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Governing Body
31 May 2018
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Proposal
for a Regional Fuel Tax for Auckland
File No.: CP2018/08547
Te take mō te pūrongo / Purpose of the report
1. To
seek Governing Body approval of the proposal for a Regional Fuel Tax for
Auckland (RFT), to be submitted to the Ministers of Transport and Finance.
Whakarāpopototanga matua / Executive summary
2. Auckland
Council consulted on its 10-year Budget 2018–2028 (LTP), from 28 February
2018 to 28 March 2018. The council asked the community about whether it
supported Auckland Council’s preferred funding mechanism of introducing a
Regional Fuel Tax of 10 cents per litre plus GST for a period of up to 10 years
(subject to the introduction of legislation to enable this). While there
was uncertainty about the government’s transport priorities, Auckland
Council made clear that all funding from a RFT would be committed to transport
projects and/or services and will improve the performance of Auckland’s
transport network.
3. Subsequently,
the Government introduced the Land Transport Management
(Regional Fuel Tax) Amendment Bill (Bill) and released the draft Government
Policy Statement on Land Transport (GPS). Council and the Government also
jointly released the updated Auckland Transport Alignment Project (ATAP).
4. On
30 April 2018 the Governing Body approved a draft Regional Fuel Tax proposal
for consultation. This included a programme of fourteen projects which
supported the goals and objectives of the draft GPS and aligned the
council’s investment with the government’s to achieve the outcomes
and programmes of ATAP as well as supporting the outcomes of the Auckland Plan
and aligning with the Regional Land Transport Plan (RLTP).
5. Consultation
ran from 1 May to 15 May 2018, with 14,820 responses being received.
Public feedback showed 42% support for the RFT, 51% did not
support and 7% chose “other”. If pro forma submissions are excluded
from the submitter statistics, the results would be 47% in support, 44% not in
support and 9% other.
6. Public feedback also indicated the level of importance given to each
of the fourteen projects. Generally, those projects with a wide geographic
spread had higher support than those that were perceived to be more locally
focused.
7. The RFT proposal now needs to be considered and adopted before
submitting to the Ministers of Transport and Finance. A report on the
consultation undertaken is also required, by legislation, to be submitted to
the Ministers.
8. No major changes are proposed to the projects that make up the
programme in the proposal. The programme is an integral part of the delivery of
ATAP which will deliver $28 billion of transport investment over the next 10
years. Major changes to the RFT programme could undermine the delivery of parts
of ATAP, but public preferences and commentary can be taken into account in
prioritising implementation.
9. At
the time of approval of the draft RFT proposal, the Governing Body identified a
couple of key issues related to the implementation of the proposal i.e. the
system of rebates for non-road use of fuel and the potential for exclusion of
parts of the region from the fuel tax.
10. In response to the Council’s submission to the Finance and
Expenditure Select Committee on the Bill, the Committee has recommended a
number of changes to the Bill that reflect many of the concerns raised by the
Council. This includes that the legislation should provide for a regional
council to propose an exclusion of part of the region from the RFT
scheme. In the Council’s consultation on the RFT proposal, it
proposed to exclude Aotea Great Barrier Island subject to the legislation being
amended to provide for this.
11. The Mayor, on behalf of the council, wrote to the Minister of
Transport on the issue of rebates for non-road use of fuel. The Minister has
responded positively indicating his support for regulations that provide for a
broad entitlement to claim a rebate when fuel has been subject to RFT and is
subsequently used off-road, and that eligibility should extend to private
individuals. This reflects the Council’s view on the scope of rebate
regulations.
12. The Select Committee has also recommended that the legislation provide
that, when making regulations, Ministers must have regard to the principle that
the tax is intended to be paid by users of public roads, which is consistent
with the Council’s submission. Cabinet will determine these
regulations through a separate process.
13. Some minor changes have been made to the RFT proposal in response
to: changes to the legislation recommended by the Finance and Expenditure
Select Committee that considered the Bill; some improved information on
projects; discussions with government officials.
14. In order to achieve any required final edits resulting from feedback
from the meeting, a delegation is sought for the Mayor, Deputy Mayor and Chief
Financial Officer.
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Ngā tūtohunga / Recommendation/s
That the Governing Body:
a) approve
the Regional Fuel Tax proposal (Attachment A of the agenda report) and the
report on consultation on the Regional Fuel Tax proposal (Attachment B of the
agenda report) to be submitted to the Ministers of Transport and Finance.
b) delegate
to the Mayor, Deputy Mayor and Chief Financial Officer responsibility for
minor edits to the Regional Fuel Tax proposal and associated consultation
report.
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Horopaki / Context
15. Auckland
Council consulted on its 10-year Budget 2018–2028 (LTP), from 28 February
2018 to 28 March 2018. At the time, it was clear that without additional
transport funding, the Council would have little ability to do anything other
than projects already committed and renewals of existing works. The
Council asked the community about whether it supported the Council’s
preferred funding mechanism of introducing a Regional Fuel Tax of 10 cents per
litre plus GST for a period of up to 10 years (subject to the introduction of
legislation to enable this).
16. While there
was uncertainty around the government’s transport priorities (as the
consultation preceded the release of the GPS and the release
of the updated ATAP), the Council made clear that all funding from a RFT
would be committed to transport projects and/or services that will improve the
performance of Auckland’s transport network. The Consultation
Document indicated that the programme of projects to be funded by a RFT were
likely to focus on public transport infrastructure, active transport
infrastructure, safety projects, and high priority roading projects to ease
congestion and support growth. The Council indicated that following the
completion of the ATAP review, Council would consult with the community again
on the specific transport programme proposed to be funded from the RFT.
17. Subsequently,
the Government introduced the Land Transport Management
(Regional Fuel Tax) Amendment Bill and released the draft Government Policy
Statement on Land Transport (GPS). The Council and the Government also jointly
released the updated Auckland Transport Alignment Project (ATAP) which sets the
framework and priorities for the council’s investment in transport.
18. On 30 April
2018, the Governing Body approved a draft proposal for a RFT as the basis for
consultation with the public. The proposal was prepared based on the Bill as
introduced and included projects that aligned with ATAP, the GPS, the Auckland
Plan and the RLTP.
19. Consultation
took place from 1 May 2018 to 15 May 2018.
Tātaritanga me ngā tohutohu / Analysis and advice
Public
Feedback
20. Public consultation sought community views on both, general support
for using a Regional Fuel Tax to fund additional transport investment, and the
relative importance of the projects that are proposed to be funded by the RFT.
21. The
council received 14,820 responses, across all channels, to the question of
using a RFT to fund additional transport projects. Of these, 14,549 were
written responses, 182 comments were provided through Have Your Say events and
89 comments were provided via social media.
22. Of
these total responses 42% supported the RFT, 51% did not support and 7% chose
“other”.
23. The
written responses included 1751 pro forma submissions. If these pro forma
submissions were excluded from submitter statistics, the responses would be 48%
in support, 44% not in support and 8% other. More detailed information on
feedback is contained in Attachment C and D.
24. Common
themes from comments were:
In support
· Strong support for
improving public transport
· Support for use of
fuel tax as a user pays system
· A fuel tax would
encourage use of public transport
Did not support and Other
· Concerns about
affordability
· Preferences for
other funding mechanisms such as reducing council expenditure or congestion
charges
· The increased
government excise taxes should provide enough funding
· An unfair impact on
rural communities
· Improved public
transport options should be in place before introducing a fuel tax.
25. As set out above, as part of the 10-year Budget consultation, the
Council also sought the community’s views on the introduction of an RFT
of 10 cents per litre plus GST to fund transport infrastructure in Auckland.
Colmar Brunton were also used to conduct a representative survey of the key
questions in the LTP, one of which was the RFT. Written responses to the public
consultation on the RFT showed 46 per cent support, 48 per cent did not support
and 6 per cent chose other. When these statistics were adjusted by excluding
all pro forma submissions, the results were 48 per cent support, 43 per cent
did not support and 9 per cent other. The Colmar Brunton survey found 52 per
cent support for the RFT, 43 per cent did not support and 5 per cent chose
other. More detail on both the public feedback and the Colmar Brunton survey is
publicly available on the Council website.
26. It is noted that both of these results preceded the
government’s announcement of an increase in fuel excise duty, however,
the results of public consultation, after adjusting for proformas, is very
similar.
27. The RFT consultation also asked the community to indicate, for each
of the fourteen projects to be funded by the RFT, their relative importance
i.e. very important, moderately important, less important. The chart below
shows how the individual projects rank based on this feedback.
28. Projects that have the highest level of “very
important”/”moderately important” ranking, generally also
have a wide geographic benefit. Projects that could be perceived as
having a benefit to a more local area are generally ranked much lower. This
becomes more apparent through the analysis of submitters by local board area
(see Attachment C for more detailed analysis of feedback by project). The
Eastern Busway is the highest ranked project only in Howick local board area
and Mill Road only in the Papakura area.
29. As part of the communication campaign six Facebook polls were held
to raise awareness of the consultation. The poll questions were intended to be
broad and not directly tied to the consultation questions e.g. “are you
affected by congestion in Auckland”. The poll question “Do you agree with a regional fuel tax to improve our transport
network?” was posted in error and widely
shared attracting over 10,000 “votes”. 74% of these
“votes” were opposed to the RFT. The receipt of this feedback is
acknowledged, but caution must be
applied to interpreting feedback through social media channels as it is not
possible to determine the extent to which the feedback is demographically or
geographically representative of the Auckland population, or in fact whether
the feedback came from outside of Auckland.
Considerations
30. The Governing Body now needs to consider the draft Regional Fuel Tax
proposal and finalise the proposal to be submitted to the Ministers of
Transport and Finance.
31. Two key elements need decision:
a) Regional
Fuel Tax as a mechanism for funding; and
b) The
mix of projects included within the proposal.
Regional
Fuel Tax as a mechanism for funding
32. The
10-year Budget has been constructed on the assumption of a Regional Fuel Tax
providing the necessary revenue for a significant portion of the Regional Land
Transport Plan (RLTP).
33. Without
additional funding the transport capital programme will deliver only renewals
and committed projects. The current challenges of escalating congestion, rising
deaths and serious injuries on the roading network, negative environmental
impacts from transport and supporting housing growth will not be addressed.
34. Auckland
Council and the government have also recently agreed on the outcomes and
programmes of the Auckland Transport Alignment Project (ATAP). ATAP
delivers $28 billion of transport investment over 10 years. Without the RFT (or
equivalent funding), Council would not be able to deliver its commitments to
ATAP which could jeopardise the overall programme significantly. The projects
within the RFT programme alone leverage additional funding of $2.8 billion
against the revenue generated by the RFT ($1.5 billion).
35. Other
options for funding that have been considered are - extending the existing
Interim Transport Levy (ITL) or a general rates increase. The funding raised by
the ITL is far short of what is needed for the identified programme ($60
million per annum compared to $150 million per annum from the RFT). The cost of
the ITL also falls equally on all ratepayers rather than users of the transport
system, who will benefit from the investment.
36. Equivalent
funding raised from a general rates increase would result in a 10-11 per cent
increase, in addition to any other general rates increase (currently proposed
at 2.5% for years 1 and 2 of the 10-year Budget).
The mix of
projects included within the proposal
37. The
projects included in the draft Regional Fuel Tax proposal for consultation were
guided by the draft GPS, ATAP, the Auckland Plan and the RLTP. They represent
the appropriate mix of projects to address Auckland’s key transport
challenges:
· Escalating
congestion and its significant negative impact on both individuals and business
· Poor transport
choice beyond private vehicles, especially in low income areas
· A near doubling of
deaths and serious injuries on roads since 2012
· Growing recognition
of the need to reduce the transport system’s environmental impact
· Enabling and
supporting a rapid acceleration in the rate of housing construction
· The need for streets
to pay a growing role in creating vibrant and inclusive places.
38. Public
feedback shows a high level of support for those projects that have a wide
geographic impact. Those that are perceived to have a more local benefit are
more likely to be supported by submitters in the area of benefit.
39. However,
the RFT funded projects are complemented by a programme of government funded
projects (through NZTA and Kiwirail).This total mix of projects is designed to
provide an integrated regional solution focused on the key challenges, as well
providing benefits across all communities. There does not seem to be any
compelling reasons to change the mix of projects from the draft proposal, but
public preferences and commentary can be taken into account in prioritising
implementation.
Other issues
40. At
the time of approval of the draft RFT proposal, the Governing Body identified
some key issues related to the Bill and the implementation of the proposal.
41. Key
issues relating to the Bill were addressed in the Council’s submission to
the Finance and Expenditure Select Committee (approved by Governing Body on 19
April 2018). This submission was supported by a presentation to the
select committee on the 2 May 2018 by the Mayor and Deputy Mayor.
42. On
21 May 2018, the Finance and Expenditure Select Committee reported back to the
House on the Bill, and has recommended changes to the Bill that reflect a number
of the issues raised in the Council’s submission. The
recommendations include: that the legislation should allow parts of a region to
be excluded from a scheme; that operating expenditure related to interest does
not need to be recognised at a project level; that Ministers must consult with
a council before setting a limit on NZTA’s recoverable costs; that
formal variations to a scheme should only be required for material changes to
the programme of capital projects; and that if the maximum rate of RFT is to be
changed the Minister must set out his/her reasons for doing so.
43. Issues
relating to exemptions and rebates, including the potential for regulations
exempting parts of the region from the fuel tax, were addressed separately in a
letter to the Minister of Transport, signed by the Mayor and Deputy Mayor on
behalf of council.
44. The
Minister’s response indicates that the council’s view on these
issues was positively received. In particular, the Minister has indicated
his support for regulations that provide for a broad entitlement to claim a
rebate when fuel has been subject to RFT and is subsequently used off-road, and
that eligibility should extend to private individuals. The Minister also
indicated that NZTA is developing an on-line rebate system with a focus on ease
of use.
45. Of
further note, the Select Committee has recommended changes to the Bill to make
clear that when making exemption regulations the Minister must have regard to
the principle that regional fuel tax is intended to be borne only by those who
use fuel on public roads. In relation to regulations for rebate
eligibility, the Select Committee has recommended that eligibility should be
when a supplier has not been paid for the fuel, when there has been a
double-payment or in any other circumstance where it would be unjust or
contrary to the policy of the Bill for regional fuel tax to be collected or
kept.
46. The
RFT proposal which the Council consulted on, proposed to exclude Aotea Great
Barrier from the RFT. Given the Select Committee’s recommendations
on the Bill, the Council can now propose to exclude Aotea Great Barrier Island
from the RFT scheme in its final proposal. The final proposal which Governing
Body is considering for adoption, proposes to exclude Great Barrier as the
projects will have little benefit to residents of the island, the proportion of
non-road use of fuel is high, and as physical separation enables a relatively
simply administration of the exclusion of the island.
Proposed
changes to Regional Fuel Tax proposal
47. A
final version of the Regional Fuel Tax proposal is attached (Attachment A). A
number of changes, of a less significant nature, are included from the draft
proposal that was part of the consultation. These changes have been driven by:
a) Potential
changes to the legislation recommended by the Select Committee
b) Improved/more
detailed information on projects
c) Feedback
from government officials.
48. Some
additional changes were also made to better align wording with ATAP. A
marked-up copy showing the changes has been made available to councillors.
Report to
the Ministers
49. As well as the formal proposal for a Regional Fuel Tax, a report on
consultation undertaken on the proposal also needs to be provided to the
Ministers. This report is attached at Attachment B.
Transparency
and reporting
50. The new legislation requires that a regional council must include in
its Annual Report:
· The revenue received
· How the revenue has
been applied - to which projects and for what purpose (capital expenditure,
debt repayment, operational expenditure)
· Progress on delivery
of the capital programme supported by the RFT.
Ngā whakaaweawe ā-rohe me ngā tirohanga a te
poari ā-rohe /
Local impacts and local board views
51. The incidence
of the RFT costs are not geographic but based on individual circumstances.
Costs will be determined by the extent of fuel use which in turn is reliant on
kilometres driven in private vehicles and fuel efficiency of those vehicles.
However, the impact of the RFT will vary according to the ability of different
communities to absorb that cost.
52. Local Boards
have raised the issue of affordability consistently through their feedback.
Other issues that were common across many Local Boards were the need to look at
other charging mechanisms such as congestion charging and reducing, or at least
not raising, public transport charges.
53. Local Boards
gave their feedback on the RFT alongside their feedback on the RLTP. There was
a range of detailed feedback on the various projects and outcomes of both the
RFT and the RLTP. Boards were generally supportive of all or large parts of the
programmes. Particular support was given to specific projects that were of
interest to individual Local Boards. In many cases the addition of projects to the
RLTP was also sought. Local Board feedback and resolutions set out in
Attachment E.
54. Fifteen Local
Boards supported the RFT as a charging mechanism.
55. Two Local
Boards specifically did not support the RFT. Howick Local Board supported
prioritisation of the AMETI Eastern Busway project ahead of light rail, but
sought that it be funded through cost savings and higher contribution from
alternative funding sources. Manurewa Local Board supported the position of
their community, which did not give majority support through the public
submission process. They also expressed concerns about affordability for their
community.
56. Four Local
Boards did not specifically state support or no support for the RFT:
· Great
Barrier Local Board sought to be exempted from the RFT.
· Papakura
Local Board agreed additional revenue is needed but questioned whether other
alternatives had been fully explored.
· Upper
Harbour Local Board supported the outcomes of the RFT but expressed concern
about the reliability of the public feedback in the 10-year Budget consultation
because the impact of the government’s excise duty was not known at that
time.
· Waiheke
Local Board expressed its concern about the impact of the RFT on island
residents but recognised that the projects included Matiatia’s Park and
Ride facility.
Tauākī whakaaweawe Māori / Māori impact
statement
57. 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.
58. Submissions from iwi authorities reflected the concern of the
additional cost that a RFT places on low income families. Suggestions ranged from
lowering the fuel tax (and extending implementation timeframes of the projects)
through to rebates for low income families (see Attachment C for more detail).
The Mana Whenua forum provided conditional support and asked to work with the
council and government to address the impacts on low income households.
Ngā ritenga ā-pūtea / Financial implications
59. 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.
60. 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.
61. As set out
earlier in this report, 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.
Ngā raru tūpono / Risks
62. The key risks
associated with this decision are:
a) Financial – as
set out above, should the RFT not proceed the Council faces either a
significant rate rise to fund transport infrastructure or reducing the
transport budget to the level of renewals and committed projects only.
b) Strategic –
should the RFT, or alternative equivalent funding, not proceed, there will be a
significant barrier to achieving the outcomes that council is seeking in
terms of - supporting growth, reducing deaths and serious injuries on roads,
reducing congestion and its economic and social impacts, reducing the
negative environmental impact of transport.
c) Political – ATAP
has created alignment of transport investment between central government and
Auckland Council. Funding from the RFT enables Council’s transport
programme, as well as leveraging of government subsidy and government funded
projects. Without this funding the political alignment achieved through ATAP is
jeopardised.
d) Legislative –
implementation of the RFT proposal requires legislation to be passed and in
force by 1 July 2018. The Council understands that the intention is for the
legislation to be in force by 1 July 2018, however, the Bill is yet to be
passed and is currently awaiting its second reading (parliament is in recess
until 12 June).
Ngā koringa ā-muri / Next steps
63. Should the
Governing Body approve the Regional Fuel Tax proposal it will be forwarded,
along with the report on consultation, to the Ministers of Transport and
Finance.
64. Approval of
the proposal and passing of the Land Transport Management
(Regional Fuel Tax) Amendment Bill in the expected timeframes will allow
implementation of the Regional Fuel Tax on 1 July 2018.
Ngā
tāpirihanga / Attachments
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No.
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Title
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Page
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a⇩ 
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RFT proposal
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15
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b⇩
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Consultation report to Ministers
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41
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c⇩ 
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Feedback report
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43
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d⇩
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CEI Report
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61
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e⇩
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Local Board Resolutions and feedback
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67
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Ngā kaihaina / Signatories
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Author
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Theresa Stratton - Senior Business Analyst
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Authorisers
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Ross Tucker - Acting General Manager, Financial
Strategy and Planning
Matthew Walker - Acting Group Chief Financial Officer
Stephen Town - Chief Executive
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