.

“It was noted that the rationale for holding the portfolio is weak, and it is unusual for an organisation with the objectives of Auckland Council to hold such an asset.”

Mr Bishop said alternative uses for the portfolio funds included repaying debt and accelerating infrastructure investment. However, additional liquidity support might also be required if the portfolio was divested.

“Selling it to repay debt will reduce the risk of a downgrade to the council’s credit rating profile. Under the council’s long-term plan, the ne,t debt:total revenue ratio reaches 265%, meaning little available capacity to undertake further capital investment other than what is already in the long-term plan without breaching this ratio.

“The council’s credit rating agencies have indicated downward ratings pressure if this ratio approaches 270%. Therefore any unforeseen changes to planned operating results, such as a reduction in revenue or increase in debt, could lead to a lower credit rating.

“A one-notch downgrade is estimated to cost the council a minimum 0.15% in higher interest costs, while a bigger downgrade will result in a greater increase. On the council’s current debt portfolio of $8 billion, this results in an additional $12 million/year expense once existing debt is refinanced, more than offsetting the positive return from the portfolio over time.”

Mr Bishop said that as the investment portfolio was reduced, the overhead costs (both internal & external) of administering it became more significant: “Current external overhead costs are about $1.5 million, largely represented by fees paid to JANA & the fund managers. The refined responsible investment policy also requires significantly more oversight of the portfolio, adding additional cost and diverting council staff focus away from more material matters such as managing the council’s debt portfolio, interest rate expense & credit rating profile.”

Earlier stories:
4 April 2008: Auckland Regional Holdings’ “satisfactory” half sees revenue up 45%, profit up 55% to unstated figure
2 March 2004: Auckland gets Infrastructure Auckland $45 million for interchange

Attribution: Council committee agenda & release.

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Council 2.5% rates rise & tourist-targeted rate pass

Auckland mayor won approval yesterday for a 2.5% overall lift in the rates bill for the financial year starting on 1 July, got support for the council to pay staff the “living wage” at a minimum and won what could have been a tight vote on a version of bed tax.

The bed tax will actually be a targeted rate on certain accommodation – large hotels in particular. Against claims that it might be challenged as unlawful, Mr Goff said the council had been advised that the targeted rate was a legitimate device and that it could be passed on to customers.

I’ve long questioned a bed tax as a measure of charging visitors – who you want to like you – fees on top of their already very large input into Auckland’s income, and pouring billions of dollars into Government coffers through gst.

That’s the nub of the split between supporters of a charge on tourists and opponents: the Government takes tax without having to lift a finger, but has been loathe to redistribute it – until pre-election time.

The tourist accommodation targeted rate is intended to support operation of council organisation Ateed (Auckland Tourism, Events & Economic Development Ltd), which many condemn as an unnecessary & extravagant addition to council costs. I’ll come back to that issue another day, but for the moment argue that it has value in raising the region’s economic output.

For a long time council & government talked past each other on funding, but that changed when they jointly worked on the Auckland transport alignment project last year. Although improved funding mechanisms appear to be some way off, the 2 organisations are at least still talking about it.

The budget – the council’s annual plan – returns to the council chamber on Thursday 29 June for endorsement once staff have worked through all the decisions made yesterday.

Links:
12, Final annual budget 2017-18 – Mayoral proposal   
Attachments:
Annual budget 2017-18 – Key budget & rating issues
Other rates policy issues
Implementing a living wage

Attribution: Council meetings.

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Council value for money review gets tick tomorrow

Auckland Council goes to the basics of the super-city tomorrow when its finance & performance committee will formally institute a “value for money” programme review aimed at lifting efficiency savings from $183 million in 2014-15 to $300 million/year by 2025.

The cost-effectiveness review programme also lifts the supervision of council-controlled organisations – particularly the big ones, Auckland Transport, Watercare Services Ltd & Ateed (Auckland Tourism, Events & Economic Development Ltd) – from sniping when one of those organisations steps out of line, to a closer performance audit.

When the super-city council was formed at the 2010 council elections, the new council had a number of key tasks to do, all at once: rationalise services & expenses, equalise costs to ratepayers across all the old 7 territorial council areas, and establish what the new council should & shouldn’t do. On top of that broad equalising, the council had major plans to create for specific areas and, for the whole region, the unitary plan that would combine regional policy statements & district plans in one document.

Given tight timeframes for everything it was doing, the new council didn’t try to go back to ground level in 2010 and decide then exactly what it should be doing across the whole region but, naturally, chose to work with the previous councils’ programmes and whittle them down to a consistent presentation.

Now, the work starts in earnest.

Section 17A of the Local Government Act requires councils to review “the cost-effectiveness of current arrangements for meeting the needs of communities within its district or region for good quality local infrastructure, local public services and performance of regulatory functions”. A review must consider options for the governance, funding & delivery of infrastructure, services & regulatory functions.

The review laid out for the finance & performance committee by value for money programme manager Sally Garrett introduces “a framework to evaluate expenditure and to provide greater accountability to the governing body & the ratepayer on what is being achieved with public expenditure. The objective of the programme is to analyse cost-effectiveness in a systematic manner across the Auckland Council group and to provide a basis on which more informed decisions can be made on long-term planning priorities.”

The first 3-year review programme starts with 2 phases, initially focusing on activities & services considered high priority to assist in the development of the 2018 long-term plan. Ms Garrett says in her report to the committee it’s assumed each review will take 2-4 months and that up to 4 reviews can be run at the same time.

The first 4 reviews will be:

  • 3 waters – water, wastewater & stormwater budget categories
  • Domestic waste – domestic waste services including refuse, recycling, inorganics & organic services
  • Organisational support – communications & engagement services across the council group, followed by a rolling series of reviews including transactional services, payroll, finance, information systems, procurement, human resources, customer services & legal functions, and
  • Investment attractions & global partnerships – how investment attraction & global partnership services are delivered across the group.

Under the programme, expert panels will be appointed in April-May, data for the first 4 reviews will be collected & analysed from May-August, and conclusions & recommendations will flow from July-September.

The woman managing the programme, Sally Garrett, has a long history in this type of work, first in her 5 years as a principal in Ernst & Young’s management strategy group, then for 6 years as Watercare’s business services general manager. During 3 years as an independent consultant, Ms Garrett assisted the royal commission on Auckland governance and put together the programme for Auckland City Council to manage the transition to the super-city council, including overseeing the due diligence phase and the migration of staff & assets.

She joined Auckland Council in 2012 to manage the finance transformation programme and was appointed to run the value for money programme in 2015.

Attribution: Committee agenda.

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Goff gets agreement on council budget consultation and starts to tighten grip on CCOs

Auckland Council’s finance & performance committee held a 9-hour session yesterday which indicated some directions under the new mayor, Phil Goff: a closer watch on its commercial operations, a tighter rein on costs and a bigger role for local boards.

Helped by committee chair Ross Clow’s clear intention to keep things flowing, the council made progress without the usual surfeit of political speech-making, with mostly succinct questioning, and an awareness of the subject matter as it had been circulated early enough to be digested.

Mr Goff made it clear right from his first meeting that questions would be questions, and he’s drilled the message home. His next task is to convince the boards of the council-controlled organisations that they aren’t autonomous, that when the council wants an answer it should be given a proper one, and that those organisations will have to lift their performance – not just by a smidgeon, but by multi-million-dollar shifts in both savings & earnings.

That seismic shift in performance would be worth far more than a bed tax, in both dollars & perception, though that tax is still on the wishlist.

The council finance committee’s main tasks yesterday were to go through the quarterly reports of the council-controlled organisations and of the council itself, approve the pro forma half-yearly accounts to 31 December and, toward the end of the day, discuss the letters of expectation the mayor had written for the council-controlled organisations and, the last, to put finishing touches to the public consultation document on the council’s annual budget, to go out in the New Year.

The committee agreed to one amendment to the mayor’s consultation proposal – put by new councillor Desley Simpson and seconded by the mayor – to seek other operating revenue streams to minimise the impact for ratepayers.

A proposal from councillors Wayne Walker & John Watson to consult on introducing chemical-free weed control in public parks & reserves & urbanised areas, including the option for a targeted rate to fund any additional costs, was defeated, though not entirely rejected. A number of councillors supported the principle but there was debate on costs and some aspects of implementation, and the mayor said that, if it was to be introduced, it ought to be done properly & after thorough examination.

The third amendment, proposing such a review, became a note to be forwarded to the council’s environment & community committee.

The revised budget consultation proposal goes to the council’s governing body for approval tomorrow.

This story outlines the main business of yesterday’s meeting, but not the real content – the debates & position-taking. I’ll try to get that extra story posted for Friday.

Attribution: Council committee meeting.

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New mayor wants bed tax, fuel tax & new housing tax

Auckland mayor Phil Goff released his budget plan today to restrict rate rises and raise significant new revenue while restraining borrowing and supporting underpaid & vulnerable residents.

His proposal goes to Auckland Council’s finance & performance committee on Wednesday, returns to that committee on Tuesday 13 December and on to the council’s governing body 2 days later for approval to be put out to consultation.

  • I’ll be adding new pages to this story this evening as I read through the proposal, which runs to 68 points & 15 pages.

Mr Goff has proposed restricting rate rises to a 2.5%/year average and introducing:

  • a visitor levy (bed tax)
  • a targeted rate for new largescale housing developments, and
  • a regional fuel tax.

In a release out this afternoon, Mr Goff said: “Ratepayers have shouldered the responsibility for the growth of our city and cannot be expected to continue to do that on their own. This proposal shares that responsibility more fairly across all of those who benefit from living & doing business in our city.”

Mr Goff said his proposal delivered on his campaign commitment to restrict rate rises: “I made a commitment to restrict the annual average rate rise to 2.5%, down from 3.5%, and that is what this proposal delivers.”

The proposal would implement his commitment to a living wage for council employees and contribute an additional $500,000 to co-ordinating work to support homeless Aucklanders: “This proposal puts the people of this city first by taking a responsible & fair approach to tackling Auckland’s growth challenges, and seeking to support those who most need help to live a decent life in our city.”

Mr Goff noted that significant work was underway at the council to find efficiencies across the council group, which includes Auckland Transport, Ateed (Auckland Tourism, Events & Economic Development), Panuku Auckland Development, Regional Facilities Auckland & Watercare Services Ltd.

“We are taking a responsible fiscal approach by ensuring that Auckland Council is more efficient and delivers value for money while finding innovative ways to raise extra revenue to support growth.

“Accommodation providers & other businesses benefit most directly from the funding the council puts into attracting visitors to the city and supporting major events. That is why I am proposing a new visitor levy to be collected by hotels, motels & B&Bs to replace ratepayer spending by Ateed in this area.

“We are also ensuring that we remain well within the council’s debt cap to avoid a potential credit downgrade which would force ratepayers to fund millions of dollars in extra interest costs.”

The mayor has set out a series of recommendations for consultation and promotes these initiatives:

  • 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 largescale developments to pay for major new infrastructure, increase Auckland’s housing supply and discourage landbanking
  • Seeking Government support to implement a regional fuel tax to help close the $400 million gap in transport infrastructure funding which the Government & council identified through the Auckland transport alignment project
  • Bidding for a significant share of the Government’s housing infrastructure fund
  • Generating savings from efficiencies across the Auckland Council group
  • Introducing a living wage for council employees, and
  • Contributing $500,000 to co-ordinating work to support homeless Aucklanders.

The uniform annual general charge would rise by 2.5% and the business rates differential, which has been programmed to decline to zero over several years, would remain unchanged from this year’s figure.

The visitor levy (bed tax) has been proposed for Auckland many times and has been fought off by the hospitality sector. Its proponents have regarded it as separate from rates – although that income is what hotels use to pay their rates, in the same way that every other landlord uses rent to pay rates.

“The initiatives that I’m promoting will require collaboration with central government, businesses & our communities. We want to work openly & honestly with all of our partners to make sure that Auckland is one of the world’s best performing cities.

“Given it is only 4 weeks since inauguration, there is still a lot of work to be done. Many of these initiatives will fall under the long-term plan, but it is important to start consulting Aucklanders now.”

Following the December meetings on what should go out to consultation, the council is scheduled to adopt its consultation document & supporting material on 9 February, run the budget consultation through February-March, confirm decisions to be incorporated into the budget on 1 June and adopt the budget on 29 June.

Earlier stories:
22 July 2015: Corrected: Councils want tax reshuffle, innovation a long way off
29 June 2009: ARC overcomes canning of fuel tax, sets 3.9% rate rise
8 October 2008: Penlink gets tick along with electrification, ferries & tickets in first bite of regional fuel tax
13 November 2006: Stadium on the wharf will require a bed of new tax
6 November 2005:
Council looks more closely at bed tax
2 March 2004: Councillors opt for bed tax report
2 March 2004: Christmas present: new tax
2 March 2004: On the road to a supercity
16 August 2002: Councillors opt for bed tax report

Links:
Mayoral proposal for 2018 annual plan pdf
Local authority funding project

Attribution: Mayoral release.

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No ticks yet for mayoral candidates though Goff makes start on fiscal policy

2 candidates for Auckland’s mayoralty have committed to a “ratepayer protection pledge” guaranteeing they won’t vote for any rate or levy hikes exceeding 2%/year in the next council term, and a third candidate has written a policy to cap the residential average rise at 2%. But the candidate most likely to win if the right of politics vote is split 3 ways, Phil Goff, released a fiscal policy yesterday designed to restrict rate rises to an average of 2.5%.

The call for a ratepayer protection pledge was made last week by the Auckland Ratepayers’ Alliance, created by the NZ Taxpayers’ Union, and won support from mayoral candidates John Palino & Mark Thomas. Victoria Crone had already written her own policy with the 2% cap.

Mr Goff’s version of crimping the always-up thinking includes requiring every council department to make savings that would contribute to a new efficiency target of at least 3% of overall spending.

All these percentage thinkers have it wrong.

Picking a number to cut rates by is a great way of ensuring the arms & legs will be cut off, leaving a corpulent policy and no ability to implement it. Auckland City Council did that several years ago.

When the new super-city council was created in 2010, it should have looked at what it needed to do and stuck with it. But the council, in that first year, had an almighty project on its hands to bring consistency across a region that previously had 7 territorial councils & one regional council and, at budget time, it did the usual exercise of seeing what could be left out.

Starting at “what to do” instead of “what not to do” sets the parameters, which can be reviewed.

An example of how to do things badly is in consent processing, an area of the council where customers pay for the service. A predetermined percentage cut would mean that, as the need for inspections rises, fewer people would be available. But, by investigating efficiencies – in this case, including policies set by both government & council – a leaner yet better performance might be possible.

The net result for me is a cross against all those candidates – no ticks.

The Hide ploy

When Act MP Rodney Hide set up the super-city council, a central ploy was to ensure politicians couldn’t get their hands on the commercial businesses of the council, which were semi-quarantined in “council-controlled” organisations.

Thus Auckland Transport, Watercare Services & a few other arms of the council were almost, but not quite, autonomous. But their budgets are, in the end, up for approval by the council, and the council needs to know what justifies the figures, so the semi-autonomy concept could never work satisfactorily.

Mr Goff’s fiscal policy shows a determination to turn those organisations, effectively, back into departments: “A particular focus will be on combining council & council-controlled organisations’ procurement systems and progressively moving towards shared services for the group in terms of back office functions such as finance & human resources.”

Are council departments the way to go? They could be, but New Zealand experience tells you that politicians never fund services & infrastructure adequately when they have direct control – and direct exposure to the reactive votes – which was a big part of isolating them from this risk.

Tax allocation & infrastructure funding

Mr Goff – former housing minister & leader of the opposition – set out brief policy yesterday on 2 issues which deserve far more consideration than politicians have given them: allocation of tax income and financing of infrastructure.

If you allocate tax income according to geographic population, Auckland may well be receiving less than its due. On the same basis, would cycleways – or new housing subdivisions – get any funding? Few people are riding bikes because it’s dangerous or impractical, and nobody lives in these unbuilt subdivisions yet, but logic tells you that funding is required if change is to occur.

Extending that logic, you could argue that these subdivisions should be built somewhere else that’s cheaper, where the land is available, and therefore that the focus should be on shifting jobs to centres outside Auckland.

He advocated replacing the interim transport levy on rates with a petrol tax, as was previously proposed by the council & rejected by the Government, and later switching to a congestion charge or toll. In all cases you can argue that someone is benefiting without paying, and someone is paying without benefiting. Mr Goff’s view on roads was that those who benefit from reduced congestion should pay.

His views on tax & funding: “Working with central government to expand its infrastructure fund and investigate infrastructure bonds: While more than half of New Zealand’s growth is in Auckland, the extra gst & income tax collected goes to central government. I will advocate for Auckland to get its fair share of that extra revenue to pay for servicing that growth.

“To reduce the risk of even greater gridlock & a worsening housing crisis, we need an additional $17-20 billion for core infrastructure to support future urban land areas. It is inappropriate & unfair to fund that solely through the blunt tool of raising rates. We need to find alternative innovative funding sources such as sharing more Government revenue with council, public-private partnerships or raising infrastructure bonds.

“I will also advocate for the removal of the flat levy on rates to pay for a shortfall in transport infrastructure funding in favour of a road charge. This could be in the form of a petrol tax that is later replaced by a congestion charge or toll. It is only fair that those who benefit most from using the roads contribute to the cost of reducing congestion.

“Implementing this fiscal policy will be an important step towards restoring ratepayer & Government confidence in Auckland Council by ensuring that in future it works effectively & efficiently in the best interests of the people of this city.”

Mr Goff is getting somewhere, but should be far further advanced on these policies. I think Orakei board member Mark Thomas has done far better in advocating detailed policies, with assessments of how they would work & their impacts.

Candidate websites:
Crone
Goff
Palino
Thomas

Attribution: Candidate policies.

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