|
Governing Body
19 April 2018
|
|
Submission
on Land Transport Management (Regional Fuel Tax) Amendment Bill
File No.: CP2018/05115
Te take mō te pūrongo / Purpose of the report
1. To seek approval of Auckland Council’s submission to the
Finance and Expenditure Select Committee on the Land Transport Management (Regional
Fuel Tax) Amendment Bill.
Whakarāpopototanga matua / Executive summary
2. The
Land Transport Management (Regional Fuel Tax) Amendment Bill (Bill) passed its
first reading and was referred to the Finance and Expenditure Select Committee
(Select Committee) on 28 March 2018. The deadline for written submissions
to the Select Committee is 20 April 2018.
3. The
Bill proposes to introduce a mechanism under which regional fuel taxes can be
established, in order to enable regions to fund transport infrastructure
programmes that would otherwise be delayed or not funded. The regional
fuel tax would initially only be available to the Auckland region (and to other
regions from 1 January 2021).
4. A
draft Auckland Council submission has been prepared. The draft submission
has had input by Auckland Transport officials. We are seeking Governing
Body approval for the draft submission.
5. The
main submission points are that:
· Auckland
Council supports the policy of the Bill to enable Auckland
Council, and other regional councils from 1 January 2021, to obtain
additional funding for transport infrastructure by way of a regional fuel tax;
· We
are pleased that the Bill will enable Auckland Council to take a number of
actions prior to commencement of the Amendment Act;
· Auckland Council supports the approach set
out in the Bill to establish and maintain a Regional Fuel Tax scheme (RFT
scheme) for an area;
· Auckland Council supports a clearly defined exemption and rebate
scheme, and we understand the Ministry of Transport will undertake
consultation, in the near future, on the proposed eligibility for rebates and
any further exemptions to be established by regulation; and
· Auckland Council proposes some improvements to the drafting of the
Bill that we would like to see, as we consider these improvements would better
ensure that the Bill achieves its intent. This includes the Bill’s
provisions regarding interest, and variation and termination of an RFT scheme,
as well as other minor technical improvements.
|
Ngā tūtohunga / Recommendation/s
That the Governing Body:
a) approve
the submission on the Land Transport Management (Regional Fuel Tax)
Amendment Bill appended in Attachment A to the agenda report.
b) authorise
the Deputy Mayor and Chief Executive to make any minor amendments to the
submission prior to lodgement on Friday 20 April 2018.
c) note
the Mayor and Deputy Mayor intend to appear before the Finance and
Expenditure Select Committee to discuss the submission.
d) note
the Ministry of Transport will undertake consultation, in the near future, on
the proposed eligibility for rebates and any further exemptions to be
established by regulation.
e) direct
staff to prepare an Auckland Council submission on the Ministry of
Transport’s upcoming consultation on the proposed eligibility for
rebates or any further exemptions.
|
Horopaki / Context
6. The
Bill passed its first reading and was referred to the Finance and Expenditure
Select Committee on 28 March 2018.
7. The
Select Committee has called for written submissions on the Bill. The
deadline for written submissions is 20 April 2018.
8. The
Bill proposes to introduce a mechanism under which regional fuel taxes can be
established, in order to enable regions to fund transport infrastructure
programmes that would otherwise be delayed or not funded.
9. The
process for establishing a regional fuel tax provided for in the Bill involves:
· A
council making a proposal that sets out the proposed tax rate, the duration of
the tax, the transport programme and projects that the tax will fund, and how
the proposal contributes to the relevant regional transport plan, the
Government Policy Statement (GPS) on land transport, and any other relevant
document specified by the Minister of Finance and the Minister of Transport
· A
council consulting the community before finalising a proposal
· A
council submitting its proposal to the Minister of Finance and the Minister of
Transport
· The
Minister of Finance and the Minister of Transport accepting or rejecting the
proposal and, if accepting it, recommending the making of an Order in Council
to implement a regional fuel tax in that region.
10. The Bill
implements a number of policy decisions relating to the introduction of a
regional fuel tax, including that the regional fuel tax:
· is
to apply to petrol and diesel, but not to compressed natural gas and liquefied
petroleum gas
· be
collected at the distribution level
· be
used toward the funding of capital expenditure, associated debt repayment, and
associated operational expenditure
· have
a maximum rate of 10 cents per litre of fuel, and a maximum initial duration of
10 years (although may be extended)
· be
available initially only to the Auckland region and to other regions from 1 January
2021
· will
include an exemptions and rebates scheme, which will largely be prescribed by
way of regulations
· be
subject to goods and services tax
11. The Bill
provides that the New Zealand Transport Agency (NZTA) has administrative
and enforcement functions, including collecting the tax and processing
refunds. The NZTA has the power to charge the ongoing costs of
administering the regional fuel tax scheme against the tax revenue from it.
Tātaritanga me ngā tohutohu / Analysis and advice
12. The Governance
Group established to oversee the aligned delivery of consultation for the
Regional Land Transport Plan (RLTP), the Regional Fuel Tax proposal, and the
Development Contributions Policy has reviewed the Bill and recommended that a
submission to the Select Committee be prepared. It has also provided
recommendations on the drafting of Auckland Council’s submission.[1]
13. On the basis
of this guidance, a draft submission has been prepared and includes the
following submission points:
· Auckland
Council supports the policy of the Bill to enable Auckland
Council, and other regional councils from 1 January 2021, to obtain
additional funding for transport infrastructure by way of a regional fuel tax;
· We
are pleased that the Bill will enable Auckland Council to take a number of
actions prior to commencement of the Amendment Act;
· Auckland Council supports the approach set
out in the Bill to establish and maintain an RFT scheme for an area;
· Auckland Council supports a clearly defined exemption and rebate
scheme, and we understand the Ministry of Transport will undertake
consultation, in the near future, on the proposed eligibility for rebates and
any further exemptions to be established by regulation; and
· Auckland Council proposes some improvements to the drafting of the
Bill that we would like to see, as we consider these improvements would better
ensure that the Bill achieves its intent. This includes the Bill’s
provisions regarding interest, and variation and termination of an RFT scheme,
as well as other minor technical improvements.
14. Officials at
Auckland Transport have had input into the draft submission.
15. The draft
submission to the Finance and Expenditure Select Committee on the Land
Transport Management (Regional Fuel Tax) Amendment Bill is attached to this
report. The Governing Body’s approval of the attached submission is
sought.
Ngā whakaaweawe ā-rohe me ngā tirohanga a te
poari ā-rohe /
Local impacts and local board views
16. Local Boards
have been consulted on the Bill, and any feedback provided will be provided to
the Select Committee with Auckland Council’s submission.
Tauākī whakaaweawe Māori / Māori impact
statement
17. We acknowledge that the Bill is relevant to Māori as it would
enable an RFT scheme to be established in the Auckland region. In that
regard, as part of the consultation on the LTP, Auckland Council has consulted
with Māori on the concept of a regional fuel tax as a means of funding
transport infrastructure investment. We will also consult with Māori
as part of consultation on a specific regional fuel tax proposal in the coming
weeks. Elected members will have a chance to consider that feedback in
the context of the regional fuel tax proposal process.
Ngā ritenga ā-pūtea / Financial implications
18. Comments on
the Land Transport Management (Regional Fuel Tax) Amendment Bill have no
direct financial implications in relation to this submission.
Ngā raru tūpono / Risks
19. No risks with
this draft submission have been identified
Ngā koringa ā-muri / Next steps
20. Auckland
Council has indicated in the draft submission that it wishes to appear before
the Finance and Expenditure Select Committee to discuss the submission.
We expect to be advised of the date for a hearing following the deadline for
submissions on 20 April 2018.
21. The Finance
and Expenditure Select Committee is required to report back to Parliament on 21
May 2018, with the expectation that the law is passed in June 2018 ready for
implementation in Auckland from 1 July 2018.
Ngā
tāpirihanga / Attachments
|
No.
|
Title
|
Page
|
|
a⇩ 
|
Auckland Council submission on Land Transport
Managment (Regional Fuel Tax) Amendment Bill
|
9
|
Ngā kaihaina / Signatories
|
Authors
|
Michael Burns – Acting Manager Financial
Strategy
Dani Gardiner, Manager Public Law
|
|
Authorisers
|
James Hassall - General Counsel
Matthew Walker - Acting Group Chief Financial Officer
Stephen Town - Chief Executive
|
|
Governing Body
19 April 2018
|
|
Housing Infrastructure Fund
File No.: CP2018/05239
Te take mō te pūrongo / Purpose of the report
1. To
seek approval of the council group’s submission of a detailed business
case in relation to the Government’s Housing Infrastructure Fund.
Whakarāpopototanga matua / Executive summary
2. On
23 March 2017 the Governing Body considered and approved Auckland
Council’s final proposal for Housing Infrastructure Fund (HIF) funding
across four areas. Of the four areas, Ministry for Business, Innovation and
Employment (MBIE) assessed that only the North-West area complied with HIF
criteria and made an indicative assignment to Auckland Council of $300 million.
3. The
detailed business case sets out a proposal for $300 million of HIF funding to
unlock an estimated 6,200 dwellings in the North-West area. The North-West area
focuses on the higher density zones to enable the maximum number of dwellings.
This results in the greatest potential for rapidly increasing housing.
4. Access
to HIF is a one-off opportunity which would result in estimated saving to
council of between $50-$60 million in interest costs over 10 years. Under the
proposal part of the HIF funding will show on the council balance sheet and
this can be managed within council debt limits. Transport
projects will utilise a New Zealand Transport Authority
(NZTA) Financial Assistance Rate (FAR) adjustment which means this part of the
HIF funding will not impact council debt levels.
5. The
detailed business case must be submitted to MBIE before the end of April 2018
and funding agreements between Auckland Council and MBIE will need to be
completed by June 2018. Proceeding with the detailed business case and
completion of the funding agreements enables Auckland Council to progress with
the HIF process until further information on risks associated with potential
cost escalation and developer commitment can be further assessed.
6. Auckland
Council will have the option not to proceed. Final draw down and commitment to
deliver the associated infrastructure will be conditional upon:
· final
costs for transport infrastructure coming within the budgeted envelope
· developer
commitment to:
o proceed
within the timeframes envisaged under the HIF programme.
o fund
the costs of the collector road and any cost sharing required for three waters
bulk infrastructure via development agreement.
|
Ngā tūtohunga / Recommendation/s
That the Governing Body:
a) agree
that Auckland Council will submit a detailed business case that proposes $300
million for funding from the Housing Infrastructure Fund to unlock an
estimated 6,200 dwellings in the North-West area.
b) authorise
the Mayor and Deputy Mayor to approve the final business case documentation.
c) delegate
authority to the Chief Executive and Group Chief Financial Officer to
undertake all necessary steps to implement any successful bids for funding
from the Housing Infrastructure Fund (including but not limited to discussion
of funding terms with the Government and executing funding agreements),
provided that implementation remains broadly consistent with the detailed
business case.
|
Horopaki / Context
Background
7. In
July 2016 the Prime Minister announced a $1 billion Housing Infrastructure Fund
(HIF) to accelerate the supply of new housing. The fund was intended to
provide an interim funding source to bring forward specific transport and water
projects for high-growth councils with infrastructure financing constraints.
The high-growth cities and regions are Auckland, Hamilton, Tauranga,
Christchurch and Queenstown.
8. On
23 March 2017 the Governing Body considered and approved Auckland
Council’s final proposal to unlock an estimated 37,100 dwellings across
four areas with an estimated cost of $973 million. Alternative funding
arrangements were also presented at meeting due to the financing constraints
that Auckland Council operates within. The proposal included directly accessing
HIF for North-West and Northcote areas and the use of a Special Purpose Vehicle
(SPV) for North and South.
9. MBIE
assessed that only the North-West area complied with HIF criteria and made an
indicative assignment to Auckland Council of $300 million, which was intended
to unlock 10,500 dwellings. Proposals for the North and South were rejected as
they were contingent on an SPV arrangement which were outside the criteria set
by the Government. The Northcote proposal was not of sufficient scale.
Tātaritanga me ngā tohutohu / Analysis and advice
Strategic
review and detailed business case
10. Since the
indicative assignment of HIF funding from MBIE, officers have been progressing
with the implementation process. This has involved a strategic review of the
HIF proposal along with the preparation of the detailed business case.
The strategic review set out to test the original case for investment in the
North-West area and confirmed that these were still valid and that progressing
with the HIF proposal was justified.
11. Preparation
of the detailed business case has involved a review and an in depth analysis of
project costs along with a reassessment of the expected dwelling yields. This
has been carried out in conjunction with AT and NZTA and followed industry best
practice. This level of analysis has only been able to be undertaken for the
detailed business case due to the short timeframes involved in preparation of
the original bid. To fit within the assigned budget for the North-West area the
detailed business case has focused on a smaller area that includes the higher
density zones to enable the maximum number of dwellings. This results in the
greatest potential for rapidly increasing housing.
12. The detailed
business case supports proceeding with the proposal to invest in the
North-West. The detailed business case to support the HIF application includes
a $300 million budget envelope with an estimated 6,200 dwellings being
unlocked.
North-West
Context
13. Auckland
Council has invested significantly in bulk infrastructure and community
facilities in the Westgate area. The HIF proposal compliments this
investment. Westgate, Redhill’s and Whenuapai are also considered a
strategic investment area due to being:
· live
zoned
· currently
delivering housing
· the
location of the first Council led Unitary Plan change for the region
(Whenuapai)
· a
major beneficiary of the proposed North-Western rapid transit project.
Cost
per dwelling
14. Unlocking
6,200 dwellings for a public investment of $300 million results in a cost of
around $48,000 per dwelling. Further enabling the remainder of the zones in the
North-West area will require significantly more investment for a comparatively
lower dwelling yield. Enabling the higher density areas now at a lower cost
will result in the lower density areas facing higher costs in the future when
compared to an average cost of enabling the entire area and averaging the costs
across all land owners.
Financial
impact
15. Access to HIF
is a one-off opportunity which would result in estimated saving to council of
between $50-$60 million in interest costs over 10 years. Around $130 million of
the $300 million HIF funding is proposed to be in the form of an interest free
loan. This part will be reflected in council’s financial liabilities but
this is able to be accommodated within council’s prudential debt limits.
16. The detailed
business case sets out how council intends to primarily fund this via a
combination of development contributions, infrastructure growth charges, and
developer agreements. There is also potential to look at using infrastructure
targeted rates as a funding source. This combination of funding tools provides
council with the opportunity to best incentivise developers to deliver within
the planned timeframe
Risk
of cost escalation
17. At this stage
there is uncertainty about how any escalation in transport project costs will
be shared between Auckland Council and NZTA. To maximise access to HIF funding
while reducing the impact on councils balance sheet the HIF proposal included
bringing forward NZTA FAR funding to early years with a subsequent reduction in
later years.
18. For transport
projects NZTA would typically fund around 51 per cent of total completed
project costs and the risk of cost escalation is shared between council and
NZTA. The terms of the FAR adjustment are still being negotiated with NZTA. One
potential outcome is that NZTA limit the funding available via the FAR rate
adjustment to the estimated costs in the proposal. This would expose council to
funding the entire increase in costs if the final costs exceed funding
available from HIF.
19. MBIE have
advised that a small portion of the HIF fund has not been allocated and that
any increase in costs may be met from the unallocated funds. The additional funding
available is estimated to be around $50 million across all growth councils.
Escalation in costs beyond any additional HIF funding that may be approved by
MBIE may need to be met by council.
20. There is
uncertainty around the level of risk that council is exposed to through
potential escalation in costs for capital projects associated with the HIF bid.
Project costs will continue to be refined as the HIF work programme progresses.
More robust project cost estimates will be available prior to council committing
to provide the infrastructure.
Developer
commitment risk
21. Developers
will be required to finance an accelerated programme of all local
infrastructure to enable faster delivery of housing. The proposal is also based
on developers agreeing to fund costs of the collector road and any cost sharing
required for three waters bulk infrastructure via development agreements.
22. Developers
will need to assess the viability of borrowing on this scale in the context of
business risk. Officers are currently unable to ascertain developer willingness
to proceed under the revised proposal. Discussions with developers will be held
once a decision has been released from the Environment Court regarding the
Redhills precinct plan (expected May 2018).
23. There is a
risk that developers may not be able to proceed at the speed that the council
will be seeking. Developers may also face financial constraints of their own
which limit their ability to access the financing required to fund their
portion of the local infrastructure.
Other
demands on infrastructure investment
24. Unlocking the
proposed area requires additional investment in parks of around $140 million.
This has been approved and allocations have been made in council budgets.
Further investment in community infrastructure will be required once the wider
area is unlocked. This is not expected to be in the near future.
25. Proceeding to
unlock this part of the North-West area may result in increased expectations to
unlock the remaining land in the wider area. This may result in operational
pressure to prioritise investment in the North-West ahead of other regional
priorities, particularly transport investment. Fully unlocking the wider area
now is not feasible within council’s current financial constraints and
would require further work with central government on transport funding and
priorities for this area.
Conclusion
26. Officers
recommend that the HIF detailed business case be submitted to MBIE for $300
million to unlock an estimated 6,200 dwellings. This will keep the option of
HIF funding open to council while further work is undertaken to better
understand the risks of costs escalation and to gauge developer commitment.
27. The detailed
business case must be submitted to MBIE before the end of April 2018 and
funding agreements between Auckland Council and MBIE will need to be completed
by June 2018. Completion of the agreements will not require Auckland Council to
continue with the proposal. If further changes to costs undermine the benefits
of continuing with the proposal or developers are unwilling to meet their
commitments then Auckland Council will have the option not to proceed.
Alternative
options
28. The council
could withdraw from the HIF now. This would allow more detailed work to
be undertaken on the costs and development potential in other areas supported
by investigation of alternatives to financing growth infrastructure. However,
withdrawal from the scheme at this stage may be viewed unfavourably and impact
on the council’s discussion on other alternative funding/financing
solutions. Withdrawing from HIF will also mean the council will be unable to
benefit from the interest cost savings.
29. To fully
unlock Redhills and Whenuapai will cost substantially more but enable around
13,000 dwellings. This would not fit within the indicative HIF assignment of
$300 million or within council’s debt constraints. Choosing to unlock
just one of these areas over the other would not maximise the dwelling yield
for the funding available.
30. In the
absence of HIF funding and subsequent infrastructure provision, some
development would still occur in Whenuapai and Redhills in accordance with the
AUP. Development on this basis will not progress housing and development
outcomes and will not allow council to ensure that the wider transport network
effects would be addressed.
Ngā whakaaweawe ā-rohe me ngā tirohanga a te
poari ā-rohe /
Local impacts and local board views
31. If
successful, the Housing Infrastructure Fund will support the development plans
set out in the Auckland Plan Development Strategy, the Auckland Unitary Plan,
the Future Urban Land Supply Strategy and the Transport for Urban Growth
programme business case. Local board views on these development plans
have been extensively canvassed over recent years.
Tauākī whakaaweawe Māori / Māori impact
statement
32. If
successful, the Housing Infrastructure Fund will support the development plans
set out in the Auckland Plan Development Strategy, the Auckland Unitary Plan,
the Future Urban Land Supply Strategy and the Transport for Urban Growth
programme business case. The views of mana whenua and mataawaka on these
development plans have been extensively canvassed over recent years.
Ngā ritenga ā-pūtea / Financial implications
33. Proceeding
with the detailed business case and funding agreements will enable the council
to eventually make use of the HIF funding and potentially realise estimated
interest cost savings of $50-60 million over ten years. Withdrawing from HIF
will mean the council will be unable to access these potential cost savings.
34. Around $130
million of the $300 million HIF funding is proposed to be in the form of an
interest free loan. This part will be reflected in council’s financial
liabilities but this is able to be accommodated within council’s
prudential debt limits.
Ngā raru tūpono / Risks
35. Proceeding
with the detailed business case and funding agreements will not commit council
to deliver the associated infrastructure. Should the risks associated with
continuing to access the HIF funding eventuate then council will be able to
appropriately address them at that time.
36. Withdrawal
from the HIF scheme at this stage may be viewed unfavourably and impact on the
council’s discussion on other alternative funding/financing solutions.
Ngā koringa ā-muri / Next steps
37. The detailed
business case must be submitted to MBIE before the end of April 2018 and
funding agreements between Auckland Council and MBIE will need to be completed
by June 2018.
38. The terms of
the FAR adjustment are due to be agreed with NZTA by the end of April.
39. Discussions
with developers will be held once a decision has been released from the
Environment Court regarding the Redhills precinct plan (expected May 2018).
40. Delivery
programme is expected to commence from early 2019.
Ngā
tāpirihanga / Attachments
|
No.
|
Title
|
Page
|
|
a⇩
|
HIF project areas - Redhills and Whenuapai
|
25
|
Ngā kaihaina / Signatories
|
Authors
|
Bobbi Psarkinson – Principal Advisor, Financial
Policy
Fiona Docherty Wright – Head of Infrastructure
Funding Agreements, Development Programme Office
|
|
Authorisers
|
Ross Tucker - Acting General Manager, Financial
Strategy and Planning
Matthew Walker - Acting Group Chief Financial Officer
Stephen Town - Chief Executive
|
