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




Meeting Room:



Thursday, 1 June 2017


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 Chair David Taipari


Cr Hon Christine Fletcher, QSO

Cr Sir John Walker, KNZM, CBE


Mayor Hon Phil Goff, CNZM, 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


30 May 2017


Contact Telephone: (09) 890 8143

Email: mike.giddey@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz




Finance and Performance Committee

01 June 2017



ITEM   TABLE OF CONTENTS                                                                                        PAGE


12        Final Annual Budget 2017/2018 - Mayoral Proposal                                                  5 



Finance and Performance Committee

01 June 2017



Final Annual Budget 2017/2018 - Mayoral Proposal


File No.: CP2017/10041





1.       To present the Mayoral proposal for the final Annual Budget 2017/18 for deliberation and decision-making.

Executive summary

2.       The Governing Body adopted the annual budget consultation document in February this year which identified the key issues on which the council was seeking feedback before adopting the Annual Budget 2017/18.

3.       The mayoral proposal for the Annual Budget 2017/18 places high priority on rating stability to restore public confidence in the council, supporting vulnerable Aucklanders and on implementing a more equitable revenue strategy that creates the financial headroom for the acceleration of infrastructure investments to relieve transport and housing pressures in the region.

4.       The Annual Budget 2017/18 includes $208 million additional capital expenditure on infrastructure, primarily for transport. This provides a strong signal of my future priorities for next year’s Long Term Plan with a core focus on infrastructure that supports housing construction, particularly transport and water. To enable this there will be a continued emphasis on alternative funding sources such as targeted rates, road pricing and the government’s Housing Infrastructure Fund.

5.       The key issues for consultation were that the general rates increase be limited to 2.5 percent in 2017/18. Achieving this requires the Uniform Annual General Charge to increase by 2.5 percent and the business-residential rating differential to be held at its 2016/17 level. Targeted rates for funding ATEED’s tourism promotion and for growth infrastructure were also consulted on, as was a living wage for council staff who provide important services to Auckland but struggle to afford to live in the region.

6.       The Annual Budget 2017/18 proposal seeks to share the burden of growth more fairly among those who live and benefit from working in Auckland, to continue to generate savings across the council group and to allow ratepayer funds to be redirected into much needed infrastructure projects that will relieve the growing pressure on our region.

7.       It is a budget that allows the council to begin to address the primary pressures of housing affordability and transport congestion in Auckland within the confines of the council’s borrowing constraints. And it indicates to Government and Auckland residents that Auckland Council is doing everything it can to raise revenue, address Auckland’s most pressing challenges and operate efficiently with the limited tools it has available.



That the Finance and Performance Committee:

a)      recommends that the Governing Body adopts an average increase to both the fixed and variable portions of the general rate for existing ratepayers of 2.5 per cent for the final Annual Budget 2017/18

b)      recommends that the Governing Body agrees to amend the council’s Revenue and Financing Policy to pause the Long-Term Differential Strategy for the 2017/18 year and extend the time to reach the target proportion of 25.8 percent of rates from the business sector until 2037/38


c)      recommends that the Governing Body, as part of the final Annual Budget 2017/18, agrees to a targeted rate on commercial accommodation providers to fund a proportion of the visitor attraction and major events expenditure of Auckland Tourism, Events and Economic Development (ATEED) as follows:

i)        the amount of the targeted rate is set at 50 percent of ATEED’s budgeted expenditure on visitor attraction and major events, being $13.45 million

ii)       in consideration of the distribution of benefits and affordability for commercial accommodation providers, they be categorised by type into three tiers:

·    Tier 1 comprising hotels and serviced apartments

·    Tier 2 comprising motels, lodges and motel-like accommodation in campgrounds

·    Tier 3 comprising other accommodation providers such as backpackers, campgrounds and hostels

iii)      in further consideration of the distribution of benefits for commercial accommodation providers, they be categorised by location into three zones:

·    Zone A comprising the local board areas of Albert-Eden, Devonport-Takapuna, Mangere-Otahuhu, Maungakiekie-Tamaki, Orakei, Waitemata

·    Zone B comprising the local board areas of Henderson-Massey, Hibiscus and Bays, Howick, Kaipataki, Manurewa, Otara-Papatoetoe, Puketapapa, Upper Harbour, Waiheke, Whau

·    Zone C comprising the local board areas of Franklin, Great Barrier, Papakura, Rodney and Waitakere Ranges

iv)      the targeted rate is applied on a differential basis based on the type and location as set out in the following table:



Differential ratios


Provider type

Hotels and

serviced apartments

Motels and

Lodges (including motel-like accommodation at campgrounds)

Other (Backpackers, campgrounds, hostels)



Zone A




Zone B




Zone C




Note: The change from the original proposal is set out in paragraph 21.

v)      the council will consider applications for remission under its existing rate remission scheme (Remission of rates for miscellaneous purposes), for example where the owner/ratepayer are separate from the accommodation operator and the nature of the relationship between the parties means the targeted rate is unable to be passed on to the accommodation operator

vi)      staff report back on the development of a more targeted remission scheme as part of the Long Term Plan 2018-28

vii)     staff report back on a proposal for 2018/19 for the inclusion of informal accommodation providers currently being rated as residential properties

viii)    staff report back on a proposal for the introduction of alternative governance arrangements of ATEED, including greater participation for commercial accommodation providers appropriate to their level of funding of ATEED’s activities


ix)      the council’s Revenue and Financing Policy be amended to provide for targeted rates to be used to fund visitor and external relations, destination and marketing and major events in the Economic Growth and Visitor Economic activity

x)      the $13.45 million of general ratepayer funding no longer required to fund ATEED be used to fund transport infrastructure projects, specifically mass transit to the airport and other airport access improvement projects

xi)      note that ATEED’s future role and activities will be considered as part of the Long Term Plan 2018-28

xii)     note that the Mayor is open to discussing with the industry any proposals it wishes to put forward for an industry-led and funded regional tourism organisation as a partial or complete alternative to using a targeted rate to fund ATEED’s tourism promotion activities

d)      recommends that the Governing Body agrees to amend the council’s Revenue and Financing Policy to facilitate future proposals to the Governing Body on the use of targeted rates to fund growth infrastructure

e)      recommends to the Governing Body that Auckland Council group implements a living wage policy over the council term to October 2019 as follows:

i)        the rate will initially be based on the reference living wage published by the Living Wage Movement Aotearoa New Zealand for 2017 being $20.20, and thereafter will be calculated based on council wage inflation

ii)       the living wage applies to Auckland Council and its substantive council-controlled organisations and excludes contractors and volunteers

iii)      a phased implementation approach be employed to ensure the greatest benefit is received by people earning lower than a living wage in priority to addressing relativity issues

iv)      a complementary Trainee, Cadet, Intern and Apprenticeship rate is developed

v)      the operating budget for the final Annual Budget 2017/18 include costs of $1.9 million for living wage policy implementation and that this be offset by savings

f)       recommends that the Governing Body agrees to the operating and capital budgets incorporating the above rating and other changes and the following other key changes to rates policy and capital and operating budgets for the final Annual Budget 2017/18 as below:

i)        $500,000 operating budget to fund collaborations on homelessness

ii)       $10 million of Auckland Transport operating budget to fund mass transit network investigations

iii)      updated capital budgets for City Rail Link which reflect an increase of
$240 million in council’s share of net capital investment by 2024/25 (revised total council investment of $1.7 billion)

iv)      an additional $161 million capital budget to accelerate transport investment (including $30 million for mass transit land acquisition)

v)      $7.2 million of additional capital budget for works on either side of the Skypath construction

vi)      $10 million of capital budget for cruise ship infrastructure

vii)     $20 million of stormwater capital budget brought forward from future years to address weather event resilience

viii)    additional capital budget of $10.2 million for Regional Facilities Auckland to construct a shared plant facility for services to the Town Hall and Aotea Centre

ix)      waste management services and charges be standardised in accordance with staff recommendations

x)      Manukau, Uptown and Wiri business improvement districts be expanded in accordance with staff recommendations





8.       Auckland has benefited from unprecedented population growth, but it has placed the region and its people under immense pressure. Traffic congestion turning to gridlock is costing Auckland and New Zealand billions in lost productivity each year. That and housing unaffordability are the challenges that must be addressed as priorities for Auckland.

9.       Although Auckland Council has a limited suite of tools with which to address the challenges facing Auckland, the Annual Budget 2017/18 sets out a number of proposals which will ensure the council restricts general rate rises and provides value for money to Aucklanders, develops new revenue streams which allows for ratepayer funds to be redirected to much needed infrastructure projects and helps the most vulnerable Aucklanders.

10.     The budget was proposed on 30 November 2016 and accepted as a proposal for consultation by the Governing Body on 15 December 2016.

11.     In February this year the Governing Body adopted a consultation document which set out for the community the key issues to receive feedback on before adopting the Annual Budget for 2017/18. The consultation issues reflected the desire to reinforce the rating stability that has arisen from the standardisation of rating policy across the Auckland region. A core objective of the mayoral proposal is that both residential and business ratepayers receive an average general rates increase of 2.5 percent in 2017/18.

Rating policy

Note officer reports on these issues are attached to this report

Rating stability

12.     Public submissions received were strongly supportive of the rating stability policies of setting the average general rates increase for both residential and business ratepayers at 2.5 percent, and of pausing the implementation of the long-term differential strategy for business and residential rates for one year. The officers’ report notes “clear majority support for rebalancing how services and capital investment in Auckland is funded to shift some of the burden from general ratepayers to those who more directly benefit from the expenditure”.

13.     The updated budget prepared by council staff based on a 2.5 percent general rates increase contains efficiency savings for both the council parent and CCOs, which can be achieved without reducing service levels and without compromising the council’s prudential limits.

14.     Importantly, a general rates increase of 2.5 percent, while delivering the services Aucklanders expect of their Council, maintains pressure on the Council group of organisations to achieve ongoing savings of at least 3 percent across this term of Council.

15.     From 2018/19 general rate rises will be influenced by the future path of inflationary pressures.  The Consumer Price Index increased by 2.2 percent in the March 2017 quarter, though consumer price inflation is forecast to remain subdued.  Nevertheless, the council will need to take into account the impact of inflationary pressures in critical areas, such as the construction sector.



Accommodation provider targeted rate

16.     The use of targeted rates provides the council with an opportunity to better and more fairly allocate the funding for specific expenditure between different groups of ratepayers. The visitor attraction and major events expenditure of ATEED has contributed to the growth in the visitor economy of Auckland. This growth provides both general benefits for Auckland and clear and direct benefits for the tourism industry. In particular, it directly benefits commercial accommodation providers, whose customers are overwhelmingly visitors to Auckland.

17.     The consultation process has provided significant feedback, showing strong support from ratepayers and providing information from the detailed submissions of industry participants. I have continued to engage with the hotel industry during the period after consultation closed, meeting a number of key industry players, both owners and management.

18.     In consideration of the staff report on this matter (attached as Attachment A), along with workshops and discussions with councillors and industry participants, I have revised my proposal for the accommodation provider targeted rate.

19.     The revised proposal reflects the weighing of a number of factors as set out in the staff report in paragraph 76. As a result, the revised proposal retains a significant proportion of general rates funding of ATEED’s visitor attraction and major events expenditure. The revised proposal also differentiates the application of the rate based on accommodation provider types and their location. It also takes into account a judgement regarding the relative affordability of the rate on different accommodation provider types, including the providers’ ability to pass it on to their customers, if they decide to do so. More broadly, the overall impact on the community (general ratepayers) of meeting the region’s revenue needs is an important consideration.

20.     The revised proposal is for half of the $26.9 million ATEED visitor attraction and major events expenditure to continue to be funded by general rates, and for half to be funded by the accommodation provider targeted rate. This 50/50 apportionment is a political judgement applying a “stand back” evaluation of the factors set out in the staff report, including consideration of ATEED expenditure that has less direct benefit for accommodation providers.

21.     The table below shows how the modified accommodation provider targeted rate differential ratios will be applied and includes additional information as to how this compares to the original proposal.


Differential ratio


estimated rates increase

Provider type

Hotels and

serviced apartments

Motels and

lodges (including motel-like accommodation at campgrounds)

Other (campgrounds, backpackers, hostels)



Zone A

Differential ratio

Average rates increase

% of original proposal

Average $ per room per night














Zone B

Differential ratio

Average rates increase

% of original proposal

Average $ per room per night














Zone C

Differential ratio







NOTE: Amounts are estimates only and are stated exclusive of GST

22.     A rate collecting $13.45 million would create capacity for about an additional $100 million of capital investment in transport infrastructure over the next six years.



23.     As set out in the staff report, the revised proposal includes the use of the council’s existing rate remission scheme and provision for the development of a bespoke scheme. Submissions provided information about certain accommodation operating models, such as some strata-title serviced apartments owned by investors, where the nature of the relationship between the owner and accommodation operator means in some cases the targeted rate is unable to be passed on to the operator.

24.     I propose to consider whether the informal sector, such as Airbnb, should be included from the 2018/19 year for the Long Term Plan. A rating policy for these accommodation providers, including their status as business or residential ratepayers, will be developed over the coming months and reported back to the Finance and Performance Committee for consideration.

25.     ATEED’s future role and functions will be considered as part of the Long Term Plan 2018-28, which is already partly underway in the economic development work stream of the section 17A reviews. Specifically, the visitor attraction expenditure for future years will be significantly influenced by industry participants as part of the governance structure that will be set up.

26.     Some industry participants have approached the Mayoral Office with the suggestion of an industry-led and funded regional tourism organisation as an alternative to using a targeted rate to fund ATEED’s tourism promotion activities. To date no specific proposal has been submitted by the industry, and it is not possible to gauge whether this idea has significant support within the industry.  Notwithstanding this, I am open to discussing with the industry any proposals it wishes to put forward over the coming twelve months.

Growth infrastructure targeted rate

27.     The Auckland Unitary Plan has enabled significant intensification of existing urban areas and identified 11,000 hectares of new areas – which could deliver 422,000 new homes by 2040.

28.     While urban development can progress quickly, rural land identified for development lacks the required infrastructure such as roads, sewers, water supply and community amenities to support new housing. Currently this infrastructure is funded partly from external sources (such as NZTA) and from council’s development contributions and infrastructure growth charges. These lump sum charges are payable when a new dwelling is consented or connected to water and wastewater networks. These funding mechanisms create two particular issues, being that they are often insufficient to pay for the infrastructure that must be built, and secondly that they offer no incentive for landowners to develop their land.

29.     66 percent of written submissions supported this proposal to amend the Revenue and Funding Policy to add growth infrastructure targeted rates to the council’s rating toolkit which can be used to affect the acceleration of development of new housing areas and may curb landbanking – a growing issue and outcome from steadily increasing property values in Auckland.

30.     The detailed policy of growth infrastructure targeted rates will be developed for inclusion in the Long Term Plan 2018-28. It is envisaged that growth infrastructure targeted rates be used alongside the existing development contributions and infrastructure charges, as an annual payment that spreads the cost of infrastructure over several years and can be levied ahead of development occurring. This would have the advantages of incentivising development of land, reducing the current reliance on ratepayers to subsidise new housing developments, more closely link the rates paid by landowners to the uplift in value of their land as a result of it being available for development, and establishing a more predictable and secure revenue stream for council.



Other budget changes

Living wage policy

31.     The 2017/18 budget will mark the first stage of implementing a living wage policy across the Auckland Council group. By raising the minimum wage for our staff to $18.00 an hour in the first year we are setting down the path of making a significant difference to our lowest paid employees. This change also has the benefit of being a positive shift for gender pay equity. 71 percent of the submissions received through the public consultation process were in support of a living wage.

32.     Importantly, the officers’ report (refer Attachment C) recommends the establishment of a separate wage and guidelines for employees taking part in council’s trainee, cadet, apprenticeship and internship programmes to ensure that our commitment to invest in youth and other programmes with social outcomes is maintained.


33.     As New Zealand’s largest city, Auckland faces significant challenges in relation to homelessness. Council is not best suited to lead efforts to reduce homelessness but can have significant influence on the issue as a facilitator of inter-agency efforts.

34.     The annual budget proposes that Council contribute $500,000 a year towards coordinating central government agencies such as Housing NZ, MSD, DHBs and Police with NGOs and private businesses supporting the homeless in Auckland. A significant portion of this investment will go towards implementing the housing first model in the region, where the homeless are provided with a stable and healthy home with support services around them.

35.     As a facilitator, Council will be able to best influence and help direct efforts that will have a measurable and positive affect on homelessness in Auckland.

36.     Homelessness is not just an Auckland Council problem. The Government has acknowledged the issue by putting $3 million over three years towards community agencies working with the homeless.

Mass Transit Network

37.     Auckland continues to face serious transport access issues involving the city centre, the inner suburbs, the airport and the South. An expanded and well-connected mass transit network is at the heart of Auckland Transport’s plans for supporting growth in existing and future urban areas. Investigation and design of potential mass transit solutions continues and requires $10 million of increased operating budget in 2017/2018, with $30 million of capital budget for route protection including property acquisition. In addition, general rates funding freed up by the accommodation provider targeted rate will contribute further to airport access improvement projects, including mass transit to the airport.







Annual Budget 2017/2018 - Key Budget and Rating Issues



Other rates policy issues



Implementing a living wage





Mayor Hon Phil Goff, CNZM, JP


Finance and Performance Committee

01 June 2017


































Finance and Performance Committee

01 June 2017









Finance and Performance Committee

01 June 2017