I hereby give notice that an ordinary meeting of the Finance and Performance Committee will be held on:




Meeting Room:



Tuesday, 13 December 2016


Reception Lounge
Auckland Town Hall
301-305 Queen Street


Finance and Performance Committee









Cr Ross Clow


Deputy Chairperson

Cr Desley Simpson, JP



Cr Dr Cathy Casey

Cr Mike Lee


Deputy Mayor Bill Cashmore

Cr Daniel Newman, JP


Cr Fa’anana Efeso Collins

Cr Dick Quax


Cr Linda Cooper, JP

Cr Greg Sayers


Cr Chris Darby

Cr Sharon Stewart, QSM


Cr Alf Filipaina

IMSB Member David Taipari


Cr Hon Christine Fletcher, QSO

Cr Sir John Walker, KNZM, CBE


Mayor Hon Phil Goff, JP

Cr Wayne Walker


Cr Richard Hills

Cr John Watson


IMSB Member Terrence Hohneck



Cr Penny Hulse



Cr Denise Lee



(Quorum 11 members)




Mike Giddey

Senior Governance Advisor


9 December 2016


Contact Telephone: (09) 890 8143

Email: mike.giddey@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz




Finance and Performance Committee

13 December 2016



ITEM   TABLE OF CONTENTS                                                                                        PAGE


21        Letters of Expectation for Council-controlled Organisations, 2017-2018              5

22        Annual Budget 2017/18 – Mayoral Proposal on items for Public Consultation   33   



Finance and Performance Committee

13 December 2016



Letters of Expectation for Council-controlled Organisations, 2017-2018


File No.: CP2016/23596



1.       To recommend content for inclusion in the 2017-2018 Letters of Expectation (LOEs) for substantive Council-controlled Organisations (CCOs).  These CCOs are:  Auckland Council Investments Limited (ACIL), Auckland Tourism Events and Economic Development (ATEED), Auckland Transport (AT), Regional Facilities Auckland Limited (RFA), Watercare Services Limited and Panuku Development Auckland. 

Executive summary

2.       The annual LOEs are an important accountability tool that informs the substantive CCOs of council’s expectations.

3.       The LOEs provide direction on:

a.   issues of importance for council to help inform refinement of CCO behaviour, operations and service delivery

b.   the development of the CCOs’ Statements of Intent (SOI) for 2017-2020.

4.       This year the messages in the LOEs should reflect Council’s determination to ensure the substantive CCOs:

·   take active steps to reinforce accountability to council, and operate with more transparency, especially around budgeting and financial reporting

·   align their activities with Council strategies including the refreshed Auckland Plan

·   collaborate effectively with other members of the council group, and participate in group-wide policies

·   operate with a strong customer focus, and are responsive to Local Boards as well as the Governing Body.

5.       The Finance and Performance Committee’s role is to recommend the content of the LOEs to the Mayor, for him to finalise the Letters.  Six draft LOEs are attached for the consideration of the committee.  Each LOE contains general messages common to all substantive CCOs, and particular messages of relevance to the particular CCO.


That the Finance and Performance Committee:

a)      recommend to the Mayor the 2017/2018 Letters of Expectation for Auckland Council Investments Limited, Auckland Tourism Events and Economic Development, Auckland Transport, Regional Facilities Auckland Limited, Watercare Services Limited and Panuku Development Auckland, incorporating any changes to the drafts agreed by this committee, and minor editorial changes as required. 


6.       The LOEs are an important document that commences the annual accountability process for the substantive CCOs.

7.       The purpose of the LOEs is to outline council’s direction on:

a.   issues of importance to help inform refinement of respective CCO behaviours, operations and service delivery

b.   the development of the CCOs’ SOIs for 2017-2020.

8.       Significant strategic direction is already provided to the CCOs through the various planning documents approved by council, such as the Auckland Plan, Local Board Plans, the Economic Development Strategy, and City Centre Master Plan. It is not considered necessary to repeat the relevant priorities from these planning documents in the LOE.

9.       Council operational and governance imperatives on the CCOs that are enduring in nature are included in the CCO Governance Manual, and therefore not considered necessary to include in the LOEs and SOIs.

10.     The Finance and Performance Committee has the delegated authority to advise the Mayor on the Letters of Expectation.  Draft LOEs have been prepared for the committee’s consideration. 

11.     The resolutions from this committee will be provided for the Mayor’s consideration, to inform the final LOEs. 

General messages for 2017-2018

12.     As council moves into the third term since amalgamation, there is a need to re-set some of the expectations on the CCOs about their participation and commitment to a whole-of-group approach.  This year’s draft LOEs therefore outline a number of general expectations, and send a strong signal that Council will be giving significantly more attention to the degree to which CCOs are delivering outcomes for Aucklanders.

13.     These expectations are set out below.

·   CCOs need to take active steps to reinforce accountability to council.  This will require strong leadership from Boards and chief executives, to build cultures and behaviours which recognise their organisations’ responsibilities to residents and ratepayers.  Greater transparency in financial reporting is an important element of this.  Additionally, CCOs need to work with council to develop new performance metrics which genuinely measure our success in achieving outcomes. 

·   CCOs need to align their operations with council strategies.  A key plank of this is participation in development of the refreshed Auckland Plan. 

·   A stronger sense of collaboration in the council group is needed.  This means collaborating across the other CCOs, and with council itself, to achieve group outcomes, and to maximise investment opportunities.  As part of this, the shared services model and participation in group-wide policies remains important.

·   CCOs should develop a stronger focus on customer service.  One aspect of this is engaging more actively with Local Boards.  

Specific messages

14.     Each LOE also contains references to specific expectations and priorities for the individual organisation.  Some of the most important messages are outlined below.

15.     Auckland Transport is to be reminded of its role as a placemaker, and that its operations need to align at all times with the strategic direction set down by council, including in the Auckland Transport Alignment Project (network optimisation; demand management and new technology; delivering strategic new investments).  This strategic direction influences the requirements for greater transparency over spending, more aggressive public transport and active modes targets, and a particular message around engagement with local boards. 

16.     Watercare is asked to continue its shift to participating as a full member of the council group.  One key plank of this is its participation in the central interceptor optimisation work, and ensuring that its approach to supporting Auckland’s growth areas is in line with council plans. 

17.     Panuku’s focus is about continuing its organisational development to ensure it successfully delivers on its work programme.  It is also important that Panuku’s plans are integrated and aligned with the development plans of the other CCOs, especially Auckland Transport and Watercare.

18.     ATEED is asked to bring a tighter focus on prioritising its work to deliver on the economic development strategy.  This includes working with Council on how we can make more progress in facilitating economic development in less prosperous areas of Auckland.

19.     RFA’s priorities for the year include driving better value and transparency in the council-funded cultural heritage sector, and ensuring council has good visibility over its plans for major assets such as stadia and the Aotea precinct. 

20.     ACIL’s role in delivering dividends from the Port and Airport is recognised, but the Letter should deliver expectations about further reclamation of land and wharf extensions into the harbour, and expresses a desire to investigate options for reducing the adverse effects of motor vehicle storage on the wharves. 


Local board views and implications

21.     CCO governance and direction is the responsibility of the Governing Body.

22.     A key element of this year’s LOEs is for CCOs to ensure they engage with the development of Local Board plans during the process, and not just once the Local Board plans, and their own plans, are set. 

Māori impact statement

23.     CCO governance documents require the CCOs to take into account the Independent Maori Statutory Board’s schedule of issues of significance and statutory Treaty of Waitangi provisions, and where appropriate engage with the board on these matters.

24.     The CCO Governance Manual (2015) also requires CCOs to develop Māori responsiveness plans consistent with Whiria Te Muka Tangata, the Māori Responsiveness Framework, and to contribute to Te Toa Takitini – a council group approach that seeks to embed Māori responsiveness into the council group’s culture to achieve progress on significantly lifting Māori well-being and better outcomes with Māori. For this year, the LOEs should specifically request that CCOs identify when a comprehensive Māori responsiveness plan will be completed, for those CCOs that have not yet done this:  RFA, AT, and Watercare. 






Draft Auckland Transport Letter of Expectations 2017-2018



Draft Watercare Letter of Expectations 2017-2018



Draft Panuku Letter of Expectation 2017-2018



Draft ATEED Letter of Expectations 2017-2018



Draft RFA Letter of Expectations 2017-2018



Draft ACIL Letter of Expectations 2017-2018





David Wood – Director Finance and Policy - Mayoral Office


Finance and Performance Committee

13 December 2016



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13 December 2016



Annual Budget 2017/18 – Mayoral Proposal on items for Public Consultation


File No.: CP2016/24837



1.       To propose items for public consultation on the Annual Budget 2017/18[1].

Executive summary

2.       The Annual Budget 2017/18 is the last under the Long Term Plan 2015-2025. 

3.       Next year the council will commence deliberations on the Long Term Plan 2018-2028.  This will be the primary vehicle for making significant budgetary changes over the triennium, including the replacement of the Interim Transport Levy with a more durable instrument such as a regional fuel tax. 

4.       The mayoral proposal for the Annual Budget 2017/18 places high priority on rating stability in the 2017/18 year to restore public confidence in the council’s financial management and prudence.  Previous years have been characterised by volatile movements in rates, which has been unnerving for ratepayers. 

5.       The 2016/17 financial year was the first time since amalgamation all residential and farm lifestyle ratepayers had the same general rates increase.  Businesses also received the same, slightly lower rates increase (consistent with the long term differential strategy).  We need to reinforce the stability that arisen from the standardisation of rating policy across the region.  A core objective of the mayoral proposal is that all ratepayers will receive a general rates increase of 2.5% in 2017/18.  Achieving this will require the Uniform Annual General Charge to increase by 2.5% (to preserve its percentage share of general rates), and the business-residential rating differential to be held at its 2016/2017 level.  

6.       The second priority is to commence implementation of a revenue strategy that creates the financial headroom for the council to bring forward capital investments in transport and housing infrastructure without recourse to unacceptably high increases in general rates.  A significant infrastructure deficit has arisen from years of underinvestment, coupled with rapid population growth.  Addressing this challenge requires the council to draw on new revenue sources to ensure the financial burden is borne by those who will benefit from the infrastructure investment.  The Annual Budget 2017/18 consultation represents the first step towards executing this revenue strategy, and includes proposals relating to: 

·     the council’s participation in the government’s Housing Infrastructure Fund,

·     introducing growth infrastructure targeted rates for significant housing developments,

·     introducing a visitor levy via a targeted rate to fund visitor related expenditure of Auckland Tourism, Events and Economic Development (ATEED).

7.       The mayoral proposal also recommends we consult the public on the introduction of a living wage for employees of the council group over the triennium.  Implementing the living wage in a staged manner over three years will provide opportunities to accelerate the progress of  the social equity payments already built into the council’s remuneration policy, and lock-in opportunities to lift productivity through complementary initiatives to upskill the workforce.  It will also ensure the living wage is funded through council efficiencies, such as better fleet management and group procurement. 


8.       Another spending priority will be a $0.5 million investment in 2017/18 to promote collaboration across council, government agencies, charities and philanthropists to address chronic homelessness.  The scale of spending does not trigger the materiality or significance thresholds for community consultation. 

9.       Council will be required to examine the cost effectiveness and necessity for all aspects of its operational and capital expenditures.  This will be promoted through a continuing programme of value for money reviews, better procurement, and the adoption of group shared services. Efficiency targets for council business units and council controlled organisations will be identified as part of the budget refresh scheduled for February 2017.


That the Finance and Performance Committee:

a)      note that the mayoral proposal places high priority on:

i)        achieving rating stability in the 2017/18 year to restore public confidence in the council’s financial management and prudence;

ii)       commencing the implementation of a revenue strategy that creates the financial headroom for the council to accelerate capital investments in transport and housing infrastructure without recourse to unacceptably high increases in general rates;

b)      note that rating stability can be achieved by:

i)        capping general rates increases at 2.5% in 2017/18;

ii)       increasing the Uniform Annual General Charge in line with the general rates increase;

iii)      pausing implementation of the Long-term Differential Strategy, which relates to business and residential rates, for one year;

iv)      not making changes to the share of the Interim Transport Levy (ITL) paid by residential and business ratepayers;

c)      agree to recommend to the Governing Body that the Annual Plan 2017/18 public consultation document include the following items:

Rating policy changes

i)        the Uniform Annual General Charge (UAGC), including the mayor’s proposal that the UAGC only increase in line with the general rates increase;

ii)       pausing implementation of the Long-term differential strategy – which relates to business and residential rates – for one year;

iii)      introduction of a visitor levy (via a targeted rate) to fund visitor related expenditure of Auckland Tourism, Events and Economic Development (ATEED);

iv)      changes to the council’s Revenue and Financing Policy which, in turn, will facilitate future proposals to the Governing Body on the application of  growth infrastructure targeted rates on specific housing developments;

v)      the expansion and establishment of business improvement districts;

vi)      waste management targeted rates;

Other budget changes

vii)     mass transit network;

viii)    introduction of a Living wage over three years;

ix)      homelessness;


Budget changes for information

x)      the rural fire service, reflecting the anticipated enactment of the Fire and Emergency New Zealand (FENZ) Bill;

xi)      changes to the implementation of the Waste Management and Minimisation Plan;

xii)     Housing Infrastructure Fund;

xiii)    Skypath implementation;

d)      note that efficiency targets for council business units and council controlled organisations will be identified as part of the Annual Budget process.



Consultation requirements

10.     The Local Government Act 2002 requires each local authority to consult on and adopt a LTP every three years.  In each intervening year local authorities are required to consult the Auckland community on any significant or material changes to the relevant year of the LTP through the Annual Budget consultation document. 

11.     Significance is determined by the local authority’s Significance and Engagement policy. The council’s finance and legal staff have developed internal guidance to test potential budget changes against significance and materiality thresholds. 

12.     Most changes to rating policy require consultation. 

13.     Legislation also requires that the council’s consultation document include a summary of key matters from Local Board Agreements and the Draft Tūpuna Maunga Authority operational plan for the annual plan year.

14.     The consultation document may include other issues that the council considers to be of high public interest but which are not legislatively required. 

Financial position

15.     The initial starting point for the 2017/2018 Annual Plan is year 3 of the Long-term Plan 2015-2025 (LTP).  This included capital investment of $1.6 billion, and average general rates increases of 3.5%.

16.     Council staff have updated budget projections to reflect decisions made subsequent to the adoption of the LTP, actual performance in 2014/15 and 2015/16, the timing of capital projects, and latest forecasts of external variables such as interest costs and inflation.

17.     Key decisions made since adoption of the LTP in June 2015 have included:

●     changes to the capital programme made as part of decision-making for the 2016/2017 budget,

●     changes to operational expenditure and efficiency savings made in the Annual Budget 2016/2017,

●     reduced revenue as a result of the lower general rates increases adopted in 2016/17.

18.     Reviews of current market conditions and council projections indicate that in 2017/18 average council interest rates and inflation rates will be lower than projected in the LTP.  Updated forecasting assumptions will be generated prior to final decision-making on the Annual Budget in 2017.



19.     The updated financial position for 2017/18 includes:

●     capital expenditure of $1,961 million

●     operating expenditure of $3,822 million

●     Rates increases of between 2.5% and 3.5%, which result in total revenue of $4,131 - $4,145 million, closing borrowing of $9,146 - $9,161 million, and an S&P debt to revenue ratio of 256% - 257%.

20.     The council group capital programme for the remainder of the 2015-2025 LTP period has also been updated to reflect decisions made subsequent to LTP adoption. Figure 1 below shows this updated capital programme and how this relates to the projected debt to revenue ratios (based on LTP revenue settings of 3.5% annual general rate rises).

Financial Strategy

21.     A core tenet of the council’s financial management approach is maintaining our AA credit rating. This credit rating underpins the council’s access to international credit markets and competitive interest rates.  This is the focus of the council’s prudential limits, which are expressed as debt and interest as a percentage of revenue.  When the prudential limits are paired with the revenue settings we calculate the maximum borrowing the council can undertake, and therefore the size of its capital investment programme.

22.     A credit downgrade would reduce investor confidence in Auckland Council, drive up our cost of borrowing, and reduce our capacity to secure longer duration debt. 

Annual Budget  2017/18  - Consultation Items

Rating policy levers

23.     Consulting the community on a lower average general rates increase via the Annual Budget consultation document is not necessary unless material changes to service levels are required to achieve it.  A reduction in service levels is not on the agenda, as current forecasts indicate general rates increases can be contained without compromising the council’s prudential limits.  For the sake of transparency, however, there is merit in clearly signalling to the public in the document our intention to reduce the rates increase below the currently planned 3.5 per cent.  



24.     Only the Governing Body can set a rate (general or targeted). The council has three levers to manage the distribution of the rates requirement across ratepayers:

●     the level of the UAGC

●     the business-residential differential

●     targeted rates.

25.     To provide ratepayers with rating stability in the 2017/2018 year[2] the council would need to:

●     increase the UAGC in line with the general rates increase

●     keep the rating differentials at the 2016/2017 level.

Uniform Annual General Charge (UAGC)

26.     The current rating policy provides for the UAGC ($394 for 2016/2017) to be increased annually by the general rates increase.  This maintains the proportion of rates raised from the UAGC at approximately 13.4 per cent.  Increasing the UAGC by the increase in general rates for 2017/2018 will provide rating stability.

27.     My strong preference is to increase the UAGC in line with the general rates increase.  Any proposal to materially change the UAGC would need to be canvassed with the Auckland community through the consultation document.

Long-term differential strategy

28.     The Long-term Differential Strategy (LTDS) lowers general rates (UAGC and value-based general rate) for businesses in equal steps from 32.7 per cent of the total requirement in 2016/2017 to 25.8 per cent by 2036/2037.  The rate of reduction is set so that the increase in rates for residential and farm/lifestyle properties above the underlying general rates increase is around 0.5 per cent each year.

29.     The differentials relative to the urban residential rate for 2016/2017 are set out in the table below.


Property category

Business differential split

Relative differentials within usage categories for 2016/2017

Rate in the dollar for 2016/2017 (including GST) ($)

Differential relative to urban residential rate for general rate for 2016/2017


Business grouping

Urban business

32.7 per cent




Rural business




Non-business grouping

Urban residential

67.3 per cent




Rural residential




Farm and lifestyle




No road access




Uninhabitable island(1)





30.     To allow for all ratepayers to have the same rates increase in 2017/2018 requires pausing the LTDS for a year.  A one year pause will extend the timeframe to achieve the goal of the LTDS by one year to 2037/2038.  The intention is that the LTDS will be resumed when the replacement for the Interim Transport Levy is implemented, as any replacement is expected to shift more of the burden of incremental transport investment on to businesses.  While I consider the current parameters of the ITL to be inequitable with respect to its impact on residential ratepayers, I am prepared to not reopen the design of the ITL given it has only a year to run. 

Targeted rates

31.     The use of targeted rates provides the council with an opportunity to better align the sources of revenue with the beneficiaries of specific expenditures.  A range of targeted rates are set out in the rating policy.  Possible additional targeted rate initiatives are discussed below. 

Visitor levy

32.     The number of commercial guest nights in Auckland rose from 6 million in the year ending July 2011 to 7.3 million in the year ending July 2016.  This growth is partly attributable to the visitor attraction and major events activities of Auckland Tourism, Events and Economic Development (ATEED), and has placed additional demands on the city’s infrastructure and services.  In light of the benefits visitors derive from the council activities, ATEED has been exploring with the commercial accommodation sector the available options for indirectly funding some or all of ATEED’s visitor-related expenditure from visitors rather than Auckland ratepayers. 

33.     The council cannot set a bed tax, but may be able to achieve a similar outcome through a targeted rate on accommodation providers.  We wouldexpect, but not require, the financial impact of the targeted rate to be passed on to guests through an additional charge on their bills.  The revenue captured through a levy is expected to be $20 - $30 million per annum.  Indicative council analysis suggests the levy would translate into a 3-4% surcharge on a typical tariff for a 4-5 star hotel – in the order of $6-10 per night.  Municipal charges of this nature are common practice in OECD countries.

34.     The Chair of the Finance & Performance Committee has invited his deputy, Councillor Desley Simpson, to convene a Steering Group that will advise on the content of the public consultation document with respect to the visitor levy.  Following public consultation, if there is support to proceed with a levy the Steering Group will advise on the design of a preferred targeted rate instrument.  Representatives of the accommodation sector will be invited to participate on the Steering Group. In the event the levy is implemented the wider tourism and accommodation sector will be invited to participate on an body tasked to advise ATEED on the allocation of levy revenues.

35.     Any visitor levy revenue will replace the equivalent amount of ratepayer funding which ATEED currently receives.  It will not be a source of additional revenue for ATEED.  The ratepayer funding that is freed up will be available for new infrastructure investments, including transport infrastructure projects that will relieve congestion pressures across Auckland.  This will be of benefit to both visitors and Auckland residents.

Growth infrastructure targeted rates

36.     To support Auckland’s rapid population growth, the recently adopted Auckland Unitary Plan has enabled significant intensification of the existing urban areas and identified 11,000 hectares in new areas – that's one and a half times the size of Hamilton and will provide enough land for 110,000 new homes.  Because these new areas are currently rural and lack the infrastructure needed to support new neighbourhoods and town centres, substantial investment will be needed in new roads, sewers, water pipes, parks and community facilities.

37.     After adjusting for external funding sources (such as transport subsidies from the New Zealand Transport Agency) Auckland Council currently funds growth infrastructure primarily through development contributions and infrastructure growth charges.  These are lump sum charges that are payable when a new dwelling is consented or when a dwelling connects to the water and wastewater networks. Together, these charges currently average about $30,000 per dwelling.

38.     Landowners pay nothing while they hold their land in an undeveloped state. 

39.     Where these charges are not adequate to cover the cost of providing infrastructure to service a particular development, that creates a funding challenge for the council.  Typically the council resolves this by either delaying the infrastructure investment until there are sufficient houses being built in a particular area to make the investment viable, or uses general rates to make existing ratepayers across Auckland subsidise the cost of the infrastructure.

40.     The full cost of providing all of the infrastructure needed to support large scale housing developments is substantial. Meeting these costs will require ongoing discussions with central government on solutions such as the Housing Infrastructure Fund, new transport funding mechanisms, and alternative approaches to infrastructure funding used overseas that will require legislative change (for example Municipal Utility Districts and Tax Increment Financing).

41.     In the meantime, there are some instances where new housing developments are ready to proceed immediately apart from the need to resolve a relatively modest infrastructure funding challenge.  In some cases this relates to different landowners within a Special Housing Area being unable to agree amongst themselves who should pay for a local connector road or stormwater pond.  In other cases, it relates to providing the final piece of bulk or trunk infrastructure (for example an arterial road, a wastewater pumping station or an extension of the water main) that will open up a new housing area.


42.     To help address Auckland’s housing and infrastructure challenges, the council has been investigating a range of alternatives for funding the significant bulk infrastructure costs associated with new developments.  One approach is to use targeted rates alongside the existing development contribution and infrastructure charges.  This approach would effectively spread a lump sum charge out over time as an annual payment, and can be triggered ahead of development occurring.

43.     This approach has a number of advantages including:

·     increasing land holding costs, thereby weakening the incentives for landbanking

·     reducing the reliance on existing ratepayers across Auckland to subsidise new housing developments

·     creating a closer link between the rates paid by landowners in a specific area and the uplift in the value of their land as a result of it being available for development

·     establishing a more predictable and secure revenue stream for council

44.     If growth infrastructure targeted rates are applied to large scale developments of thousands of houses this should assist with our efforts to place downward pressure on land price increases across the Auckland region.


45.     The first step is a discussion with Aucklanders generally about the merits of using growth infrastructure targeted rates as a tool to fund infrastructure for new housing developments.

46.     The council’s Revenue and Financing Policy would need to be amended to provide for the use of targeted rates to fund growth infrastructure including water and wastewater.  The council must identify all its sources of funding in its Revenue and Financing Policy, and is required to consult on any material changes to it.

47.     If the council agrees to consult on this policy change, staff will discuss the use of this new tool with key developers in those areas most ready to provide new houses.  From these discussions, staff may develop specific funding proposals involving targeted rates that can address a critical infrastructure funding challenge for a defined parcel of land and unlock more houses sooner. That proposal will then be presented to the mayor and councilors with full details on matters such as:

·   the amount of the targeted rate

·   when it would commence

·   how long it will apply for

·   what infrastructure it will fund, and

·   how the cost would be applied to particular properties, and the impacts on land owners.

48.     If any specific targeted rate proposal is approved for consultation, staff would formally consult with the relevant landowners and any other affected parties.  After considering the feedback from this consultation, the Governing Body would make a decision about implementing the charge as part of setting rates for the relevant financial year.  The Governing Body would then also make a decision on setting the rate each subsequent year, as part of each year’s rate setting process.  

Business improvement district  - establishment and expansion

49.     The Business Improvement District (BID) programme enables the Auckland business sector to fund local business investment, promotion and joint initiatives with council and central government.  Funding is secured through a targeted rate set by Auckland Council on all businesses properties in a defined business association area.  Business associations are incorporated societies independent from Auckland Council, and the targeted rate revenue is passed to the business association as a grant. 

50.     Activities funded through the BID programme include:

·     promotions, events and marketing campaigns

·     business support and enterprise

·     local economic development activities

·     skill and expertise development

·     crime prevention initiatives

·     networking and shared services

·     local improvement projects

·     advocacy to local and central government.

51.     Currently $15.7 million is collected from targeted rates to fund activities across 48 participating business associations, representing over 25,000 Auckland businesses. 

52.     Establishing or expanding a BID area requires the business association to undertake a ballot of members (business ratepayers and occupiers of business properties in the BID area). Ballots are coordinated by an independent polling agent separate from Auckland Council and the business association. 

53.     The following BID establishments and expansions are proposed for 2017/18.


Proposed change








New establishment

54.     To be successful a ballot:

·     must achieve a threshold of at least 25% of the total voting forms being returned, and

·     of the returned voting forms, a minimum of 51% of the votes must be in favour.

55.     The results of the ballots will be reported back to the Local Boards and to the Governing Body to support final decisions.

Waste Management targeted rates

56.     The intent of the Waste Management and Minimisation Plan (WMMP) is to move to a charging regime that promotes waste minimisation.  Waste management services have been transitioning to a region-wide delivery approach. The associated charges have been incrementally adjusted from the legacy council regimes. 

57.     Full implementation of that approach is still some way off.  In the interim, some material changes are required to standardise recycling charges across the region as the services are now standardised.  In addition, some adjustments are proposed to charges where extra services are requested.  The detail of the proposed changes are set out in Attachment A

Local Board targeted rates

58.     Local targeted rates provide a funding mechanism for local boards to make investments in their communities beyond the resourcing available to them from general rates funding.  At present there are two local targeted rates promoted by local boards.  These fund free swimming pool access for adults in the respective local board areas:

●     Otara Papatoetoe swimming pool targeted rate

●     Mangere Otahuhu swimming pool targeted rate.

59.     At this stage no additional local targeted rates have been proposed by local boards for 2017/18.  If a Local Board wishes to propose a local targeted rate we encourage that they make a submission no later than 28 February 2017.  Any proposals received in the New Year will need to be subject to a separate consultation process.

Other budget changes

60.     Three other potential budget changes that do not meet the significance and materiality thresholds but are nevertheless of high public interest could be included in the Annual Budget consultation document:

a.    Mass transit network

An expanded and well-connected mass transit network is at the heart of Auckland Transport’s plans for supporting growth in existing urban and future urban areas. Auckland Transport has indicated the intention to accelerate planning and design works on routes and the most optimal mode, whether it be bus or light rail. It has also indicated the opportunity for early acquisition of strategically important properties. The debt impact is projected to be approximately $40 million in 2017/18.

b.    Living wage

I am committed to achieving a living wage for Council and CCO employees, with this being implemented in a staged manner over the triennium.  This will effect departments such as Libraries, Customer Services and Arts, Communities and Events.  A staged implementation will allow us to accelerate on the progress made through social equity payments, and to align implementation with workforce reorganisations so productivity gains can be locked-in through staff training and career development.  These proposed changes also have the additional benefit of having a positive impact on gender pay equity, as two thirds of staff in these teams are women. 

A living wage is estimated to cost around $9 million if it was fully implemented on 1 July 2017 (based on a forecast living wage of $20.40 per hour).  This applies to around 2,200 staff earning under $20.40 per hour (including casual and part-time employees) and another 1,200 staff just above the living wage who are likely to require wage adjustments to preserve relativities.  A three year timeframe allows for the fiscal impact of the policy to be funded by efficiencies, such as better fleet management and group procurement. 

There are a number of matters concerning the design of a living wage we should solicit feedback from the public, including how the living wage is calculated and adjusted through time, and the categories of council and CCO employees it should apply to.

An advisory group will be established to advise council on the detail of the public consultation and implementation issues.  It will be convened by the Chair of Finance & Performance Committee, Councillor Ross Clow, and will include representatives from the Living Wage Movement Aotearoa NZ. 

c.    Homelessness

We face a significant challenge in relation to homelessness in Auckland. The Government has acknowledged this problem by putting $3 million over three years towards supporting experienced community agencies already working with the homeless.  I am proposing that Council plays a coordinating role bringing together central government agencies like Housing NZ, MSD, DHBs and Police with NGOs and private businesses supporting the homeless.  Council has put money into the James Liston hostel and supporting NGOs, and will contribute $500,000 a year to ensuring the efforts of all of these groups are coordinated.

Budget changes for public information

61.     Staff have identified some potential budget changes that do not require decisions as part of the Annual Budget process.  However, we are legally required to consult on them, and their inclusion in the consultation document will ensure the Auckland community is aware of the changes.  The budget changes in this category are:

a.    Rural Fire Service

Auckland Council is currently a key player in delivering and funding rural fire services. The Fire and Emergency New Zealand (FENZ) Bill is currently before Parliament and is expected to pass in April 2017. If passed, this will amalgamate New Zealand's urban and rural fire services into an integrated fire and emergency service. Consequently, the council would no longer deliver rural fire services as of 1 July 2017. The cessation of a service previously provided by council would trigger the need to inform the public via the council’s annual plan process.  The net financial impact of the change is likely to be minimal. 

b.    Waste Management and Minimisation Plan (WMMP) implementation reset

As part of the WMMP Auckland Council has successfully introduced region-wide inorganic and recycling collections and is establishing a network of Community Recycling Centres. The programme team is reviewing the planned implementation of food waste and organic refuse collections. This is to ensure services for all waste streams are planned holistically, implemented in a manner bringing best value for money, and support the aspirational goal of zero waste to landfill by 2040. The review will delay rolling out the food waste and user pays refuse collection services. As a delay to a currently planned service, there is a need to inform the public via the annual plan process.

c.    Housing Infrastructure Fund

Central government established a $1 billion Housing Infrastructure Fund (HIF) to assist high-growth local authorities with providing infrastructure to support housing development. The council is preparing an application for funding from the HIF. Should the council’s bid be successful, there would be a substantial increase in the capital expenditure in transport, stormwater, water supply and wastewater in high-growth areas of Auckland.  While this is a central government investment decision, a potential change of this nature would need to be clearly signalled in the annual plan consultation document.

d.    Skypath financial implications

SkyPath is a cycling and walking project that will be attached to the Auckland Harbour Bridge.  It seeks to complete a key missing gap in Auckland’s cycling and walking networks.  It is planned as a Public Private Partnership (PPP) and as part of this Council would permit the collection of fares by the private sector from users (cyclists and pedestrians) of the pathway. 

On 28 July 2016, the Governing Body agreed to proceed with the SkyPath project and make a budget provision for SkyPath in the 2017/2018 Annual Plan and the LTP 2018-2028. This includes:

·        $7.2 million additional capex 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 2018-2028 LTP.

Efficiency Targets and value for money reviews

62.     Reducing the average general rates increase for 2017/2018 from 3.5 per cent to 2.5 per cent depends, in part, on sustaining and refreshing the programme of efficiency savings.  The specific efficiency savings proposals do not trigger materiality or significance thresholds, provided there is no adverse impact on service levels. 

63.     Efficiency targets for council business units are likely to be set as part of the Budget refresh scheduled for February.  Council controlled organisations (CCOs) will also be set targets as part of the Annual Budget process. 

64.     The Finance and Performance Committee will also be overseeing an ongoing programme of value for money reviews, as required under section 17A of the Local Government Act.  The forward programme of reviews is expected to be considered by the Committee at its February 2017 meeting, with a view to the reviews informing deliberations on the LTP 2018-2028. 


Local board views and implications

65.     The views of local boards have not been sought in relation to this advice. 

66.     Legislation requires that the council’s consultation document include a summary of key matters arising from proposed Local Board Agreements.

Māori impact statement

67.     A summary of the draft Tūpuna Maunga Operational Plan 2017/18 will be included in the consultation document.

68.     Any specific impact of the proposed consultation items on Māori is expected to be identified and addressed through the consultation process.  The Local Government Act establishes requirements with respect to engaging Māori in decision making, and taking into account Māori perspectives and traditions, and council will be advised about those requirements throughout the Annual Budget process.


69.     The key milestones for the preparation and approval of the Annual Budget 2017/18 are set out below:

13 December 2016:      Finance and Performance Committee makes recommendations to the Governing Body on consultation items

15 December 2016:      Governing Body agrees consultation items for the Annual Budget

9 February 2017:          Governing Body adopts consultation document and supporting material

February-March 2017  Public consultation on the Annual Budget

1 June 2017:                 Governing Body confirms decisions for incorporation into the Annual Budget

29 June 2017:               Governing Body adopts Annual Budget 2017/2018








Waste management targeted rates changes





David Wood – Director Finance and Policy - Mayoral Office



Finance and Performance Committee

13 December 2016



PDF Creator


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[1] The Local Government Act this defines this as the “Annual Plan” but this report uses the term ‘annual budget’ as it is more accurately conveys the substance of the process to the public. 

[2] Looking forward to 2018/19 it should be noted that during 2017 properties will be revalued for the purposes of establishing the rating liability to apply for the first year of the Long-term Plan 2018-2028. Revaluation will inevitably result in a change in the rating distribution across Auckland.