Terms of Reference
Responsibilities
The purpose of the committee is to:
a)
advise and support the mayor on the development of the Long-term Plan
(LTP) and Annual Plan (AP)
b)
monitor the overall financial management and performance of the council
parent organisation and Auckland Council group
c) make financial
decisions required outside of the annual budgeting processes.
The committee will establish an annual work programme
outlining key focus areas in line with its key responsibilities, which include:
·
advising and supporting the mayor on the development of the LTP
and AP for consideration by the Governing Body including:
o local
board agreements
o financial
policy related to the LTP and AP
o setting
of rates
o preparation
of the consultation documentation and supporting information, and the
consultation process, for the LTP and AP
·
monitoring the operational and capital expenditure of the council
parent organisation and Auckland Council Group, and inquiring into any material
discrepancies from planned expenditure
·
approving the financial policy of the council parent organisation
·
establishing and managing a structured approach to the approval
of non-budgeted expenditure (including grants, loans or guarantees) that
reinforces value for money and an expectation of tight expenditure control
·
approve the council insurance strategy and annual insurance
placement for Council
·
performance measures and monitoring
·
write-offs
·
acquisition of property in accordance with the LTP
·
disposals in accordance with the LTP
·
recommending the Annual Report to the Governing Body
·
funding for achieving improved outcomes for Māori.
Powers
(i) All
powers necessary to perform the committee’s responsibilities, including:
(a) approval of a
submission to an external body
(b) establishment
of working parties or steering groups.
(ii) The
committee has the powers to perform the responsibilities of another committee,
where it is necessary to make a decision prior to the next meeting of that
other committee.
(iii) If
a decision is a budgetary or financial decision that relates primarily to the
Finance and Performance Committee responsibilities, the Finance and Performance
Committee has the powers to make associated decisions on matters that would
otherwise be decided by other committees. For the avoidance of doubt, this
means that matters do not need to be taken to multiple committees for
decisions.
(iii) The
committee does not have:
(a) the
power to establish subcommittees
(b) powers
that the Governing Body cannot delegate or has retained to itself (section 2)
Exclusion of the public – who
needs to leave the meeting
Members of the public
All members of the public must leave the
meeting when the public are excluded unless a resolution is passed permitting a
person to remain because their knowledge will assist the meeting.
Those who are not members of the public
General principles
·
Access to confidential information is managed on a “need to
know” basis where access to the information is required in order for a
person to perform their role.
·
Those who are not members of the meeting (see list below) must
leave unless it is necessary for them to remain and hear the debate in order to
perform their role.
·
Those who need to be present for one confidential item can remain
only for that item and must leave the room for any other confidential items.
·
In any case of doubt, the ruling of the chairperson is final.
Members of the meeting
·
The members of the meeting remain (all Governing Body members if
the meeting is a Governing Body meeting; all members of the committee if the
meeting is a committee meeting).
·
However, standing orders require that a councillor who has a
pecuniary conflict of interest leave the room.
·
All councillors have the right to attend any meeting of a
committee and councillors who are not members of a committee may remain,
subject to any limitations in standing orders.
Independent Māori Statutory Board
·
Members of the Independent Māori
Statutory Board who are appointed members of the committee remain.
·
Independent Māori Statutory Board
members and staff remain if this is necessary in order for them to perform
their role.
Staff
·
All staff supporting the meeting (administrative, senior
management) remain.
·
Other staff who need to because of their role may remain.
Local Board members
·
Local Board members who need to hear the matter being discussed
in order to perform their role may remain. This will usually be if the
matter affects, or is relevant to, a particular Local Board area.
Council Controlled Organisations
·
Representatives of a Council Controlled Organisation can remain
only if required to for discussion of a matter relevant to the Council
Controlled Organisation.
|
Finance and
Performance Committee
16 July 2020
|
|
Overview
to decision making for the Emergency Budget 2020/2021
File No.: CP2020/08911
Te take mō te
pūrongo
Purpose of the report
1. To
provide an overview of the process to finalise the Emergency Budget 2020/2021
(the council’s annual plan for that year).
Whakarāpopototanga matua
Executive summary
2. There
are several other reports on the agenda for the Finance and Performance Committee
on 16 July 2020 that require decisions to enable documentation for the
Emergency Budget to be finalised at the Governing Body meeting on 30 July 2020.
3. The
Consultation Document and Supporting Information was adopted on 28 May 2020
which outlined the council’s proposals for 2020/2021 including:
· an average general rates increase of either 2.5 per cent or 3.5 per
cent
· introducing a COVID-19 Rates Postponement Scheme
· suspension of the Accommodation Provider Targeted Rate until March
2021.
4. The
Emergency Budget consultation ran from 29 May to 19 June 2020 and in total the
council received 34,915 pieces of feedback which includes feedback from 1595
people who identify as Māori. A hui with mana
whenua was held to hear their views on the Emergency Budget which 16 mana
whenua representatives attended representing 12 entities. All feedback
was presented to the Finance and Performance Committee on 7 July 2020.
5. Each
local board held workshops and meetings to consider the feedback. This helped
inform discussions between local board chairs and the Finance and Performance
committee on 14 July 2020.
6. The
Tūpuna Maunga Authority and the Governing Body will be asked to approve
the Operational Plan 2020/2021 and the Summary of the Operational Plan
2020/2021 for inclusion in the Emergency Budget. Feedback received on the draft operation plan was jointly
received by the Tūpuna Maunga o Tamaki Makaurau Authority and
the Finance and Performance Committee on 13 May 2020
during the Annual Budget consultation.
7. In
making decisions on the Emergency Budget, decision-makers must weigh up the
advantages and disadvantages of each reasonably practicable option, consider
the feedback received, and then arrive at what they determine to be the best
decision.
8. Adopting
the Emergency Budget will enable rates to be set for the 2020/2021 financial
year.
|
Ngā tūtohunga
Recommendation/s
That the Finance and
Performance Committee:
a) receive
this report as an overview of the process followed since March 2020.
b) note
that other decisions required to finalise the Emergency Budget 2020/2021 are
set out in separate reports on this agenda.
|
Horopaki
Context
9. During
the public consultation in February/March on the proposed Annual Budget
2020/2021, New Zealand moved into alert level 4 in response to the outbreak of
COVID-19. Since that consultation was conducted the financial landscape changed
almost beyond comprehension. As a result, we found ourselves
requiring a very different budget and therefore it was deemed necessary to
consult with Aucklanders again.
Key decisions made
10. Consultation
items were agreed by the Emergency Committee on 21 May 2020. The consultation
document and the supporting information were adopted by the Governing Body on
28 May 2020.
11. Public
consultation was held from 29 May to 19 June 2020.
12. The
consultation document proposed:
· an average general rates increase of either 2.5 per cent or 3.5 per
cent
· extending the council’s rates postponement policy to include
ratepayers experiencing financial hardship due to the impact COVID-19
· a proposal that would suspend the Accommodation Provider Targeted
Rate (APTR) until 31 March 2021 and reducing the expenditure that it would fund
for the 2020/2021 year.
13. The
consultation document also sought feedback on:
· some in-principle rating decisions made following the first round of
consultation
· a proposed amendment to the Funding Impact Statement regarding
interest on repayments schemes
· any
other issues that were important to the submitter.
Public consultation and feedback
14. The council
received 34,915 pieces of feedback which is the highest number of submissions
received on any consultation since the council’s formation in 2010. This
included approximately 90 per cent received digitally, 29 people provided
feedback over the phone and 149 pieces received through social media.
15. Due to
changing alert levels in New Zealand, the consultation process run differently
to previous consultations. Have Your Say events where people can give feedback
in person were not feasible. Instead, seven online information webinars were
held over the course of the consultation period with a total number of 387
attendees. Attendees were able to ask questions at these webinars and were
encouraged to make submissions via the digital and other channels.
16. Feedback was
presented to the Finance and Performance at a workshop on 7 July 2020. The summary
of feedback report is included as Attachment A of this report.
17. To ensure
decision-makers were informed about feedback received, staff with specific
subject matter expertise reviewed and summarised the feedback. This aimed to
ensure councillors understood the most commonly held community views on the key
issues.
Deliberations following consultation
18. On 14 July
2020 a workshop was held between local board chairs and the Finance and
Performance Committee. These discussions provided an opportunity for local
board views to be considered ahead of this committee making recommendations to
the Governing Body as set out in separate reports on this agenda.
19. Budget
discussions between council officers and representatives from
council-controlled organisations (CCOs) were workshopped with this committee
between 30 June and 8 July 2020.
Finalising the Tūpuna Maunga
Authority Operational Plan
20. Auckland Council is responsible for the routine management of the
Tūpuna Maunga and the administered lands (under the direction of the
Tūpuna Maunga Authority) along with associated costs. The Tūpuna Maunga Authority and Auckland Council
must agree the Tūpuna
Maunga Authority Operational Plan (Operational
Plan) and a Summary
of the Operational Plan every year. The Operational Plan sets out how the
council will carry out its
routine management.
21. Feedback received on the Draft Tūpuna
Maunga Operation Plan 2020/2021 was jointly received by the Tūpuna
Maunga o Tamaki Makaurau Authority and the Finance and Performance
Committee on the 13 May 2020 during the Annual Budget
consultation.
22. Given there
were no material changes planned to the Draft Tūpuna
Maunga Authority Operational Plan, we did not consult on this again in the
Emergency Budget consultation.
23. On 20 July
2020, the Tūpuna Maunga Authority will consider approving the Operational
Plan 2020/2021 and the Summary of the Operational Plan 2020/2021 for inclusion
in the Emergency Budget 2020/2021. Following this, adoption will be sought from
the Governing Body on the 30 July 2020.
Tātaritanga me ngā
tohutohu
Analysis and advice
24. Several other
reports on the agenda today require decisions to finalise the Emergency Budget
2020/2021.
25. When making
decisions, the Local Government Act 2002 requires council to:
· identify
all reasonably practicable options to achieve the objective
· assess
these options in terms of their advantages and disadvantages
· consider
with an open mind the views and preferences of persons likely to be affected
by, or to have an interest in the decision.
26. Feedback
received during public consultation is one key part of many components that
need to be considered when making final decisions. Comments should be explored
to understand the meanings behind the numbers and percentages presented.
The summary of feedback report can be found in Attachment A of this report.
Tauākī whakaaweawe
āhuarangi
Climate impact statement
27. The
implications of proposed budget changes for climate change are set out in the Budget decision-making for 2020/2021 report on today’s
agenda.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
28. The process
to develop the Emergency Budget was difficult for all supporting departments,
local boards and CCOs given the condensed timing constraints.
29. The adopted
Emergency Budget will affect the whole council group and these impacts are
detailed in the other reports on today’s agenda.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
30. Annual
Budgets must include local board agreements for the 21 Local Boards. Local
priorities were consulted on during the consultation in February/March 2020.
This feedback was presented to the Emergency Committee on 21 May 2020.
31. As the
proposed local board priorities were not materially changed from what was
initially consulted on, they were not included in the Emergency Budget
consultation.
32. Local reports
summarising the feedback received in the Emergency Budget consultation relevant
to each local board area were considered by each local board between 7 and 10
July 2020. Local board views were then shared with the Finance and Performance
Committee on 14 July 2020.
33. A separate
report on the agenda for this meeting covers local board input for the
Emergency Budget 2020/2021. Local board views are also considered in each of
the relevant decision-making reports on today’s agenda.
Tauākī whakaaweawe
Māori
Māori impact statement
34. The
total number of submissions from individuals who identified as Māori was
1595 compared to 115 in the 2019/2020 annual budget consultation. The summary
of feedback report can be found within Attachment A of this report.
35. During
public consultation the Governing Body held a hui with mana whenua to hear
their views on the emergency budget. 16 mana whenua representatives attended,
representing 12 entities. One mana whenua entity (Te Whakakitenga o Waikato
Incorporated) provided a written submission only. Mana whenua feedback has been
captured in detail in Attachment 3 of the Summary of Feedback report which is
Attachment A of this report.
36. Three
sub-regional live panel discussions were held in partnership with Radio Waatea,
mataawaka and councillor panelists which reached an audience of 4635 online
views and more than 12,000 radio audience.
Ngā ritenga
ā-pūtea
Financial implications
37. Budget
decisions made in relation to separate reports on the agenda will enable the
final budget for 2020/2021 to be finalised and adoption sought from the
Governing Body on 30 July 2020. The financial implications of the budget
decisions are set out in those reports.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
38. An Emergency
Budget enables rates to be set for the following financial year. Failing to
adopt the Emergency Budget 2020/2021 could impact the council’s ability
to continue to deliver the services and projects that Auckland needs.
Ngā koringa ā-muri
Next steps
39. Following
decisions today, the key steps for finalising the Emergency Budget are:
|
Emergency
Budget 2020/2021
|
2020
|
|
Prepare
final documentation
|
17 July
– 27 July
|
|
Governing
Body workshop – receive and discuss final documentation ahead of the
Governing Body meeting
|
29 July
|
|
Governing
Body meeting – adoption of the final Emergency Budget 2020/2021
|
30 July
|
|
Close
the loop with Aucklanders and distribute final documents to libraries,
service centres, local board offices and online.
|
July/August
|
Ngā tāpirihanga
Attachments
|
No.
|
Title
|
Page
|
|
a⇩
|
Emergency Budget 2020/2021 Consultation - summary of
feedback received
|
17
|
Ngā kaihaina
Signatories
|
Author
|
Kylie Thompson - Programme Manager
|
|
Authorisers
|
Ross Tucker - General Manager, Financial Strategy and
Planning
Kevin Ramsay - Acting Group Chief Financial Officer
|
|
Finance and
Performance Committee
16 July 2020
|
|
Rates Issues for the Emergency Budget
2020/2021
File No.: CP2020/08912
Te take mō te
pūrongo
Purpose of the report
1. To
seek agreement on changes to rating policy for inclusion in the Emergency
Budget 2020/2021 and recommend the amended Revenue and Financing Policy and
Rates Remission and Postponement Policy be adopted.
Whakarāpopototanga matua
Executive summary
2. In
May and June 2020, the council undertook further consultation on the 2020/2021
annual plan (“Emergency Budget”) due to the impacts of the COVID-19
pandemic. This included:
· proposing
to introduce the Postponement of Rates for Ratepayers Impacted by COVID-19
Scheme to allow ratepayers who are struggling financially as a result of the
impacts of COVID-19 to defer up to $5,000 of their 2019/2020 rates, and $20,000
of their 2020/2021 rates, until 30 June 2022
· proposing
to suspend the Accommodation Provider Targeted Rate used to fund visitor
attraction and major events activities until 31 March 2021.
3. Feedback
received on these proposals was presented at the Finance and Performance
Committee workshop on 7 July 2020.
4. Consideration
of feedback is one part of the decision-making process alongside assessment of
the advantages and disadvantages of the options. Consultation provides an
opportunity for those who may be affected by decisions to have their say and
for any new issues to be raised. Officers have considered both local board and
public feedback in developing their advice to the council.
Introduction of Postponement of Rates
for Ratepayers Impacted by COVID-19 Scheme
5. The
council proposed introducing a Postponement of Rates for Ratepayers Impacted by
COVID-19 Scheme to support ratepayers who were financially affected by COVID-19.
67 per cent of submitters from consultation supported this proposal while 23
per cent did not. The main argument against the proposal was the concern that
it would leave applicants worse off. People in favour agreed that the proposed
new policy would support people temporarily in hardship.
6. Officers
recommend that the proposal be adopted with minor amendments. These require
that residential properties owned by companies have a mortgage, clarify
application of qualification criteria and align wording of postponement fee
provision with legislation.
7. Officers
propose to set the postponement fee at:
· business
properties: 4 per cent interest and $100 per property (to cover administrative
costs)
· residential
properties: 4 per cent interest.
8. Not
charging an administration fee for residential properties avoids an effective
interest rate for the average residential ratepayer of in excess of 5.8 per
cent. Whilst lower value business properties may also face a high effective
interest rate it is a tax deductible expense.
Suspension of the Accommodation Provider Targeted Rate
9. The
council proposed suspending the Accommodation Provider Targeted Rate (APTR) for
a year. The APTR was remitted for the fourth quarter of 2019/2020 and it was
proposed to be reduced by 75 per cent for the 2020/2021 year with payment due
in the fourth quarter, 31 May 2021. This reflected the council’s
intention to reduce spending in 2020/2021 due to border
restrictions.
10. 73 per cent
of feedback from consultation supported this proposal while 14 per cent did
not. People in favour agreed that the proposed new policy made sense and would
help those in financial hardship. Those opposed to the proposal generally
wanted the council to continue to provide some visitor attraction activities
and charge accommodation providers for it.
In principle decisions subject to consideration of further
feedback
11. The Governing
Body made the following decisions in principle subject to further feedback
received from the Emergency Budget consultation:
· discontinuation
of rural sewerage service in the Upper Harbour Local Board area
· establishment
of the Central Park Henderson Business Improvement District
· changes
to waste management targeted rates.
12. Very little
feedback was received on these issues and officers recommend that these changes
be included in the Emergency Budget 2020/2021.
13. The Governing
Body also agreed to implement a pool fencing compliance targeted rate as part
of the Emergency Budget 2020/2021. This requires changes to the Revenue and
Financing Policy which were consulted on alongside the Annual Budget 2020/2021.
The amended Revenue and Financing Policy now needs to be adopted before the new
targeted rate can be set.
14. Decisions
made at this meeting will be incorporated into the Emergency Budget 2020/2021
that will be presented to the Governing Body for adoption on 30 July 2020.
|
Ngā tūtohunga
Recommendation/s
That the Finance and
Performance Committee:
a) recommend
to the Governing Body that it adopt the Rates Remission and Postponement
Policy that includes the Postponement of Rates for Ratepayers Impacted by
COVID-19 Scheme in Attachment A of the agenda report
b) recommend
to the Governing Body that as part of the final Annual Budget 2020/2021 the
Accommodation Provider Targeted Rate be suspended until 31 March 2021
c) recommend
to the Governing Body that it agree to adopt the Revenue and Financing Policy
in Attachment B of the agenda report
d) recommend
to the Governing Body that it confirm its in principle decision on 28 May
2020 to amend the rating mechanism in the Funding Impact Statement in the
Annual Budget 2020/2021 to:
i) increase
the waste management base service targeted rate to $141.03 (including GST)
ii) increase
the waste management standard refuse rate in the former Auckland City Council
and Manukau City Council areas to $141.60 (including GST) and increase the
large refuse rate for those areas to $66.55 (including GST)
iii) include
a new targeted rate for the Central Park Henderson BID
iv) discontinue
the rural sewerage pump-out service and targeted rate for ratepayers in the
Upper Harbour local board areas effective from 1 July 2021.
e) note
decisions made previously by Governing Body to amend the Funding Impact
Statement in the Annual Budget 2020/2021 to:
i) include
a pool fencing compliance targeted rate
ii) include
a Clevedon wastewater and water connection targeted rate
iii) include
the cost of HomeFit assessment ($260 plus GST) in the Retrofit-your-home
targeted rate for all new applications of more than $2,000
iv) include
a new targeted rate for the One Warkworth BID
v) provide
for the expansion of the Manukau Central BID
vi) discontinue
the rural sewerage pump-out service and targeted rate for ratepayers in the
Henderson-Massey Local Board area effective from 1 July 2021
vii) retain the
rural sewerage pump-out service for ratepayers in the Waitākere Ranges
Local Board area and increase the targeted rate from 1 July 2021 to recover
the full cost of providing the service.
f) delegate
to the chair of the Finance and Performance Committee and Group Chief
Financial Officer to authorise any minor amendments and corrections to the
Revenue and Financing Policy and/or the Postponement of Rates for Ratepayers
Impacted by Covid-19 Scheme in
the Rates Remission and Postponement policy.
|
Horopaki
Context
Decision making
15. When making
decisions the Local Government Act 2002 requires the council to:
· identify
all reasonably practicable options to achieve the objective of the decision
· assess
those options in terms of their advantages and disadvantages
· give
due consideration, with an open mind, to the views and preferences of people
who will or may be affected by, or have an interest in the decision.
16. The
consultation process ensures those interested in, or affected by, decisions
have an opportunity to have their voices heard by their elected representatives
prior to decisions being made. Feedback received during public
consultation is one key part of many components that need to be considered when
making final decisions. Comments provided as part of the feedback should be
considered in order to understand the context and the meanings behind the
numbers and percentages presented.
17. The council
must weigh up the information provided on the advantages and disadvantages of
each option, consider the feedback received, and then arrive at what it
determines to be the best decision.
Consultation and feedback
18. The council
consulted on the proposed changes to rating policy and Rates Remission and
Postponement Policy as part of the Emergency Budget 2020/2021 consultation in
May and June 2020. Implementation of the proposal for the pool fencing
inspection charges also required amendments to the Revenue and Financing
Policy. These proposed amendments were consulted on separately.
19. Analysis of
the feedback received during the Emergency Budget 2020/2021 consultation has
been included in another report on this agenda.
Tātaritanga me ngā
tohutohu
Analysis and advice
20. The following
sections set out for each of the proposed changes to council’s rating
policies:
· the
proposal that was consulted on
· a
summary of feedback received
· consideration
of feedback including the advantages and disadvantages of the options
· local
board feedback
· recommendations.
21. The analysis
below records brief summaries of local board feedback on the proposals.
Local board feedback is set out in full in a separate report also on this
agenda.
Introduction of Postponement of Rates for Ratepayers Impacted by
COVID-19 Scheme
Proposal
22. The council
proposed allowing ratepayers financially impacted by COVID-19 to put off paying
up to $5,000 of rates deferred from their May 2020 instalment, and up to
$20,000 of their 2020/2021 rates, until 30 June 2022.
23. Under the
proposal:
· postponement
will be available to all ratepayers (except those based overseas, government
organisations and utilities) who are in financial hardship as a result of
COVID-19
· eligibility
will be limited to ratepayers who owned their property before 26 March 2020
when New Zealand went into Alert Level 4
· a
postponement fee will be added to rates postponed under this scheme to cover
the financial cost to council of the postponement (interest and administration
costs)
· ratepayers
will be able to make applications up until 31 December 2020.
24. There is
uncertainty on how long the economic impacts of COVID-19 will be present. The
policy enables council to extend the duration of the policy, if required.
Feedback
25. Of the 22,545
responses received on this topic, 67 per cent supported the proposal and 23 per
cent did not.
26. Those in
support commented that the postponement would support people temporarily in
hardship.
27. Respondents
opposing the proposal thought that the postponement would leave people worse
off financially. There was concern that many ratepayers would still be unable
to pay once the postponement expired. Many opposed the addition of interest
and/or administration fees.
28. 31
stakeholders submitted on the introduction of the Postponement of Rates for
Ratepayers Impacted by COVID-19 Scheme. Twenty-eight respondents
supported the proposal and two did not. Key feedback included:
· Generation
Zero: investment properties should not be eligible for postponement
· EMA:
increase the limit by $5,000 or $10,000 to allow more businesses to take up a
postponement
· nine
business associations: extend scheme to commercial landlords that pass the
benefits on to their tenants to support small/medium businesses
· Salvation
Army: extension of scheme beyond August 2020 and rates relief for homeowners.
Consideration
29. The proposed
policy enables council to help ratepayers who are facing financial hardship as
a result of the impacts of COVID-19. The cap on postponement per property
focuses support on residential ratepayers and small to medium businesses.
Commercial landlords may apply for postponement if they are in financial
difficulty which could be a result of offering rent relief to tenants.
30. The policy
allows a postponement fee to be charged to ratepayers enrolled in the scheme to
cover the cost of borrowing and administration. If the proposed new policy is
not adopted, then the council will be unable to offer support to ratepayers
affected by COVID-19.
31. Postponing
rates under this policy reduces the amount of rates expected to be collected
next year by $60 million based on the uptake of fourth quarter deferrals. The
net cashflow impact is $50 million after factoring in forecast
repayment of deferred rates payments relating to the fourth quarter of the
2019/2020 rating year. This will mean the council will have less to
spend on activities and projects until the postponed rates are received. The
fourth quarter deferral was uncapped and did not attract interest or
administration charges. The risk of uptake exceeding forecast is mitigated by
the cap on postponed rates of $20,000 per property and the application of a
postponement fee.
Local
board feedback
32. All 19 local
boards that provided feedback on the proposal supported it. Five local boards
suggested that there should either be no postponement fee or that the
postponement fee be as low as practicable.
Recommendation
33. Officers
recommend that the Postponement of Rates for Ratepayers Impacted by COVID-19
Scheme be adopted with the following amendments:
· to
require residential properties owned by companies have a mortgage ensuring
consistent treatment with residential properties owned by individuals.
· to
change the limit on the postponement fee from interest costs to financial costs
to align the language with the wording in the Local Government Act 2002 and the
Postponement for Rates for Residential Properties Scheme
· to
clarify the application of the eligibility criteria for ratepayers for
properties classified as business or farm, where the ratepayer is not a
company, charity or incorporated society (e.g. sole traders, trusts and
partnerships).
Postponement fee
Proposal
34. The proposed
policy allows for the council to charge a fee of no more than the
administrative and interest costs of postponing the rates.
Legislative
requirements
35. The Local
Government (Rating) Act 2002 (LGRA):
· prevents
the council from recovering more than the administrative and financial cost of
the postponement to council
· requires
the council to record the net costs of the postponement to council in
accounting documents where the council does not recover the full financial
administrative costs.
Administration
and financial costs: Postponement of Rates for Ratepayers Impacted by COVID-19
Scheme
36. Officers
estimate that the cost of processing and auditing will be at least $100 based
on an average staff processing time of three hours per application.
37. The
council’s weighted average cost of borrowing is currently forecast to be
4 per cent. Some of our borrowing is longer term hence our average rate is
presently greater than the marginal rate as interest rates are falling.
38. Residential
mortgage rates are presently around 3 per cent and the base rate for business
loans are around 6 per cent to which lenders will then add a margin depending
on risk.
Proposed
postponement fee(s)
39. Officers
recommend that applicants for postponement of rates for business properties are
required to pay an administration fee of $100 per property and are charged
interest equivalent to our average cost of borrowing, presently 4 per cent.
This will ensure that business ratepayers meet the cost they are imposing on
the council.
40. Recovering
council’s full administrative and financial costs limits, but does not
eliminate, the incentive to use the council as a lower cost source of finance.
For lower value business properties, the effective interest rate may be well in
excess of 4 per cent. However, this is still likely to be in the range they
would face at other lending institutions if they were struggling financially
i.e. 6 per cent plus a risk margin. For businesses the postponement fee will be
a tax deductible expense.
41. Officers considered
two options for residential properties:
a. as for
business: - $100 administration fee and interest at council’s average
cost of borrowing, presently 4 per cent. While ensuring council’s
costs are recovered this would be an effective interest rate of 5.8 to 7.6 per
cent, depending on how long rates were postponed for, for the rates for the
average value residential property for 2020/2021 (3.5 per cent general rates
increase) of $2,808 incl GST.
b. interest costs
only at council’s average cost of borrowing, presently 4 per cent.
This would ensure that the council’s costs of borrowing were covered and
treat residential ratepayers the same as businesses. The administration costs
would be met by other ratepayers. Interest at 4 per cent is more than current
mortgage interest rates.
42. Officers
recommend that the postponement fee for residential ratepayers be set at the
council’s average cost of borrowing, presently 4 per cent. While this is
slightly higher than current mortgage interest rates it is still less than the
cost to the council of providing the support as it doesn’t include the
cost of administration. For ratepayers struggling financially and applying
under this scheme rather than the current one, and hence who will have lower
equity, the interest rate is likely to be more attractive than they could
receive from a bank.
43. Ratepayers
seeking postponement who have lived in their property for more than two years
and who will have more than 20 per cent equity after postponement can apply for
the current scheme. For the average ratepayer the current scheme will be lower
cost if they intend to postpone for more than two years because of the combined
cost of interest and the statutory land charge.
Suspension of the Accommodation Provider Targeted Rate
Proposal
44. The council
proposed to suspend the Accommodation Provider Targeted Rate (APTR), which
helps fund visitor attraction and major events activities, until 31 March 2021.
Spending on these activities is being reduced in 2020/2021 due
to border restrictions. Under the proposal the APTR would resume in the
last three months of 2020/2021 by which time it is hoped that more normal
activity may have resumed. This investment will be key to revitalising the
visitor economy.
Feedback
45. Of the 22,547
pieces of written or in-person feedback received on this topic, 73 per cent
supported the proposal and 14 per cent did not.
46. Those in
support commented that the proposal made sense and would help those in
financial hardship.
47. The main
reasons given by those that didn’t support the proposal were that council
should continue to provide some visitor attraction activities and charge
accommodation providers for it. Other comments were that accommodation
providers can afford to pay the APTR.
48. All 34 key
stakeholders who submitted on the suspension of the targeted rate paid by
accommodation providers supported the proposal. Ten submitters argued
that the APTR should be disestablished. Reasons given were that they are:
· a
large operational overhead in the hotel and motel industry
· not
equitable for commercial accommodation industry as the charge cannot be passed
on to the end user
· not
charged to all of Auckland’s Airbnb operators as they have not all been
identified or have been exempted.
Consideration
49. The APTR was
suspended from 1 April 2020 to 30 June 2020 by remitting the fourth quarter
(May) instalment of APTR for the 2019/2020 financial year. The Remission of
Rates for Miscellaneous Purposes Scheme was used to accomplish this first part
of the suspension.
50. The council
is planning to reduce its spending visitor attraction and major events while
travel restrictions are in place. When these are lifted investment in visitor
attraction and major events will be key to revitalising the tourism sector. At
this point the APTR would resume to help fund this investment. If the
disruption to this sector was to persist for much longer than anticipated, then
there is an opportunity to review the situation ahead of 31 March 2021 and
potentially extend the suspension.
51. This proposal
preserves the purpose and the intention of the APTR and is cashflow neutral for
the council. The proposal does not impact operating funding as ATEED’s
spending will reduce by the same amount. The proposal does impact on
council’s ability to borrow by around $28 million.
Local
board feedback
52. All 19 local
boards that provided feedback on the proposal supported it. Two local boards
requested further detail on how ATEED’s budget will be impacted. One
local board suggested that the suspension should not apply to online
accommodation providers (ie: Airbnb, Bookabach). Waiheke Local Board requested
that it be shifted from Zone B to Zone C so that the APTR does not apply in its
local board area.
Recommendation
53. Officers recommend
that the proposed changes to the APTR be adopted for 2020/2021.
In principle decisions subject to consideration of further
feedback
Proposal
54. The
Governing Body also made the following decisions in principle subject to
further feedback received from the Emergency Budget consultation:
· discontinuation
of rural sewerage service in the Upper Harbour Local Board area
· establishment
of the Central Park Henderson Business Improvement District (BID)
· changes
to waste management targeted rates.
Feedback
55. 81
responses were received on the Central Park Henderson BID. Of these 72
per cent supported the establishment of the BID and 28 per cent opposed it.
Those that supported the proposal thought the BID would bring significant
benefits to local businesses. Those opposed were concerned about the additional
costs at a time when businesses are struggling.
56. Minimal
feedback was received on the rural sewerage service and waste management
targeted rates:
· 1
response supported the discontinuation of rural sewerage service in the Upper
Harbour Local Board area
· 1
response was received which did not support the changes to the waste management
targeted rate. 35 submitters generally noted that waste services were
already too expensive, but these submitters did not specifically mention the
waste management targeted rate.
Consideration
57. No new issues
were raised by these submitters for the consideration of these proposals. There
was clear support for the establishment of the Central
Park Henderson BID. Almost 3,000 submissions were received in the original
consultation on waste management rates with around 65 per cent supporting both
proposed changes, a clear majority in support.
Local board feedback
58. Waitematā
Local Board supported the changes to the waste management targeted rates and
the rural sewerage pump-out service.
Recommendation
59. Officers
recommend that these changes be included in the Emergency Budget 2020/2021.
Rates decisions already made for the Emergency Budget 2020/2021
60. The Governing
Body has previously decided to amend the Funding Impact Statement in the
Emergency Budget 2020/2021 to:
· include
a pool fencing compliance targeted rate
· include
a Clevedon wastewater and water connection targeted rate
· include
the cost of HomeFit assessment ($260 plus GST) in the Retrofit-your-home
targeted rate for all new applications of more than $2,000
· include
a new targeted rate for the One Warkworth BID
· provide
for the expansion of the Manukau Central BID
· discontinue
the rural sewerage pump-out service and targeted rate for ratepayers in the
Henderson-Massey area effective from 1 July 2021
· retain
the rural sewerage pump-out service for ratepayers in the Waitākere Ranges
Local Board area and increase the targeted rate to $200.91 from 1 July 2021 to
recover the full cost of providing the service.
Tauākī whakaaweawe
āhuarangi
Climate impact statement
61. Recommendations
in this report have a neutral climate impact as they relate to the allocation
of charges rather than decisions on activities to be undertaken.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
62. The proposals
in this report and the changes already agreed by the Governing Body for
inclusion in the Emergency Budget 2020/20201 have been communicated to and
agreed on by the following departments or business units of the Auckland
Council group:
· Waste
Solutions
· Healthy
Waters
· Regulatory
Services
· Parks
Sports and Recreation
· Arts
Community and Events
· CCO/External
Partnerships
· Auckland
Tourism Events and Economic Development.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
63. Local boards
views on the impacts of regional decisions on their local community are noted
in the relevant sections above and set out in more detail in a separate report
on this agenda.
Tauākī whakaaweawe
Māori
Māori impact statement
64. The council
does not hold information on the ethnicity of ratepayers or building and
resource consent applicants so is not able to identify the exact impact on the
proposed changes on Māori. The impact of the proposed changes on Māori
will be similar to that on other residents in Auckland.
65. Responses
from Māori submitters and Mana Whenua was similar to the overall feedback.
Māori
Feedback
66. Feedback from
submitters who identified as Māori:
· 61
per cent supported the proposed rates postponement and 27 per cent did not
support.
· 68
per cent supported the suspension of the APTR and 17.6 did not support.
Mataawaka
Organisations
67. The three
mataawaka organisations that submitted on the rates postponement and the APTR
submission supported both proposals. (Te Awa Ora Trust, Ruapotaka Marae Board
and Te Arataki ki te ao Marama Branch – Māori
Women’s Welfare League).
Mana
Whenua
68. Twelve iwi
authorities submitted on the rates proposals:
· eight
supported the proposed rates postponement and three did not
· seven
supported the suspension of the APTR and three did not.
69. Ngāi Tai
Ki Tāmaki, Te Patukirikiri and Te Waiohua were concerned about the ability
of ratepayers to repay the postponement. The latter two submissions preferred
rates to be waived for Māori land. Ngaati Whanaunga opposed the
application of administration fees to the postponement. Te Waiohua thought the
APTR suspension would largely benefit big businesses and would not assist their
smaller enterprises.
Ngā ritenga
ā-pūtea
Financial implications
70. The financial
implications of the recommended charges are noted in the relevant sections
above.
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
71. There is a
risk that the uptake of the Postponement of Rates for Ratepayers Impacted by Covid-19 may exceed our forecasts. The
forecasts are based on the uptake for the fourth quarter deferrals. The value
of the fourth quarter deferrals were not capped and made free of charge. Rates
postponed under the proposed policy are capped at $20,000 per property and will
attract a postponement fee. This mitigates the risk of uptake exceeding our
forecasts. Officers will monitor the uptake of postponement.
Ngā koringa ā-muri
Next steps
72. Decisions
made at this meeting will be incorporated into the Emergency Budget 2020/2021.
On 30 July 2020, the Governing Body will be asked to adopt the Emergency Budget
2020/2021 and set rates for the 2020/2021 financial year.
Ngā tāpirihanga
Attachments
|
No.
|
Title
|
Page
|
|
a⇩
|
Rates remission and postponement policy
|
105
|
|
b⇩
|
Revenue and financing policy
|
115
|
Ngā kaihaina
Signatories
|
Authors
|
Andrew Duncan - Manager Financial Policy
Aaron Matich - Principal Advisor – Financial Policy
Beth Sullivan - Principal Advisor Policy
|
|
Authorisers
|
Ross Tucker - General Manager, Financial Strategy and
Planning
Kevin Ramsay - Acting Group Chief Financial Officer
|
