Addendum Agenda of Extraordinary Meeting of the Governing Body

Governing Body

30 April 2018

Auckland Transport Alignment Project Update

File No.: CP2018/02931

Te take mō te pūrongo / Purpose of the report

1. To seek support for the updated Auckland Transport Alignment Project (ATAP) and endorsement of implementation work.

Whakarāpopototanga matua / Executive summary

2. The Auckland Transport Alignment Project (ATAP) is a non-statutory joint transport planning exercise between the Council and the Government, to reach and maintain alignment on the best way to develop Auckland's transport system.

3. In late 2017 the new Government requested that an update of ATAP be undertaken to ensure that it reflects their transport priorities. Officials from the Council and the Government (including their respective transport agencies) have been working since December 2017 to update ATAP. The Mayor, Deputy Mayor and Planning Committee Chair have guided the Council's involvement in this work.

4. The Government's transport priorities are articulated in the recently released draft Government Policy Statement on land transport and align strongly with the direction of the draft Auckland Plan. In particular Auckland Council and the Government share a commitment to improving travel choices, safety and environmental outcomes. Updating ATAP provides an opportunity to ensure this alignment is reflected in pending updates of a number of key statutory transport planning and funding documents.

5. The updated ATAP report (Attachment A) details a $28 billion, ten year transport investment package (the "ATAP Package"). Full implementation of the ATAP Package would substantially improve Auckland's transport system by:

· accelerating large parts of the rapid transit network

· progressing key roading projects

· enabling major improvements to cycling, safety, bus priority and network optimisation

· supporting a faster rate of housing development.

6. The ATAP Package is designed to reflect the best mix of investments within the $28 billion of transport funding that is planned or assumed to be available over the next decade. This represents an increase of around $4.6 billion on 2015 funding plans. This increase is from the proposed Regional Fuel Tax, Crown Infrastructure Partners and extra funding from the National Land Transport Fund. Because the ATAP Package fits within this planned and assumed funding level, there is no funding gap to deliver it.

7. Strategic transport modelling and detailed analysis from project business cases suggests the ATAP Package performs strongly across a wide variety of key outcomes, especially in relation to safety, public transport access, supporting housing growth along the rapid transit network and cycling mode share. Modelling also indicates that the proportion of travel in congested conditions during the morning peak by car is projected to remain around 2016 levels, despite population growth of around 300,000 people.

8. Cabinet has agreed to the direction set out in the ATAP update and the package of investments needed to enable it. The high level of alignment between the Government and the Council reflected in this ATAP update represents a major milestone for Auckland's transport future. To deliver the ATAP Package, ongoing work with Government is required in relation to:

· funding and financing options

· transport planning and project evaluation processes

· exploring options to help focus Auckland's growth around the rapid transit network.

Ngā tūtohunga / Recommendation/s

That the Governing Body:

a) support the update to the Auckland Transport Alignment Project (Attachment A of the agenda report)

b) agree to the following implementation actions:

i) ensure the Auckland Transport Alignment Project update is a key input to decisions on the final Auckland Plan, the Ten Year Budget (Long-term Plan) and the Regional Fuel Tax proposal

ii) continue to work with the Government to identify and consider transport funding and financing options

iii) work with the Government to consider whether changes to transport planning and funding processes, and project evaluation tools, are required to deliver the strategic direction for transport in Auckland

iv) continue to work with the Government to investigate opportunities to maximise the growth and city shaping benefits of investment in rapid transit.

Horopaki / Context

Introduction

9. ATAP was established in 2015 to improve alignment between Auckland Council and Central Government on the future of Auckland’s transport system. The ATAP long-term strategic approach and an accompanying ‘indicative investment package’ were supported by the Governing Body in September 2016.

10. In August 2017 ATAP was updated in response to faster than expected population growth, which necessitated the earlier completion of some projects.

11. In late 2017 the new Government requested an update to ATAP to ensure it reflected their transport priorities, which place greater weight on public transport (especially rapid transit), walking and cycling, improving safety, and broad environmental, health and growth outcomes.

12. Around the same time Auckland Council approved the draft Auckland Plan, which reflected the long-term strategic approach of the original ATAP, but with a greater focus on improving travel choices (public transport, walking and cycling) and reducing harm to people and the environment.

13. The ATAP update therefore provides an opportunity to ensure transport investment priorities reflect the increasingly aligned transport vision of both the Government and Auckland Council. To do this, officials from Auckland Council, Auckland Transport, Treasury, Ministry of Transport, New Zealand Transport Agency, KiwiRail and the Ministry of Business, Innovation and Enterprise (MBIE) have been working since December 2017 to develop an updated indicative package (the "ATAP Package").

14. The Terms of Reference for the ATAP update (Attachment B) established a governance group jointly chaired by the chief executives of the Auckland Council and the Ministry of Transport. The governance group was charged with delivering a final report to the Ministers of Finance and Transport; and the Mayor, Deputy Mayor and Chair of the Planning Committee (the “Parties”).

Strategic Direction

15. The original 2015 ATAP process identified four critical transport challenges:

· enabling a faster rate of housing growth

· addressing projected declines in access to jobs for people living in large parts of the west, and some parts of the south

· addressing increasing congestion on the motorway and arterial road network

· increasing public transport mode share.

16. This ATAP update seeks to address these challenges by giving greater emphasis to the Government and Auckland Council’s shared transport priorities of (as set out in the Terms of Reference):

· accelerating the development of Auckland’s rapid transit network, particularly to unlock housing and urban development opportunities;

· encouraging walking and cycling and making these active modes safer for Aucklanders;

· delivering health, safety and environmental improvements, including disability access; and

· ensuring the indicative package delivers the best possible value for money, including broader non-monetary costs and benefits.

17. There is very strong alignment between these priorities and the draft Auckland Plan, particularly in terms of the focus areas in the Transport and Access outcome, and the Development Strategy.

Revenue

18. The ATAP Package is based around $28 billion of planned and assumed transport funding for Auckland over the next ten years. This funding level is drawn from the draft Ten Year Budget and the draft Government Policy Statement on land transport. It is around $4.6 billion more than was available for the 2015 round of statutory planning documents. This extra revenue is comprised of:

· $2.8 billion additional contribution from the National Land Transport Fund to reflect an appropriate share of funding for Auckland as signalled in the draft Government Policy Statement on land transport

· $1.5 billion from the proposed Regional Fuel Tax

· $360 million from Crown Infrastructure Partners (which will need to be repaid by landowners through funding agreements)

19. The $28 billion of assumed planned and proposed revenue is made up as follows:

Funding Source		Funding Amount (inflated to year of spend)
Auckland Council	Rates, development contributions and borrowing	$8.45 billion
Auckland Council	Regional Fuel Tax	$1.5 billion
Government	National Land Transport Fund	$16.3 billion
	Crown contribution to City Rail Link	$1.4 billion
	Crown Infrastructure Partners (repaid by landowners through funding agreements)	$0.36 billion
Total:		$28.0 billion

The ATAP Package

20. The ATAP Package represents the best mix of investments within available funding to deliver on the strategic direction over the next ten years. Compared to the previous ATAP, it places a greater focus on public transport (especially rapid transit), walking and cycling, safety and broader health, environmental and growth outcomes.

21. The ATAP Package provides direction to the more detailed project prioritisation process that will be undertaken through the development of the Regional Land Transport Programme (RLTP). It does this by recommending major projects for inclusion in pending statutory transport funding plans and by allocating the available funding of $28 billion across several broad investment areas.

22. The major projects included in the ATAP Package are:

Committed Projects
· City Rail Link · Puhoi-Warkworth motorway · Additional electric trains · Manukau-Papakura motorway widening · Northern corridor improvements and Northern busway extension to Albany
New Projects
· Light rail (City-Airport and Northwest corridor) · Eastern busway (Panmure-Botany) · Airport-Puhinui state highway upgrade, bus/rail interchange and bus priority improvements · Lower cost East West Link · Pukekohe electrification, third main Westfield-Wiri and further new electric trains · Papakura-Drury motorway widening · Mill Road (first phase) · Penlink toll road and Albany-Silverdale bus improvements · Significant safety programme · Enhanced walking and cycling, bus priority and network optimisation programmes · New infrastructure to enable greenfield growth

23. The ATAP Package allocates funding across broad investment categories in the following way:

Investment Area	Investment (inflated to year of spend)
Rapid Transit (rail, light rail, busway)	$8.4 billion
Strategic & local roads	$3.8 billion
Supporting greenfield growth	$1.3 billion
Safety programmes	$0.9 billion
Walking, cycling and local board priorities	$0.9 billion
Bus & ferry	$0.7 billion
Optimisation & technology	$0.7 billion
Total new projects	$16.7 billion
Asset renewals	$3.3 billion
Operations (net of revenue)	$8.1 billion
Total	$28.0 billion

24. The funding for rapid transit includes an initial allocation of $1.8 billion for light rail. This will be used to leverage third party funding and financing sources to progress light rail delivery over the next ten years, with the priority being the City to Airport and Northwest corridors.

25. Delivery of the ATAP Package will substantially improve the effectiveness of Auckland’s transport system. The ATAP report identifies the need for more joint work into funding and financing options. As this work progresses and more funding becomes available, additional investment should first be targeted to the following priorities in order to deliver a transformational transport programme:

· more extensive cycling and walking programmes

· further bus priority initiatives

· more support for greenfield growth

· more extensive network optimisation programmes

· additional public transport service improvements

· rail network upgrades to support express trains within Auckland and regional services between Auckland and Waikato.

ATAP Package outcomes

26. Key outcomes expected from the ATAP Package include:

· significant housing and business growth around corridors where the delivery of rapid transit infrastructure will be accelerated. Realising the potential of the rapid transit network to unlock significant additional housing is key to the effective functioning of the transport network as Auckland grows to around two million people by 2028

· initial support for transport infrastructure that enables growth in greenfield areas, where around 30 percent of growth is forecast to occur

· increased peak time public transport and cycling mode share - public and active transport share of morning peak travel is expected to grow from its current level of one quarter of all trips, to around a third of all trips by 2028. Annual public transport ridership is expected to grow from 93 million boarding in 2018 to 170 million by 2028. This will have significant safety, environmental, health and congestion benefits

· improved access to employment by both car and public transport by 2028. Congestion levels for car users to remain around 2016 levels, despite forecast population growth of around 300,000 people over the next decade. Congestion is expected to improve for public transport users over the next decade as a higher proportion of services travel along corridors separated from general traffic

· improved safety outcomes with an expected 60 percent reduction in deaths and serious injuries from 813 in 2017, to no more than 325 in 2027

· improved health and environmental outcomes through increased take up of public transport, walking and cycling, and reduced reliance on single occupant vehicles.

27. Given the scale of planned investment it is critical that the ATAP package delivers good value for money. The weighted average benefit cost ratio across the entire package was calculated as around 2.6. This suggests the package represents good value for money.

28. Value for money analysis will be conducted on a project by project basis for all potential investments proposed in the ATAP Package as part of the process for determining whether to proceed with each of them.

Tātaritanga me ngā tohutohu / Analysis and advice

29. Transport is a partnership between the Council and the Government. There is now strong alignment between both parties on how best to develop Auckland's transport system. The ATAP Package details how this alignment translates into a 10 year investment programme.

30. Since Auckland Council was formed in 2010 the need to accelerate transport investment has been clear. Substantial steps have recently been made to increase transport funding, with an extra $4.6 billion over the next 10 years now expected from a combination of the planned Regional Fuel Tax, likely Crown Infrastructure Partners funding and increased revenue from the National Land Transport Fund.

31. Supporting the ATAP update and endorsing key implementation actions around funding, reviewing transport planning processes and shaping Auckland's growth, will be critical to its successful implementation. As a key partner in these areas, it is critical for Council to participate in this ongoing work.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe /
Local impacts and local board views

32. The updated ATAP will have significant local impacts not just in terms of the timing and location of specific projects throughout Auckland, but also as a result of the overall impact of its recommended strategic direction.

33. ATAP, including the updated ATAP Package, does not have statutory standing. The ATAP strategic direction must be agreed to and then reflected in statutory planning documents such as the Auckland Plan, RLTP and the Ten Year Budget, before it is given effect to. These are all currently under development and there are well established processes to facilitate Local Board input into these documents.

34. Local Boards will also have opportunities to input into the development and implementation of specific projects, depending on their location, through standard business case, project design and consenting processes.

35. The ATAP Package also recommends that $240 million be allocated to Local Board priorities, through the Local Board capital programme. This is almost double the amount suggested in previous ATAP work. Local Boards would work with Auckland Transport to determine how this fund is allocated.

Tauākī whakaaweawe Māori / Māori impact statement

36. As with all Aucklanders, Māori will benefit considerably from the forecast improvement in access, safety, environmental outcomes and transport choice offered by the ATAP Package. While the specific impact of ATAP will vary between individuals and iwi depending on a myriad of factors, some aspects of the strategic direction are of particular relevance for Māori - most notably the focus on improving access for those living in the West and South.

37. Māori will have considerable opportunities through established processes to input into the statutory documents that will give effect to the ATAP strategic direction. Iwi groups will also be consulted as key stakeholders throughout the planning, design and implementation of specific projects.

38. The ATAP report flags an update to the design standards for transport infrastructure as one of the complementary (to the proposed level of transport investment) interventions required to ensure its strategic direction is given effect to. Ensuring that new transport infrastructure reflects Auckland’s unique Māori identify is a pivotal element of this.

39. Māori have been over-represented in Auckland’s deaths and serious injuries statistics and thus the planned increase in funding to improve safety is likely to be of particular benefit to Māori. More specifically, the ATAP Package also includes a dedicated fund to improve safety around around marae and papakāinga.

Ngā ritenga ā-pūtea / Financial implications

40. Transport is Auckland Council's largest area of investment, with transport funding decisions made through Ten Year Budget and Annual Plan processes. ATAP is a non-statutory document that helps to inform these funding decisions, as well as guide transport funding decisions made by Auckland Transport, the Government and the NZ Transport Agency.

41. Greater alignment between Council and the Government on transport should translate into a higher level of New Zealand Transport Agency co-funding for activities funded by the Council. This means that more will be able to be delivered for the same level of Council investment.

42. The implementation work recommended by the report can be delivered within existing budgets.

Ngā raru tūpono / Risks

43. Given ATAP’s ten year horizon there is a degree of uncertainty inherent in its projected outcomes, costs, revenue sources and the growth assumptions on which they are based. This uncertainty is mitigated to a significant extent by the fact that the statutory documents which give effect to ATAP are updated on a frequent basis and can be adjusted as any of these factors change.

44. In addition to this there are specific risks around funding for ATAP. The ATAP Package relies on funding sources that are proposed but not yet confirmed, specifically the Regional Fuel Tax. The $1.5 billion of forecast Regional Fuel Tax revenue supports around $4 billion worth of investment once the government co-funding and the development contributions contingent upon that revenue are accounted for.

45. Should the Regional Fuel Tax proposal not be confirmed by Council, the ATAP Package will need to be cut back by around $4 billion. This would leave almost no funding available for Auckland Transport projects other than those that are already underway or committed.

Ngā koringa ā-muri / Next steps

46. The immediate next step is to align statutory planning documents with the ATAP strategic direction. The RLTP, Regional Fuel Tax Proposal, Development Contributions Policy and the Ten Year Budget must all be confirmed by the end of June 2018.

47. While acknowledging the substantial increase in transport funding the ATAP report also recognises that more funding will be required if the shared transport vision of the Government and Auckland Council is to be realised. The report recommends that urgent work be undertaken to address this and identify both short and long term funding solutions. As a first step, the report recommends that a joint Government-Council funding and finance work stream be established to consider options in this respect.

48. In addition, the ATAP report identifies other implementation actions:

· consider what changes may be required to transport planning and funding processes and project evaluation tools to achieve the Government and Council's direction for transport in Auckland

· develop plans to communicate key goals and targets

· streamline business case processes to better recognise the strategic direction provided through ATAP

· investigate opportunities to maximise the growth and city-shaping benefits of investment in rapid transit.

49. Council staff will continue working with colleagues from central government agencies on these matters and will make recommendations to the Governing Body in due course.

Ngā tāpirihanga / Attachments

No.	Title	Page
a ⇩	Auckland Transport Alignment Project - April 2018	13
b ⇩	Auckland Transport Alignment Project - Terms of Reference	59

Ngā kaihaina / Signatories

Authors

Robert Simpson - Principal Transport Advisor, Transport Strategy

Joshua Arbury – Lead Transport Advisor, Transport Strategy

Authorisers

Jacques Victor - GM Auckland Plan Strategy and Research

Jim Quinn - Chief of Strategy

Stephen Town - Chief Executive

Governing Body

30 April 2018

Adoption of Regional Fuel Tax proposal

File No.: CP2018/04866

Te take mō te pūrongo / Purpose of the report

1. To seek approval of a draft proposal for Regional Fuel Tax (RFT), as the basis of public consultation.

Whakarāpopototanga matua / Executive summary

2. Council has recently completed consultation on its 10-year Budget (LTP). The Consultation Document signalled the Council’s proposal to fund additional transport infrastructure through a Regional Fuel Tax subject to legislation providing the basis for this.

3. At the time of the 10-year Budget consultation the Government Policy Statement (GPS) on Land Transport and the Auckland Transport Alignment Project (ATAP) were still under review so the projects for funding by a Regional Fuel Tax could not be identified.

4. Since then the Land Transport Management (Regional Fuel Tax) Amendment Bill has been introduced and the draft GPS and ATAP have been released.

5. A draft Regional Fuel Tax proposal has been prepared, based on the draft legislation, for consideration by the Governing Body. The approved proposal would form the basis of public consultation.

6. Public consultation will run for two weeks from 1 May 2018 – 14 May 2018. It will be predominantly digitally based but will endeavour to reach as widely as possible in that period and provide for those who wish to use hard copy alternatives.

Ngā tūtohunga / Recommendation/s

That the Governing Body:

a) approve the draft Regional Fuel Tax proposal appended in Attachment A of the agenda report.

b) approve public consultation on the draft Regional Fuel Tax proposal and the Overview document appended in Attachment B of the agenda report, from 1 May 2018 to 14 May 2018.

c) authorise the Mayor and Deputy Mayor to make any minor amendments to the draft Regional Fuel Tax proposal or Overview document prior to the commencement of the public consultation period.

Horopaki / Context

7. In preparing the 10-year Budget 2018-28 (LTP), the Council considered a range of funding options for its activities. The consultation on the 10-year Budget signalled that in order to achieve the level of investment that Auckland needs to address its transport issues, new funding mechanisms for transport were required. A RFT of 10 cents per litre plus GST was proposed, subject to central government providing a legislative basis for such a tax.

8. While the RFT, as a funding mechanism, was the subject of consultation, there was no ability to identify the projects that might be funded from the RFT at that time. The GPS and ATAP were still under review at the time of the 10-year Budget consultation, leading to some uncertainty about project priorities.

9. In the intervening weeks:

a) The government has initiated the Land Transport Management (Regional Fuel Tax) Amendment Bill, which is currently progressing through the Parliamentary process. If passed, this will enable Auckland to levy a RFT of up to 10 cents per litre, plus GST, from 1 July 2018.

b) The draft GPS has been released for consultation and ATAP has been updated in light of the new government priorities. This has enabled development of the Regional Land Transport Plan (RLTP) and guided the identification of the highest priority projects which are proposed to be funded by the RFT.

c) The Governing Body set up a Political Advisory Group to work with staff on developing a proposal for Regional Fuel Tax, as required by the draft legislation.

Tātaritanga me ngā tohutohu / Analysis and advice

10. A draft Regional Fuel Tax proposal has been developed based on the requirements of the draft legislation. While the legislation is still to progress through the full Parliamentary process, the transitional provisions in the legislation mean that Auckland Council can develop a draft proposal, consult with the public, and submit to the responsible Ministers for consideration, once the legislation has been passed.

11. The selection of projects in the proposal was guided by the government’s priorities, as expressed through the draft GPS and ATAP, and by the criteria agreed by the Political Advisory Group.

12. The Regional Transport Committee meeting of 27 April 2018 considered the Draft RFT Proposal. Their views will be conveyed to the Governing Body at this meeting.

13. The draft proposal (Attachment A) now requires consideration and adoption by the Governing Body for public consultation. Also included with this report is the proposed public consultation overview (Attachment B) which summarises the draft RFT proposal and indicates where the benefits of each of the projects will fall across the region.

14. The draft proposal and overview document signal the council’s intent to exclude Great Barrier Island from the RFT, in line with council’s submission on the draft legislation and subject to the legislation being amended accordingly. The overview document also signals council’s advocacy in support of rebates being enabled for fuel that is purchased for off-road use.

Communication and Consultation

15. Due to the very compressed timetable for this process, public consultation will run for two weeks from 1 May 2018 – 14 May 2018 and concurrent with consultation on the RLTP and Development Contributions Policy. Consultation will primarily be digitally focused (using the akhaveyoursay.nz website) although hard copy material and feedback forms will be available at libraries and service centres.

16. Translated summaries will be available and will be shared with community partners who staff will work with to encourage feedback from their communities. A social media campaign will also be facilitated with Maori communities/ mataawaka including two Radio Waatea live-streamed hui and ‘Q and A sessions’ to run with Maori communities in the south and west.

17. Awareness of the consultation and promotion of the public events will be via Auckland Council and Auckland Transport social media channels and proactive media engagement. Print, radio and digital advertising will be the primary focus of the media engagement.

18. OurAuckland will be delivered during the consultation process but due to print deadlines will not have details of the draft proposal, however a more generic awareness article will point readers to the akhaveyoursay website. A range of features will also appear on the online version of OurAuckland.

19. Four public drop in events will be held during the consultation period which will be combined Auckland Transport and Auckland Council events:

· Takapuna 7 May 2018

· Manurewa 8 May 2018

· New Lynn and Grey Lynn 12 May 2018

In addition three other events will be held:

· Mana whenua briefing 1 May and Have Your Say event 15 May 2018

· Regional Stakeholder event 11 May 2018

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe /
Local impacts and local board views

20. Early engagement took place with Local Boards on the development of the RLTP and the views of the boards have been considered through that process. The RLTP priority projects are reflected in the draft RFT proposal, along with a few specific Local Board priorities.

21. Local Boards have been invited to attend a briefing on the draft RLTP on 30 April 2018 and the draft RFT proposal will also be covered at this briefing.

22. Local Boards will have the opportunity to provide formal feedback to the Governing Body for consideration in the final decision making on the RFT proposal.

Tauākī whakaaweawe Māori / Māori impact statement

23. The introduction of a RFT will negatively impact some lower socio-economic communities who do not have access to alternative transport options and rely on their private vehicles. Maori tend to represent a high proportion of these communities. However, many of the projects that will be funded by the RFT are targeted at improving transport access to jobs and education for these communities as well as providing greater public transport alternatives. In the longer term this should have a positive impact for these communities.

Ngā ritenga ā-pūtea / Financial implications

24. The 10-year Budget consultation clearly signalled to the community the need to invest more heavily in transport infrastructure and the options for funding this. The RFT was the council preferred option for addressing the funding shortfall.

25. Without a RFT, Council would need to either:

a) Utilise another of the currently available funding mechanisms (general rates or an Interim Transport Levy); or

b) Fund transport at the level of renewals and committed projects only.

26. The rating options would result in ratepayers facing significant increases (10-11%) in addition to the general rates increase and paying according to their property value rather than based on their use of the transport system. To fund the transport budget at the level of renewals and committed projects only will have significant impacts on the growth and economy of Auckland.

27. The impact of the proposal on the council’s overall finances will be considered through the LTP process ahead of the Governing Body making decisions on a final RFT proposal.

Ngā raru tūpono / Risks

28. The risks associated with this proposal are:

a) Timing – the draft legislation and the proposal are working in parallel to achieve an implementation date of 1 July 2018. There can be no slippage in either process.

b) Financial – as set out above a significant proportion of the Auckland Council transport budget relies on the ability to provide a RFT as a funding mechanism.

c) Strategic Alignment – significant effort has gone into aligning the RFT proposal with ATAP, the draft GPS, the RLTP and the Auckland Plan. This alignment needs to be maintained going forward.

Ngā koringa ā-muri / Next steps

29. Following the adoption of the draft Regional Fuel Tax proposal:

· Consultation on the proposal will take place for two weeks from 1 May 2018

· On 29 May 2018 Councillors will have a workshop /briefing on public feedback and Local Board views on the proposal

· On 31 May 2018 the Governing Body will consider adoption of a proposal for submission to government.

Ngā tāpirihanga / Attachments

No.	Title	Page
a ⇩	Draft Regional Fuel Tax Proposal	69
b ⇩	Overview of Regional Fuel Tax Proposal	91

Ngā kaihaina / Signatories

Authors

Theresa Stratton - Senior Business Analyst

Kenneth Aiolupotea - Head of Citizen Insights & Engagement

Authorisers

Matthew Walker - Acting Group Chief Financial Officer

Stephen Town - Chief Executive

Governing Body

30 April 2018

Contributions Policy 2018 Consultation

File No.: CP2018/05183

Te take mō te pūrongo / Purpose of the report

1. To adopt a draft Contributions Policy 2018 for consultation.

Whakarāpopototanga matua / Executive summary

2. The Council is required to review its Contributions Policy, adopted in 2015, by 1 July 2018. Officers have reviewed the Contributions Policy 2015 and recommend a number of changes which are included in the draft Contributions Policy 2018 in Attachment A based on the:

· capital expenditure programme in the draft Long-term Plan 2018-2028 (LTP)

· proposed Regional Land Transport Plan (RLTP) capital expenditure, including projects to be part funded by the proposed Regional Fuel Tax (RFT)

· provision for investment to support potential Housing Infrastructure Fund (HIF) and Crown Infrastructure Partnership (CIP) developments.

3. The capital expenditure to be funded by growth under the draft Contributions Policy 2018 is $1.4 billion higher than under the current policy. While the majority of the increase is transport related, this also includes an additional $322 million capital expenditure on community infrastructure and parks. As a result of changes to the capital expenditure programme the average urban development contribution price (DC) will rise from $21,000 to $27,000 (excl GST).

4. The draft policy extends the time for DCs payment by at least six months for residential developments.

5. The draft Contributions Policy 2018 also includes changes to:

· funding areas for transport to reflect the Crown Infrastructure Partnership and Housing Infrastructure Fund investment areas

· the level of charging for some types of development to better reflect the demand they place on infrastructure.

6. Consultation on the draft Contributions Policy 2018, the RLTP and the Regional Fuel Tax will occur at the same time. Advice regarding the adoption of the final Contributions Policy 2018 will reflect any changes to LTP Capex programme as a result of consultation on these issues.

7. Officers propose to work with central government on a longer term (30 year) capex programme to reflect costs to support greenfield development. Officers would report progress by the end of September 2018.

Ngā tūtohunga / Recommendation/s

That the Governing Body:

a) agree to consult on the attached draft Contributions Policy 2018

b) delegate responsibility for finalising consultation material to the Chair of the Finance and Performance Committee and the Group Chief Financial Officer

c) request officers to report back by the end of September 2018 on progress on capital expenditure and development contributions for greenfields areas.

Horopaki / Context

8. The current Contributions Policy 2015 was adopted alongside the Long-term Plan 2015-2025. Development contributions have generated approximately $400 million of income for growth projects in the last three years.

9. The Council’s Contributions Policy must be reviewed at least once every three years, and therefore Council must review its Contributions Policy by 1 July 2018. Officers have reviewed the Contributions Policy 2015 and recommend that it be amended to reflect changes to capital expenditure in the draft LTP 2018-2028, the RLTP and the proposed RFT.

10. The council must consult on and adopt an amended policy by 1 July 2018. If this timeframe is unable to be met, then an extension to the existing policy will need to be agreed.

11. Decisions on the LTP 2018-2028, any RFT proposal and the Contributions Policy will be made concurrently on 31 May 2018. This will allow any changes to capital expenditure following consultation to be incorporated into the Contributions Policy 2018.

12. The policy has been reviewed in accordance with the following principles:

· purpose and principles of development contributions under the Local Government Act 2002

· equitable sharing of costs of growth between ratepayers, developers and other members of the community having regard to such matters as who causes the costs and who receives the benefits

· equitable sharing of costs of growth between different types of development and different funding areas

· revenue certainty for the council and cost certainty for developers

· alignment with outcomes sought in the Unitary Plan

· administrative simplicity

· ensuring legislative compliance.

Tātaritanga me ngā tohutohu / Analysis and advice

Capital expenditure and funding for Auckland’s growth

Capital investment

13. Over the next ten years, council will need to fund $9.9 billion of infrastructure to enable the construction of 120,000 dwellings to house an expected 300,000 additional Aucklanders. The growth component of this is $3.4 billion. The draft LTP 2018-2028 provides for additional projects (including RLTP, RFT and potential HIF and CIP projects) with a growth component $1.4 billion higher than the LTP 2015-2025. This includes an additional $1 billion in transport and $322 million investment in community infrastructure and parks.

Funding Community Infrastructure

14. Central government has recently introduced the Local Government (Community Well-being) Amendment Bill which would restore the Council’s ability to use DCs to fund public swimming pools and libraries. It is not certain when this legislation will be passed so provision for the inclusion of public swimming pools and libraries has not been included in the draft Contributions Policy 2018. Once the legislation has been passed the council can consider amending the policy to include the growth component of any qualifying expenditure or to prioritise within the expenditure programme for community infrastructure.

Contributions pricing

15. With Auckland Council’s current financial constraints, the ability to debt-fund growth infrastructure is constrained. DC prices need to rise to allow this investment to proceed. Without an increase in prices general ratepayers will continue to subsidise growth or investment will be delayed or halted. This will impact on the ability to maintain service levels in response to growth and to support housing development.

16. The average urban DC will rise from $21,000 (excl. GST) to $27,000 (excl GST). DC prices vary across the region depending on the infrastructure investment required to support growth e.g.

· Albany - new DC price will be $33,800 to reflect increase in transport infrastructure

· Howick - new DC price will be $21,000 as there is capacity available in existing network infrastructure.

17. Officers have updated the Contributions Policy to reflect the growth capex programme in the draft LTP 2018-2028.

Impact of increasing DC price

18. Increasing the DC price does not generally increase house prices, as these are set by the market, not developers. Commercial real estate agency CBRE highlighted that announcing and then building infrastructure increases land prices massively across Auckland. This allows large unearned windfall gains by the original land owner. Increasing the DC price will result in lowering of prices for developable land, as the market adjusts to the true cost of infrastructure being incorporated into what developers can pay for land.

19. Raising the price of DCs:

· reduces the subsidy from general ratepayers to greenfield developments

· better aligns DCs with actual cost of infrastructure

· increases certainty that infrastructure will be delivered

· encourages developers to more accurately price land purchased for development to reflect future DC costs, thus reducing the windfall to the original land owner

· negatively impacts developers who have overpaid for land based on the assumption that needed infrastructure will be subsidised by ratepayers.

Other proposed changes to the Policy

Funding areas

20. The draft Contributions Policy 2018 includes four additional funding areas for transport. These funding areas allocate the cost of transport infrastructure to the priority growth areas in Kumeu/Whenuapai/Redhills, Dairy Flat/Wainui/Silverdale (supporting development related to HIF and CIP initiatives), Greater Tamaki and Albany. An additional funding area has also been created for reserves and community in Greater Tamaki.

Development Types

21. Officers also recommend amendments to the following development types to better reflect the demand they place on infrastructure or clarify definitions.

Student accommodation

22. Create a new ‘student accommodation units’ category for student accommodation (administered by schools/universities). Student accommodation is closer to their residents primary travel destination and these institutions generally provide some open space. This category will have a lower price for transport and open space than residential development.

Aged care rooms

23. Reduce the DCs payable for Aged Care Rooms by removing the requirement to pay for Community Infrastructure. Officers consider that the nature of the persons occupying these units makes it unlikely that they would use Community Infrastructure such as play grounds, toilets or community halls.

Small ancillary dwelling units

24. Change the ‘size’ definition of small ancillary dwelling units to those with a gross floor area less than or equal to 65m². This aligns the Contributions Policy with the definition in the Unitary Plan to avoid customer confusion.

Retirement villages

25. Amend the definition of a ‘Retirement Village’ to align with the Unitary Plan to avoid customer confusion.

Accommodation units for short term rental

26. Amend the definition of Accommodation Units to clarify that they include properties used for short term rental. Long-term rentals will continue to be treated as dwelling units.

Payment timing

27. Residential developments are currently required to pay DCs when the building consent is issued. Officers propose to adjust the payment timing for residential developments as follows:

· developments that create five or more dwelling units will be classified as non-residential developments. This will allow the DCs assessment to be invoiced at time the Code Compliance Certificate (CCC) is applied for. This will extend the time until council receives payment by an average of 9-18 months.

· all other residential developments will be charged six months after building consent is issued.

28. This change will support residential developers by better aligning the requirement to pay DCs with developers’ cash flows. Reducing the amount of capital investment required prior to construction will make it easier for developers to finance and progress residential projects. Under this option, the timing of payment for residential DCs is more closely aligned to the time at which the increase in demand for infrastructure occurs.

Reserve pricing

29. Councillors have also requested consideration of a move to funding Parks through charges on land values rather than on Household Unit Equivalents (HUEs). Changing the reserve pricing tool will not raise additional funds for parks. This is because council can only charge for planned investment.

30. Officers do not recommend the use of land value pricing for reserves. Moving to land value based charging requires council to fund the cost of valuing the land. It also increases the risk to council’s future revenue due to the uncertainty of future land prices. While land value pricing aligns charges to the cost of park land purchases in the local area, the same affect can be achieved through the use of funding areas for HUE based charges.

Alternative options considered

31. There are two alternatives to the proposed increase in development contributions;

· defer or halt proposed capital projects supporting growth

· increase ratepayer funding of these projects.

32. The increase in development contributions price over the 10 years of the LTP 2018-2028 is forecast to provide an additional $800 million of revenue. Without this revenue the council would need to reduce its proposed capital expenditure by between $1billion and $3 billion depending on which projects were prioritised. This sum may exceed the loss in revenue because development contributions make up varying proportions of the funding of individual projects^{^[1]}. Officers do not recommend this option as these investments are vital to:

· maintaining service levels in the face of growth pressures

· supporting making land available for new development in both the greenfields and brownfields.

33. To maintain the proposed level of investment without increasing development contributions would require an increase in rates funding of between $50 million and $150 million per annum. This is equivalent to an additional general rates increase of between 3 and 10 per cent. Land owners, developers and the owners of new construction are the beneficiaries of the portion of investment in infrastructure that supports growth. Officers do not recommend this option as it is appropriate that the growth share of funding comes from the beneficiaries via development contributions not general ratepayers.

34. The council’s draft Revenue and Financing Policy (consulted on at the same time as the LTP 2018-2028) provides for the use of targeted rates to fund growth infrastructure. However, no proposals have been consulted on as part of the Long-term Plan 2018-2028. As rates can only be struck as part of an Annual or Long-term Plan this is not a practical option for the 2018/2019 year. The council may consider targeted rates to fund growth infrastructure in the future.

35. Officers have also considered not making changes to the policy noted in the other changes section above and maintaining the status quo. These options were rejected for the reasons set out in the table below.

Proposed change	Reason for rejection of status quo as an option
New funding areas	Contributions for development in these areas would be below their share of the cost. The additional cost would fall on other developers
Amend demand factors for: · student accommodation · aged care rooms	Contributions for these developments would pay a share of costs in excess of the demand they place on infrastructure
Definition amendments for: · small ancillary dwelling units · retirement villages · accommodation units for short term rental	Ongoing confusion for customers dealing with different definitions in council policies and additional administration costs to resolve
Payment timing for residential developments	Does not support residential developments by aligning payments with cashflows.

Future Urban Land Supply Strategy and a long-term view of growth costs

36. The Auckland Transport Alignment Project and the RLTP reflect the government’s medium term priorities for transport investment. The priorities are public transport and safety with limited provision for roading. Timing challenges have meant only preliminary consideration has been given to future transport needs to support greenfields development. Therefore the draft Contributions Policy 2018 only includes additional investment in infrastructure in a few priority development areas. As a result the proposed average greenfields DC price is $27,000 (GST excl), which is at the same level as the proposed average urban DC price.

37. However, the investment in infrastructure to support the council’s Future Urban Land Supply Strategy identifies the cost per house in greenfields as around $150,000. This includes the cost of the government’s investment in state highway upgrades, NZTA’s contribution to council roading investment and Watercare’s Infrastructure Growth Charge. The proportion of the overall cost that would be recovered from development contributions is approximately $70,000.

38. In the medium term it is important that DC prices set for greenfields reflect the longer term overall cost of the required infrastructure. This will ensure that development in greenfields:

· is not subsidised by general ratepayers

· is priced appropriately in comparison to brownfields intensification

· does not allow early movers to pay lower prices and shift the burden to later developers

· ensures more cost-effective infrastructure procurement. For example, it is likely to be cheaper if a 30-year view is taken from the onset when delivering the infrastructure needed to service the ultimate population of greenfield areas. Securing land for future roads and parks prior to development, or initially constructing bridges that provide for future road widening, is more cost-effective than retrofitting infrastructure

39. Officers will work with central government to determine longer term investment plans for the roading to support greenfields development. This will provide a foundation for planning the capital expenditure programme to be funded from development contributions. Progress on this work will be reported on by the end of September.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe /
Local impacts and local board views

40. The DC price varies by location depending on the cost of infrastructure required to support development in an area. The funding areas are set out in the attached policy documents.

41. Boards will be able to provide feedback during the consultation period (1 May to 14 May 2018).

Tauākī whakaaweawe Māori / Māori impact statement

42. Council does not hold information on the ethnicity of developers. The impact on Maori will be similar to the impact on other residents and ratepayers.

43. The Council’s Māori cultural initiatives fund provides grants to support marae and Papakāinga development. These grants can be used to fund DCs as well as other development costs.

44. The Contributions Policy treats Kaumatua Housing the same as retirement villages.

45. Kaumatua housing generally places the same lower demands on council services as retirement villages. Research shows the typical characteristics of Kaumatua housing are good access to on-site social and cultural connections, close proximity to direct family (Papakāinga) and the wider Maori community, an onsite health clinic and transport often coordinated through communal people movers rather than individual car ownership and use.

46. Feedback from iwi on the draft Contributions Policy 2018 will be sought at hui to be held on 2 May 2018.

Ngā ritenga ā-pūtea / Financial implications

47. The financial implications are set out in the report.

Ngā raru tūpono / Risks

48. Investment in DC funded growth related infrastructure carries the risk of growth targets, and therefore DC revenue, not being met. These risks will be managed through accurate forecasting and regular reviews of the investment strategy.

Ngā koringa ā-muri / Next steps

49. Public consultation on the draft Contributions Policy 2018 will be aligned with the consultation on the RLTP and RFT. Consultation will be held from 1 May to 14 May 2018. A Have Your Say Event targeted to developers will be held on 7 May to provide an opportunity for face to face feedback. Feedback on DCs will also be received at the RLTP and RFT events. The Proposal for consultation is in Attachment B.

50. Feedback will be considered and then a decision on a final policy for adoption will be made at the 31 May meeting of the Finance and Performance Committee. The Governing Body will then adopt the policy on 27 June, to take effect from 1 July 2018.

Ngā tāpirihanga / Attachments

No.	Title	Page
a ⇩	Draft Contributions Policy 2018	103
b ⇩	Proposal Document	139

Ngā kaihaina / Signatories

Authors

Beth Sullivan - Principal Advisor Policy

Andrew Duncan - Manager Financial Policy

Felipe Panteli - Senior Policy Advisor

Authorisers

Matthew Walker - Acting Group Chief Financial Officer

Stephen Town - Chief Executive

[1] The proportion of DC funding differs for different projects i.e. reserve acquisitions are primarily DC funded whereas transport projects have a mix of general rates, NZTA and DC funding. Lower DC funding for parks would reduce capex by a similar amount. Lower DC funding for transport would remove projects of a higher value as we would lose access to the associated NZTA funding.

Mayor	Hon Phil Goff, CNZM, JP
Deputy Mayor	Cr Bill Cashmore
Councillors	Cr Josephine Bartley	Cr Mike Lee
	Cr Dr Cathy Casey	Cr Daniel Newman, JP
	Cr Ross Clow	Cr Dick Quax
	Cr Fa’anana Efeso Collins	Cr Greg Sayers
	Cr Linda Cooper, JP	Cr Desley Simpson, JP
	Cr Chris Darby	Cr Sharon Stewart, QSM
	Cr Alf Filipaina	Cr Sir John Walker, KNZM, CBE
	Cr Hon Christine Fletcher, QSO	Cr Wayne Walker
	Cr Richard Hills	Cr John Watson
	Cr Penny Hulse