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

 

Date:

Time:

Venue:

 

Wednesday, 8 December 2021

10.00am

This meeting will be held remotely and can be viewed on the Auckland Council website
https://councillive.aucklandcouncil.govt.nz/

 

 

Kōmiti ā Pūtea, ā Mahi Hoki /
Finance and Performance Committee

 

OPEN AGENDA

 

 

MEMBERSHIP

 

Chairperson

Cr Desley Simpson, JP

 

Deputy Chairperson

Cr Shane Henderson

 

Members

Cr Josephine Bartley

Mayor Hon Phil Goff, CNZM, JP

 

IMSB Member Renata Blair

Cr Richard Hills

 

Cr Dr Cathy Casey

Cr Tracy Mulholland

 

Deputy Mayor Cr Bill Cashmore

Cr Daniel Newman, JP

 

Cr Fa’anana Efeso Collins

Cr Greg Sayers

 

Cr Pippa Coom

Cr Sharon Stewart, QSM

 

Cr Linda Cooper, JP

IMSB Chair David Taipari

 

Cr Angela Dalton

Cr Wayne Walker

 

Cr Chris Darby

Cr John Watson

 

Cr Alf Filipaina

Cr Paul Young

 

Cr Christine Fletcher, QSO

 

 

(Quorum 11 members)

 

 

 

Sandra Gordon

Kaitohutohu Mana Whakahaere Matua / Senior Governance Advisor

 

2 December 2021

 

Contact Telephone: (09) 890 8150

Email: sandra.gordon@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

 

 


 


 

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)

 

Code of conduct

 

For information relating to Auckland Council’s elected members code of conduct, please refer to this link on the Auckland Council website - https://www.aucklandcouncil.govt.nz/about-auckland-council/how-auckland-council-works/elected-members-remuneration-declarations-interest/Pages/elected-members-code-conduct.aspx

 


 

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

08 December 2021

 

ITEM   TABLE OF CONTENTS            PAGE

1          Apologies                                                                                 9

2          Declaration of Interest                                          9

3          Petitions                                                                 9  

4          Public Input                                                           9

5          Local Board Input                                                 9

6          Extraordinary Business                                       9

7          Annual Budget 2022/2023: Overview to decision making                                                  11

8          Annual Budget 2022/2023: Regional topics for consultation - local board input (Covering report)                                                                  21

9          Tūpuna Maunga Authority Operational Plan 2022/2023                                                             23

10        Annual Budget 2022/2023: Mayoral Proposal items for consultation                                      123

11        Annual Budget 2022/2023: Budget Update    173

12        Annual Budget 2022/2023: Kerbside refuse charging policy review                                     235

13        Annual Budget 2022/2023: Other Rates and Fees Matters                                                      337

14        Annual Budget 2022/2023: Rating of Whenua Māori Changes to Financial Policies              389

15        Consideration of Extraordinary Items

 


1          Apologies

At the close of the agenda no apologies had been received.

 

2          Declaration of Interest

Members are reminded of the need to be vigilant to stand aside from decision making when a conflict arises between their role as a member and any private or other external interest they might have.

 

3          Petitions

There is no petitions section.

 

4          Public Input

There is no public input section.

 

5          Local Board Input

There is no local board input section.

 

6          Extraordinary Business

Section 46A(7) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

“An item that is not on the agenda for a meeting may be dealt with at that meeting if-

(a)        The local  authority by resolution so decides; and

(b)        The presiding member explains at the meeting, at a time when it is open to the public,-

(i)         The reason why the item is not on the agenda; and

(ii)        The reason why the discussion of the item cannot be delayed until a subsequent meeting.”

Section 46A(7A) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

“Where an item is not on the agenda for a meeting,-

(a)        That item may be discussed at that meeting if-

(i)         That item is a minor matter relating to the general business of the local authority; and

(ii)        the presiding member explains at the beginning of the meeting, at a time when it is open to the public, that the item will be discussed at the meeting; but

(b)        no resolution, decision or recommendation may be made in respect of that item except to refer that item to a subsequent meeting of the local authority for further discussion.”


Finance and Performance Committee

08 December 2021

 

Annual Budget 2022/2023: Overview to decision making

File No.: CP2021/15873

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To recap the annual budget process to date, provide an overview of the decisions required now and set out the next steps that will be undertaken to consult with Aucklanders and finalise the Annual Budget 2022/2023.

Whakarāpopototanga matua

Executive summary

2.       The council is required to prepare and adopt an annual plan (referred to by Auckland Council as the annual budget) for each financial year.

3.       Before adopting an annual plan, the council must consult on any significant or material differences from the content of the long-term plan for the financial year to which the proposed annual plan relates. The consultation document must also include:

·    content relating to local board agreements

·    a summary of the draft Tūpuna Maunga o Tāmaki Makaurau Authority Operational Plan 2022/2023 (draft operational plan).

4.       Local boards will adopt local material for inclusion in the Annual Budget 2022/2023 Consultation Document and Supporting Information at their business meetings in December 2021. 

5.       The Tūpuna Maunga Authority has adopted the draft operational plan and the summary at a hui on 15 November 2021. These documents are also being presented to this committee on today’s agenda for agreement.

6.       Potential changes to local board decision-making responsibilities will also be included for public consultation as part of the Annual Budget 2022/2023 as agreed by the Governing Body on 28 October 2021. Further detail relating to the potential changes will be included in the relevant report to the Governing Body on 8 February 2022.

7.       Today the Finance and Performance Committee will consider items for consultation on the Annual Budget 2022/2023 and make recommendations to the Governing Body. The Governing Body will consider these recommendations at its meeting immediately following the Finance and Performance Committee meeting.

8.       Staff will then prepare a consultation document and supporting information for adoption at the Governing Body meeting on 8 February 2022. The Governing Body will also be asked to approve the consultation approach for the Annual Budget 2022/2023.

9.       Minor changes to the dates of the consultation period have been made in response to a change in the revaluation process. Consultation will now take place a week later than originally planned and will run from 28 February to 28 March 2022. Following feedback from the community, local boards and the Finance and Performance Committee will reconsider budgets and final decisions will be made in early June 2022 before the Governing Body adopts the Annual Budget 2022/2023 in late June 2022.


 

Ngā tūtohunga

Recommendation/s

That the Finance and Performance Committee:

a)      note the contents of this report, which sets the context for the other reports and decisions on today’s agenda.

b)      note that the annual budget consultation will include potential changes to local board decision-making responsibilities as agreed by the Governing Body on 28 October 2021 and further details will be provided in a report to the Governing Body on 8 February 2022.

Horopaki

Context

10.     The council is required by legislation to prepare and adopt an annual plan (referred to by Auckland Council as the annual budget), every year, except once every three years when the long-term plan acts as the annual budget.

11.     The annual budget outlines what we plan to do and how we plan to pay for it over the coming financial year.

Developing the Annual Budget 2022/2023

12.     The process to develop the council’s Annual Budget 2022/2023 began in late September 2021 where a number of workshops were held through to December to discuss the annual budget.

13.     The council must consult on any significant or material differences from the content of the 10-year Budget 2021-2031 (also known as the Long-term Plan or the Recovery Budget) for 2022/2023 financial year. Items for consultation will be agreed today at Finance and Performance Committee for recommendation to the Governing Body for approval.

14.     Staff will then prepare a consultation document and supporting information for adoption by the Governing Body on 8 February 2022.

Tātaritanga me ngā tohutohu

Analysis and advice

15.     The starting budget for 2022/2023 is year two of the 10-year Budget 2021-2031 (also known as the Long-term Plan or the Recovery Budget). This is updated to incorporate any council decisions made since the 10-year Budget was adopted, and any changes to the council’s significant forecasting assumptions.

16.     If an amendment to the long-term plan was triggered, that would require the use of the special consultative procedure (SCP) and an audit as set out in section 94 of the Local Government Act 2002.

17.     The communications and engagement approach for the Annual Budget 2022/2023 will be outlined in a report for consideration alongside the consultation document and supporting information for recommendation/ approval at the Finance and Performance Committee and Governing Body meetings on 8 February 2022.

18.     The key topics covered at Finance and Performance Committee workshops between September and November were:

·    climate action

·    waste management

·    budget package

·    financial policy.

19.     Analysis and advice on these key topics, along with other matters relevant to the annual budget consultation, is set out in the other reports on today’s agenda.   

Waste Management

20.     Auckland Waste Management and Minimisation Plan – Te Mahere Whakahaere me te Whakaiti Tukunga Para I Tāmaki Makaurau 2018 (the waste plan) sets out the Auckland Zero Waste Vision and actions to achieve it. The waste topics in this year’s annual budget are to deliver on the commitments within the waste plan to standardise services across the region in support of that vision.

21.     To minimise kerbside household waste, the waste plan commits to the introduction of a region-wide “three-bin” collection system to enable maximum diversion of waste from landfill. This system includes a weekly food scraps collection and alternating fortnightly collections for recycling and refuse. The food scraps service will start in urban areas from March 2023 taking nine-months to roll out across the region, with an associated introduction of a targeted rate.

22.     In addition, the waste plan commits to implementing a region-wide user pays ‘Pay-As-You-Throw’ (PAYT) charging system for refuse collections, which would involve moving legacy Auckland and Manukau cities from payment via a targeted rate to a user pays system. Prior to implementing this change, a comprehensive review has been undertaken to determine whether PAYT remains the best policy for Auckland.

23.     The conclusions of the review support a shift in policy to the adoption of a regionwide rates-funded system for kerbside refuse collections. This evidence will be presented in a standalone paper (Kerbside Refuse Charging Policy Review) on today’s agenda for consideration by the Finance and Performance Committee.

24.     Section 44(e) of the Waste Minimisation Act 2008 requires that any amendment to the waste plan uses the special consultative procedure (SCP) set out in section 83 of the Local Government Act 2002 (LGA). An SCP requires a statement of proposal and notification of the most recent waste assessment. For the purposes of clarity for stakeholders, it is proposed to include the statement of proposal and notification within the Annual Budget 2022/2023 Consultation Document and Supporting Information. Any additional consultation requirements of the SCP will be carried out at the same time, or combined, with the proposed annual budget consultation as permitted by section 83A of the LGA.

25.     The waste topic also includes consideration of minor changes needed to harmonise policies for how Auckland Council provides and charges for kerbside waste services for multi-unit dwellings of ten or more units, domestic dwellings of two to ten units, and business and farm properties. These items, and the introduction of the targeted rate for food scraps are included separately within the Other Rates and Fees Issues report on today’s agenda.

26.     When preparing the consultation material, staff will endeavour to make it clear how the full “three bins” service will be implemented and paid for once fully rolled out, and also be clear about which changes will occur in the 2022/2023 financial year versus those that will be rolled out over a slightly longer timeframe. 

Governance Framework Review

27.     In 2017, as part of the Governance Framework Review, the Governing Body resolved in principle that local boards be given more flexibility of decision-making over local operational funding and service levels.

28.     The Joint Governance Working Party (JGWP), which consists of six Governing Body members and six local board members, was established as the vehicle to progress these proposals.


 

 

29.     On Thursday 28 October 2021, the Governing Body considered the work overseen by the JGWP and agreed to:

a)      support the proposal to increase local board decision-making responsibilities to all local community services within the funding envelope allocated to each local board, including decisions on local service assets.

b)      adopt the proposed changes to local board decision-making responsibilities for public consultation as part of the Annual Plan 2022-23.

c)      note that increasing local board decision-making will transfer responsibility for most local community services decisions currently made by the Governing Body or committees of the whole to local boards.

d)      note that most of these responsibilities can be conferred under existing policy by removing operational constraints but that amendments to the Allocation of Decision-making Responsibility Policy will be required through annual plan consultation because decisions on local service assets are currently made by the Governing Body

[Resolution GB/2021/137]

30.     The proposed changes to local board decision-making responsibilities will be included in the Annual Budget 2022/2023 Consultation Document and Supporting Information to give effect to this resolution and will be included in the relevant report to the Governing Body on 8 February 2022.

Local Board Agreements

31.     Auckland Council is required to include local board agreements for each of its 21 local boards in the annual budget. Content relating to each local board agreement must be included in the annual budget consultation document.

32.     Local boards will adopt local material for inclusion in the consultation document and supporting information at their business meetings in December 2021. 

Tūpuna Maunga Authority Annual Operational Plan

33.     Auckland Council and the Tūpuna Maunga Authority must also agree the Tūpuna Maunga Annual Operational Plan each year pursuant to section 60 of Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Act 2014.

34.     Auckland Council is required to include a summary of the Tūpuna Maunga Authority Operational Plan in its annual budget. A summary of the draft Tūpuna Maunga Authority Annual Operational Plan must also be included in the annual budget consultation document.

35.     At a hui on 15 November 2021, the Tūpuna Maunga Authority adopted the draft operational plan for 2022/2023 and the summary of the draft plan. These documents are also being presented to this committee for agreement via a separate report on today’s agenda.

Tauākī whakaaweawe āhuarangi

Climate impact statement

36.     As part of the annual budget process, climate action has been identified as a key topic and therefore is being addressed as part of the Mayoral Proposal which is another report on today’s agenda.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

37.     Council-controlled organisations (CCOs) have been directly involved in the development of the annual budget topic material where appropriate.

 

38.     All council departments will be affected by decisions made for the Annual Budget 2022/2023. Budget updates are made on a regular basis to the Executive Leadership Team and updates are provided from the Finance team via the commercial managers or CCO conduit to the wider council group.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

39.     Local boards have been engaged throughout the development of the Annual Budget 2022/2023.  Local board chairs were invited to attend all Finance and Performance workshops held between September and December 2021. Input on regional issues was presented by local boards to the Finance and Performance Committee on 17 November 2021. Subsequent formal feedback resolved by local boards has been captured in a separate report on the agenda today.

40.     Local boards will adopt their local content for inclusion in the consultation material in early December 2021. This includes the proposed key priorities for each local board for 2022/2023, to be included in each local board agreement. 

41.     Local boards received briefings with subject matter experts on each regional topic, as well as workshops to discuss these topics to formulate their feedback for consultation.

Tauākī whakaaweawe Māori

Māori impact statement

42.     The Mayor provided an overview and set the scene for Māori engagement on the Annual Budget 2022/2023 at the Tāmaki Makaurau Mana Whenua Forum on 21 October 2021. Additionally, Councillor Dalton and Councillor Filipaina, with support from staff, also met with the forum on 18 November 2021 to provide context for the overall budget process, key topics under consideration, seek feedback on proposed engagement options and the forum’s engagement preferences moving forward.

43.     Engagement with mana whenua and mataawaka is a focus for the wider engagement strategy which will be presented as part of the communications and engagement approach to the Governing Body on 8 February 2022 for approval.

44.     Workshops, technical support, and Have Your Say events will be available for mana whenua and mataawaka to provide feedback on the Annual Budget 2022/2023 from January to March 2022.

45.     Reporting on the Annual Budget 2022/2023 will take a new split view approach to ensure that Māori entities feedback is clear and distinct from general population feedback.

Ngā ritenga ā-pūtea

Financial implications

46.     The Annual Budget 2022/23 project has been funded as part of existing operational budgets.

47.     As noted above, if a long-term plan amendment was triggered an audit would be required which would need additional budget to cover the associated costs.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

48.     Annual budgets (including the 10-year Budget every third year) enable rates to be set for the following financial year. Not completing the Annual Budget 2022/2023 in accordance with statutory requirements has the potential to impact on the council’s revenue, and its ability to continue to deliver the services and projects that Auckland needs.

49.     Another risk is compliance with the prescriptive requirements of the Local Government Act 2002. Legal Services will review the consultation material for legislative compliance before being presented to the Finance and Performance Committee and the Governing Body for adoption.

50.     The timeline for the Annual Budget 2022/2023 has significant risk associated with it. A high level of project management and political engagement is required in order to meet the key milestones and adopt the annual budget by the statutory deadline of 30 June 2022. If required, staff will consider any timeline implications resulting from today’s decisions.

Ngā koringa ā-muri

Next steps

51.     Decisions made today will inform the preparation of the Annual Budget 2022/2023 Consultation Document and Supporting Information.

52.     Staff will also prepare material to support the communication and engagement campaign for consultation, including an information pack for elected members. 

Finalising the Annual Budget 2022/2023

53.     Minor changes to the dates of the consultation period have been made in response to a change in the revaluation process. Consultation will now take place a week later than originally planned and will run from 28 February to 28 March 2022.

54.     The table below sets out the remaining steps in the process (at a high level) to finalise the Annual Budget 2022/2023.

Table One: Finalising the annual budget following decisions made today

 

Phase

Timing

Local boards hold workshops and meetings to finalise local content for consultation

Dec 2021

Finalise consultation document and supporting information

Dec 2021/
Jan 2022

Finance and Performance Committee workshop to review the draft consultation document and supporting information, and consider the proposed consultation and engagement approach

2 Feb 2022

Finance and Performance Committee/ Governing Body meet to recommend/adopt consultation document and supporting information and approve the consultation and engagement approach

8 Feb 2022

Public consultation

28 Feb 2022 –
28 Mar 2022

Finance and Performance Committee meeting on consultation feedback

May 2022

Finance and Performance Committee workshops on decision making for the annual budget

Apr 2022 -
May 2022

Finance and Performance Committee workshop to receive local board input on decision making for the annual budget

25 May 2022

Finance and Performance Committee workshop on final decisions for the annual budget

1 Jun 2022

Finance and Performance Committee/ Governing Body make recommendations/final decisions on the content for the annual budget

7 Jun 2022

Local boards workshop local board agreements

7 Jun 2022 -
16 Jun 2022

Local boards meet to adopt the local board agreements

21 Jun 2022 -
23 Jun 2022

Finance and Performance Committee workshop the final annual budget

22 Jun 2022

Finance and Performance Committee/ Governing Body meet to recommend/adopt the final annual budget, including agreeing local board agreements

29 Jun 2022

Final Annual Budget 2022/2023 documentation and information relating to the decisions made will be made available to the public

Jul 2022

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Annual Budget 2022/2023 - Road Map

19

      

Ngā kaihaina

Signatories

Author

Tamsyn Matchett - Programme Manager

Authorisers

Ross Tucker - General Manager, Financial Strategy and Planning

Peter Gudsell - Group Chief Financial Officer

 



Finance and Performance Committee

08 December 2021

 



Finance and Performance Committee

08 December 2021

 

Annual Budget 2022/2023: Regional topics for consultation - local board input (Covering report)

File No.: CP2021/18516

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To provide an overview of local board input on regional consultation content for the Annual Budget 2022/2023

Whakarāpopototanga matua

Executive summary

2.       This is a late covering report for the above item. The comprehensive agenda report was not available when the agenda went to print and will be provided prior to the 08 December 2021 Extraordinary Finance and Performance Committee meeting.

Ngā tūtohunga

Recommendation/s

The recommendations will be provided in the comprehensive agenda report.


Finance and Performance Committee

08 December 2021

 

Tūpuna Maunga Authority Operational Plan 2022/2023

File No.: CP2021/17971

 

  

Te take mō te pūrongo

Purpose of the report

1.       To recommend adoption of the Draft Tūpuna Maunga Authority Operational Plan 2022/2023 and the Draft Summary of the Tūpuna Maunga Authority Operational Plan 2022/2023 (for inclusion in the consultation material for the Annual Plan 2022/2023).

Whakarāpopototanga matua

Executive summary

2.       Legislation requires the Tūpuna Maunga o Tāmaki Makaurau Authority (Tūpuna Maunga Authority) and Auckland Council to annually agree an operational plan as part of the annual plan process.  This requires the council to consult on a summary of the Draft Tūpuna Maunga o Tāmaki Makaurau Operational Plan (draft Tūpuna Maunga Plan). 

3.       The Tūpuna Maunga Authority met on 15 November 2021 to approve its proposed budget for inclusion in the council’s Annual Budget 2022/2023.  This proposed budget fits into the funding envelope agreed through the Long-term Plan 2021-2031.  The Draft Tūpuna Maunga Plan and a summary of the draft plan were adopted by the Tūpuna Maunga Authority at that hui.

4.       The Governing Body must now also adopt the draft Tūpuna Maunga Plan, and the summary. The summary of the draft Tūpuna Maunga Plan will then be included in the consultation material for the Annual Plan 2022/2023 that will be presented for adoption by the Governing Body on 8 February 2022. The draft Tūpuna Maunga Plan will then be consulted on alongside the council’s Annual Plan 2022-2023 from 22 February to 22 March 2022. 

5.       The Tūpuna Maunga Authority will meet on a date to be determined in May 2022 to adopt the final plan and summary. Following that hui, the Governing Body will also be required to agree the plan and summary at its meeting of 29 June 2022.

Ngā tūtohunga

Recommendation/s

That the Finance and Performance Committee:

a)      whakaae / agree to recommend to the Governing Body to tango / adopt the Draft Tūpuna Maunga Operational Plan 2022/2023 and a summary of the draft plan (for inclusion in the consultation material for the Annual Plan 2022-2023).

Horopaki

Context

6.       Auckland Council and the Tūpuna Maunga Authority must agree the Tūpuna Maunga Plan, and summary of that plan, each year pursuant to section 60 of Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Act 2014. A summary of the draft Tūpuna Maunga Plan must be included in the annual plan consultation material.

Tātaritanga me ngā tohutohu

Analysis and advice

7.       Each year a Tūpuna Maunga Plan is developed to provide a framework in which the council will carry out its functions for the routine management of the Tūpuna Maunga and administered lands for that financial year.  The Tūpuna Maunga Plan must be prepared and adopted concurrently with the council’s annual or long-term plan and must be included in summary form in the annual or long-term plan consultation documentation.

8.       The Tūpuna Maunga Authority met on 15 November 2021 and adopted the Draft Tūpuna Maunga Plan (Attachment A) and a summary of the Draft Tūpuna Maunga Plan (Attachment B). Content relating to the Draft Tūpuna Maunga Plan will be referred to in the consultation document and the summary of the Draft Tūpuna Maunga Plan will be included in the Annual Plan 2022/2023 supporting information.

9.       Two consultation streams will be undertaken during the consultation period.  An event for Tūpuna Maunga Authority members to receive spoken feedback on the Draft Tūpuna Maunga Plan will be held at a date to be determined in March 2022.  For its part, the council will receive submissions during the consultation period. The various consultation feedback to the Tūpuna Maunga Authority and the council will be reviewed and reported to a joint workshop of the Tūpuna Maunga Authority and council in April 2022.

Tauākī whakaaweawe āhuarangi

Climate impact statement

10.     This report relates to the budget and operational plan of the Tūpuna Maunga Authority, an independent co-governance entity.  Matters relating to climate impacts may be addressed by that authority.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

11.     The organisations that are part of the council group will have an opportunity to comment on the Draft Tūpuna Maunga Plan prior to the final plan being presented for adoption, and any feedback received will be presented to the Tūpuna Maunga Authority and the council for consideration.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

12.     The work of the Tūpuna Maunga Authority spans eight local board areas, but the adoption of the draft Tūpuna Maunga Plan by Auckland Council is a Governing Body decision.  The views of local boards have not been sought at this stage but local boards will have an opportunity to provide input on the draft Tūpuna Maunga Plan through the consultation process.  In particular, each year the Tūpuna Maunga Authority writes to the eight local boards with Tūpuna Maunga within their local board areas seeking comment on the draft Tūpuna Maunga Plan.

Tauākī whakaaweawe Māori

Māori impact statement

13.     The Tūpuna Maunga Authority is a tangible expression of a Treaty-based partnership between Ngā Mana Whenua o Tāmaki Makaurau and Auckland Council. It is a vehicle through which the mana whenua worldview and historical, cultural and spiritual connections with the maunga will be given visibility and guide decision-making for the health and wellbeing of these important taonga.

Ngā ritenga ā-pūtea

Financial implications

14.     The Draft Tūpuna Maunga Plan budget is provided for in the council’s 10-year Budget 2021-2031 and no increase is sought.


Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

15.     The Tūpuna Maunga Authority Operational Plan 2022/2023 is necessary to support the council’s routine management of the Tūpuna Maunga under the direction of the Tūpuna Maunga Authority.  There is a moderate reputational risk to Māori outcomes and relationships if the council did not approve funding for the Tūpuna Maunga in the Auckland area. This could seriously affect council’s ongoing relationships with mana whenua organisations of Tāmaki Makaurau. 

16.     Further, there is a risk of non-compliance with section 60 of the Ngā Mana Whenua o Tāmaki Makaurau Collective Redress Act 2014 if the council and the Tūpuna Maunga Authority do not agree a draft operational plan and summary for inclusion in the consultation materials for the Annual Budget 2022/2023. The Tūpuna Maunga Authority has agreed the draft Tūpuna Maunga Plan and summary at its hui on 15 November 2021.

17.     If the draft Tūpuna Maunga Plan is approved, there is a theoretical reputational risk in relation to any members of the community opposed to co-governance entities established by Treaty of Waitangi settlements.

Ngā koringa ā-muri

Next steps

18.     A recommendation to adopt the consultation material for the annual plan will be presented on 8 February 2022 at Governing Body. The summary of the Draft Tūpuna Maunga Plan 2022/2023 will be included in that material.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Draft Tūpuna Maunga Authority Operational Plan 2022-2023

27

b

Draft Summary of the Tūpuna Maunga Authority Operational Plan 2022-2023

115

     

Ngā kaihaina

Signatories

Author

Dominic Wilson - Head of Co-governance

Authorisers

Phil Wilson - Director, Governance & CCO Partnerships

Peter Gudsell - Group Chief Financial Officer

 


Finance and Performance Committee

08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

Annual Budget 2022/2023: Mayoral Proposal items for consultation

File No.: CP2021/17798

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To consider the Mayoral Proposal for the Annual Budget 2022/2023 and determine the key items from the proposal for consultation.

Whakarāpopototanga matua

Executive summary

2.       This year’s annual budget is the second year of the Recovery Budget 2021-2031 (10-year Budget).

Budget challenge

3.       The context for the budget is an environment of continuing uncertainty, reflected by projected revenue losses of an extended COVID-19 lockdown together with rising interest rates and increasing inflation.

4.       There is a potential operating budget deficit, estimated to be around $85 million for 2022/2023, some of which is projected to be ongoing.

5.       In different circumstances, this might lead to the requirement for increased general rates, expenditure cuts, deferred capital expenditure and additional borrowing.

6.       However, the availability of $127 million for Auckland in the coming financial year as the first tranche of the Government’s ‘better off’ funding package associated with its mandating of Three Waters Reform, alleviates the pressure to take drastic actions now.

7.       It gives us time to get a clearer picture of the fiscal situation we will likely face in the 2022/23 financial year and beyond, and to develop a longer-term and sustainable response to likely ongoing financial pressures.

Climate action

8.       Council has voted unanimously to acknowledge there is a climate emergency and has strongly supported our Climate Action Plan, Te Tāruke-ā-Tāwhiri. In the previous two budgets, we managed to include funding for climate actions, including around $152 million in the 10-year Budget. That clearly is not enough to adequately address the threat that global heating poses to our city, country and the world, and to meet the goals we have set for ourselves.

9.       We have a responsibility to play our part in mitigating the catastrophic effects that climate change will have on our children and grandchildren through severe weather events and sea level rises.

10.     I propose a $1 billion climate action package over 10 years as part of the Annual Budget 2022/2023 public consultation. It would be funded by a Climate Action Targeted Rate (CATR - $574 million), co-funded by the Government for transport activities ($344 million) and fare revenue ($127 million). The proposed package focuses on transport and urban ngahere (forest), with a strong equity consideration for areas that need it most. It would improve transport choice for over one million Aucklanders who will be living within 500 meters of new or improved bus services. This represents valuable co-benefits across our wards, but ultimately, climate outcomes benefit everyone. Based on analysis of unaudited valuation data, the targeted rate for the median value residential property would cost around $57.40 a year or $1.10 a week.

11.     There is never a good time to raise a new targeted rate even if the purpose for which that is being done is both important and indeed critical. But the time is running out. We must now walk the talk of the climate commitments we have made.

12.     Despite the actions we have taken to date Auckland’s carbon omissions are not even remotely tracking in line with the target of reducing emissions by 50 per cent by 2030. The scale of this challenge is enormous, but meeting it is a responsibility we cannot ignore. We need transformational, not incremental change and there is less than 100 months remaining to achieve the targets we have set. Council must act now to play its part in limiting the impact of global heating.

Ngā tūtohunga

Recommendation/s

That the Finance and Performance Committee:

a)      agree to recommend to the Governing Body that the Annual Budget 2022/2023 consultation document include the following items from the Mayoral Proposal:

i)       a base budget package proposal based on the second year of the Recovery Budget 2021-2031 (10-year Budget), taking into account the continued impact of COVID-19 and current economic conditions, and:

A)      maintaining the current capital investment profile over the next three years, noting that while the inflationary pressure may be partially mitigated by the natural slow-down caused by COVID-19 delays and supply chain constraints, this may require some deliberate deferrals of capital projects and programmes, with the intention that high and critical-risk projects are prioritised.

B)      consulting on a set of draft expenditure prioritisation criteria (Appendix 1 in Attachment A) and applying the final criteria to implement $15 million of permanent cost reductions in the form of efficiency saving and low priority service reductions across the Auckland Council group in 2023/2024, growing to $30 million per annum from 2024/2025 onwards.

C)      noting further operating cost reductions and capital deferrals over the next three years may be required if further budget risks materialise. 

D)      increasing the average general rates by 3.5 per cent for 2022/2023 as planned.

ii)       a proposed package of further climate action measures to reduce emissions and support adaptation, including:

A)      over $1 billion expenditure over 10 years towards improving bus services, decarbonising ferry services, providing for walking and cycling, and increasing tree canopy cover in communities that need it most.

B)      a Climate Action Targeted Rate (CATR) providing for $574 million over 10 years to fund the proposed climate action, with the remainder funded by government co-funding ($344 million) for transport activities and fare revenue ($127 million).

C)      the targeted rate is proposed to be:

1)      based on capital value, with 25.8 per cent to be raised from business properties and 74.2 per cent from non-business properties, rising by 3.5 per cent each year, the same as the Water Quality Targeted Rate.

2)      differentiated within the business and non-business sectors on the same basis as the general rate.

 


 

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Annual Budget 2022/2023 Mayoral Proposal December 2021

127

     

Ngā kaihaina

Signatories

Author

Mayor Phil Goff, Mayor of Auckland

 


Finance and Performance Committee

08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

Annual Budget 2022/2023: Budget Update

File No.: CP2021/18756

 

  

Te take mō te pūrongo

Purpose of the report

1.       To provide information to inform the Mayoral Proposal and council decision-making on draft budgets for consultation on the Auckland Council group’s Annual Budget 2022/2023.

Whakarāpopototanga matua

Executive summary

2.       The council’s 10-year Budget 2021-2031 (Our Recovery Budget) adopted in June 2021 disclosed high levels of financial uncertainty and incorporated spare financial headroom to deal with future shocks. Combined with strong financial performance in the 2020/2021 year, this headroom has enabled the council to cope with the current lockdown situation without the need for further current year adjustments.

3.       In preparation for consultation on the Annual Budget 2022/2023, staff have updated assumptions and budget information for year two of the Recovery Budget.

4.       Unfortunately, two key factors are now driving a material budgetary challenge for the council group for the 2022/2023 year and beyond. If the council is to maintain its commitment to long-term financial prudence, this challenge will require a response over and above relying on the financial measures in the Recovery Budget. A number of financial measures were included in the 10-year budget for the outer years which supported the package i.e., asset sales, on-going cost reductions, increased borrowings and a delay to fully funding depreciation.  

5.       Firstly, it has become clear that COVID-19 related impacts on the council’s revenue sources will now persist for longer than previously projected. Some of these such as the impacts on dividends may primarily affect the 2022/2023 year. Other impacts such as the slower expected recovery of public transport patronage will likely persist for much longer.

6.       Secondly, recent increases in interest and inflation rates mean that operating costs across the group will step up and be materially higher from 2022/2023 onwards. This includes higher wage pressure, which is unavoidable due to both a contractual commitment with unions and the need to attract and retain the necessary staff to deliver services to Aucklanders. It is highly likely that these pressures represent a permanent, structural increase in the council’s cost base.

7.       Overall, there is an estimated operating budget impact of around $85 million in 2022/2023 that needs to be managed, with around $65 million of this enduring in future years. Closing all of the group’s estimated $85 million operating gap through an increase in general rates would add 4.5 per cent to the planned 3.5 per cent average increase, giving an 8 per cent average general rates increase before factoring in any changes to targeted rates. 

8.       While these are only estimates and the financial outlook remains highly uncertain, we consider that most of this budget impact is now unavoidable and that the risks are all skewed toward more adverse financial outcomes. These estimates represent our most optimistic view of the financial trends and do not yet account for:

·    further government restrictions that may be required to protect the health system despite high vaccination levels

·    widespread public reluctance to gather due to lingering health concerns

·    further increases in interest rates over and above current market expectations

·    inflation rates that persist above the midpoint of the Reserve Bank target band

·    further wage pressure due to the need to compete with other organisations for talent

·    significant increases in interest and depreciation costs associated with cost increases for major construction projects

·    increased operating, maintenance and depreciation costs from higher levels of vested assets from both public and private sector developers

·    potential caps to Waka Kotahi operating subsidies over the next three years

·    similar COVID, interest and inflation pressures flowing through to supported organisations e.g., Auckland Regional Amenities Funding Act amenities (ARAFA), Eden Park, MOTAT, Auckland War Memorial Museum

·    funding for planned visitor attraction and major events activities that were planned to be funded by the Accommodation Provider Targeted Rate

·    costs to implement further government policy changes

·    unfavourable changes to tax legislation

9.       The Recovery Budget already includes $90 million of enduring operating savings targets. To the extent that this is not achieved, there will be further pressure on the operating budget challenge. At present around $40 million of this target for 2022/2023 and 2023/2024 is still to be solutioned.

10.     A key consideration for the council’s budget is maintaining a strong commitment to long-term financial prudence. A weakening of this commitment could lead to a credit rating downgrade which would increase interest costs and make it more difficult for council to access capital funding when needed to help deliver on key strategic objectives.

11.     The key policy settings that ensure financial prudence are the debt-to-revenue limit and balanced budget approach included in the council’s Financial Strategy, and the depreciation funding policy included in the council’s Revenue and Financing Policy. The debt-to-revenue limit is set at 290 per cent but the Financial Strategy clearly signals a long-term target of remaining below 270 per cent. The Revenue and Financing Policy states that the council does not generally use borrowings to pay for operating costs and sets annual targets for the proportion of operating expense (including depreciation) that the council will fund from current operating revenue.

12.     Financial modelling indicates that based on the current estimates, using borrowings to fully cover the estimated operating gap would not threaten the council’s 290 per cent debt to revenue ratio but would fail to meet the balance targets set out in the Revenue and Financing Policy and may not provide sufficient headroom for any major project cost escalation. Scenario modelling and sensitivity testing indicates that the position would deteriorate further under the less optimistic scenarios. We consider that such an approach would not be consistent with long-term financial prudence and could potentially cause serious concern for our credit rating agencies.

13.     Given the temporary nature of some of the operating pressures and the headroom available in the Recovery Budget, using borrowing capacity and available operating headroom to partially cover some of the estimated operating gap might be appropriate and financially prudent[1]. This approach would carry a high degree of risk and would need to be revisited again should any of the alternative scenarios or risk factors discussed above eventuate. This could trigger the need for urgent action at that point and would require flexibility to be available with regard to solutions.


 

14.     Our advice is that to ensure financial prudence and provide a suitable buffer to address some of the risks discussed, solutions other than borrowing need to be found of around $70 to $80 million. This would reduce the chance of urgent action being needed early in 2022 as risks materialise.

15.     While uncertainty remains high the operating budget pressures are very real and are highly likely to be enduring. With expenses rising faster than revenues, the status quo operating budgets for 2022/2023 onwards are not sustainable if the group is to continue delivering all of the services set out in the Recovery Budget. Staff consider that it is important and necessary to build a pathway for financial sustainability over the medium-term rather than just addressing the budget pressures for 2022/2023.

16.     The key levers available to council to respond and credibly reduce the remaining operating gap are:

·    higher than planned general rates increase

·    reduced operating costs with associated impacts on services

·    medium to long-term deferral of capital investment

·    reviewing ownership of strategic assets.

17.     It may also be possible that additional government funding could provide temporary mitigation while work continues on developing a medium-term plan for the use of the other levers to achieve the required pathway to financial sustainability. As this lever is not directly under the council’s control, relying on this lever at this stage would require the council to be reasonably certain of the likely availability, timing and conditions attached to any such funding. A key potential source of additional government funding is the first tranche of the Three Waters Reform Programme “Better Off” funding which could see $127 million of funding being made to Auckland Council from as early as 1 July 2022.

18.     None of these options are easy and they all have associated limitations and impacts in terms of community outcomes, affordability, or long-term financial sustainability. Most of these options would be material changes to the content of the Recovery Budget for the 2022/2023 financial year, such that public consultation as part of the Annual Budget process would be required.

Ngā tūtohunga

Recommendation/s

That the Finance and Performance Committee:

a)      receive the report.

b)      note there are no recommendations for this report as the recommendations on draft budgets for consultation on the Annual Budget 2022/2023 are contained in the Mayoral Proposal item on this agenda.

Horopaki

Context

19.     In June 2021, Auckland Council adopted its 10-year Budget 2021-2031, the Recovery Budget.

20.     This plan sought to address the then-projected impacts of COVID-19 (including the loss of $750 million of revenue over four years) while also committing to a $32 billion capital investment programme over ten years. It also disclosed high levels of financial uncertainty and incorporated spare financial headroom to deal with future shocks.

21.     Achieving this required a number of financial measures including on-going cost reductions, asset sales, increased borrowing, a one-off higher rates increase, and a delay to the full funding of depreciation. All of these, except for the higher rates increase, extended beyond the first year of the budget.

22.     The council is required to adopt an annual budget for the 2022/2023 year by 30 June 2022. This budget should be based on year two of the 10-year budget while incorporating tactical changes to respond to new information and specific challenges or opportunities that present themselves.

23.     Consultation on the Annual Budget 2022/2023 is planned to commence in February 2022.

Tātaritanga me ngā tohutohu

Analysis and advice

Budget update process

24.     The levels of uncertainty highlighted in the Recovery Budget mean that thorough and regular updates will be needed throughout the Annual Budget 2022/2023 process.

25.     For the first budget update, finance staff have both reviewed key forecasting assumptions and engaged with departments and CCOs across the group to ascertain the impacts of these and any other relevant new information.

26.     Given the focus on long-term financial sustainability, budget updates have looked at all years of the 10-year budget. This ensures that all impacts are considered, including how the current lockdowns will impact the opening position for 2022/2023 and also how updates will flow through to our tests of prudent budgeting such as full funding of depreciation by 2028 and our long-term debt position.

27.     A detailed analysis of the budget update process, the updated forecasting assumptions, and the resulting projected budget impacts is set out in Attachment A.

Budget update drivers

28.     Two key factors are now driving a material budgetary challenge for the council group for the 2022/2023 year and beyond.

29.     Firstly, it has now become clear that COVID-19 related impacts on the council’s revenue sources will persist for longer than previously projected. In particular, longer reductions in public transport patronage and further delays to the restoration of dividends from Auckland International Airport Limited are crystallising.

30.     Secondly, both price inflation and interest rates are increasing beyond what was expected in the 10-year budget.

31.     During the development of the Emergency and Recovery budgets there was an expectation that it would take a few years for these indicators to get back to historical levels. As such we did not project that inflation would return to the midpoint (2 per cent) of the RBNZ target range until year six of the 10-year bBudget. In response to the latest information, we have adjusted inflation assumptions for the current year (2021/2022) and for the annual budget year (2022/2023) up by 0.5 of a percentage point to 1.5 per cent and 2 per cent respectively. Alongside this, specific cost challenges are being seen around staff recruitment and retention, in part caused by the tight labour market due to ongoing border closures and historically-low unemployment rates.

32.     In response to increasing inflation we are seeing a response from central banks and interest rates are increasing. Despite the council’s hedging programme that we have in place to effectively fix a large proportion of our interest costs, this will still result in a material increase to our financing costs.

Updated budget position

33.     The updated budget included in Attachment A shows that an estimated $85 million of additional operating funding is required for 2022/2023 compared to year two of the Recovery Budget. This would equate to an additional average general rates increase of 4.5 per cent (on top of the 3.5 per cent provided for in the Recovery Budget)

34.     The below table shows that while some of this is only temporary in nature the majority is enduring, impacting future years.

Item

Budget pressures

Improved revenue

Net impact

Temporary impacts (2022/2023)

$54 million

($36 million)

$18 million

Ongoing budget impacts

$73 million

($6 million)

$67 million

Net operating budget impact

$127 million

($42 million)

$85 million

35.     The temporary pressure includes COVID-19 impacts such as the extension to the period during which we expect Auckland Airport to not pay a dividend or the impacts of border closure and gathering limits on the revenues of Auckland Unlimited. After offsetting for improved revenue projections, this temporary pressure is estimated to total around $18 million in the 2022/2023 year.

36.     The reduced public transport patronage we are forecasting based on experience both here and overseas will impact our budgets over the medium-term. We expect that the patronage number will improve over a matter of years and return to the levels we projected in Our Recovery Budget by 2029. The impact of this in the 2022/2023 year is estimated to be around $9 million, after taking expected changes to Waka Kotahi subsidies into consideration.

37.     Most of this operating pressure, however, represents a permanent change to the net costs of delivering the services that the community expects of us. Recent increases in interest rates and inflation, alongside wage pressure permanently steps up our net cost to serve and the operating funding required by around $58 million per annum (after public transport patronage has recovered).

Uncertainty and risk

38.     The financial outlook remains highly uncertain, and we need to consider the potential impact of this uncertainty.

39.     We consider most of this budget impact is now unavoidable and therefore the risks around the assumptions and potential impacts are skewed towards even more adverse impacts.

40.     These estimates represent our most optimistic view of the financial trends. As set out in Attachment A, the estimates are based on an assumption that the use of vaccinations is successful in protecting the health system and in restoring public confidence in the ability to gather together safely. The alternative scenarios presented illustrate the potential financial implications if this does not prove to be the case. Attachment A also illustrates the impacts if the current trends in inflation, interest and wage pressures were to continue to move further in their current direction.

41.     Some of the other factors discussed in Attachment A that could also adversely impact these budget estimates include:

·         significant increases in interest and depreciation costs associated with cost increases for major construction projects

·         increased operating, maintenance and depreciation costs from higher levels of vested assets from both public and private sector developers

·         potential caps to Waka Kotahi operating subsidies over the next three years

·         similar COVID-19, interest and inflation pressures flowing through to supported organisations e.g., ARAFA, Eden Park, MOTAT, Auckland War Memorial Museum

·         funding for planned visitor attraction and major events activities that were planned to be funded by the Accommodation Provider Targeted Rate

·         costs to implement further government policy changes

·         unfavourable changes to tax legislation.

42.     In addition, the Recovery Budget set ambitious targets of $90 million for permanent cost reductions and $430 million for asset recycling. There is risk that the specific asset disposals and service adjustments proposed to achieve these are not accepted. If the measures required to achieve the targets are not implemented, the council will face further financial pressure.

Key considerations

43.     A number of key criteria and principles were identified during the development of the Emergency Budget 2020/2021 to support decisions around actions to address the urgent challenges of COVID-19 disruption and the drought.

44.     For the Recovery Budget, these were adapted into the following considerations as the council looked towards longer-term challenges and decisions.

·         protecting critical infrastructure

·         managing growth and keeping Auckland moving

·         ensuring long-term financial prudence and sustainability

·         reducing emissions and adapting to climate change

·         delivering on Te Tiriti based partnerships with Māori

·         valuing Auckland’s natural environment

·         valuing inclusivity, equity and diversity

·         tailoring services to communities of greatest needs

·         supporting the local economy, jobs and employment.

45.     In addition to these considerations, the additional criteria and principles used to support the Emergency Budget decisions continue to be important and include:

·        honouring contractual commitments

·        protecting public health and safety

·        statutory obligations

·        ease of implementation.

46.     Most of these considerations remain important for making budget decisions for 2022/2023 onwards. However, the latest economic and employment trends and the current supply chain pressures suggest that there is now less of an imperative for council to support local businesses and employment through maintaining a wide range of services and high levels of capital investment. On the other hand, the pressure on some specific segments of the business community have become even more acute. 

Financial prudence and sustainability

47.     Maintaining a strong commitment to long-term financial prudence is critical to ensuring the council can maintain ongoing and cost-effective access to the capital it needs to fund its investments and to be able to respond to any future shocks. There are also specific obligations under the Local Government Act 2002 (LGA) that require local authorities to conduct their business in a financially prudent manner.

48.     The key policy settings that ensure financial prudence are the debt-to-revenue limit and balanced budget approach included in the council’s Financial Strategy, and the depreciation funding policy included in the council’s Revenue and Financing Policy. That policy states that the council does not generally use borrowings to pay for operating costs and sets annual targets for the proportion of operating expense (including depreciation) that the council will fund from current operating revenue.


 

49.     Due to the ongoing financial impacts of COVID-19 disruption, the budgets included in the Recovery Budget included a three-year delay to the council achieving a long-term balanced budget position where all operating costs, including depreciation, are covered by operating revenues. Additionally, the Recovery Budget included debt-to-revenue ratio levels of up to 290 per cent for the first three years, before gradually returning to our long-term target of 270 per cent.

50.     In considering long-term prudence and sustainability the council should consider both these measures. Staff advised that these temporary departures from long-term targets could be justified in light of the COVID-19 challenges however it is not recommended that there is any extension to these measures. To ensure best practice financial management it is recommended the council seeks to return to below its target debt-to-revenue level of 270 per cent, and to achieve full funding of depreciation as soon as possible.

Response choices

51.     In responding to both the temporary and ongoing operating budget challenges the council has a number of levers and options available to it. None of these options are easy and they all have associated limitations and impacts in terms of community outcomes, affordability, or long-term financial sustainability.

52.     Most of these options would be material changes to the content of the Recovery Budget for the 2022/2023 financial year, such that public consultation as part of the annual budget process would be required.

53.     The options are not mutually exclusive and can be used in any combination. Given the high levels of financial risk and uncertainty, the council would be best placed to respond to the emerging challenges when making final budget decisions in May next year if it included the broadest possible range of options in the annual budget consultation materials.

Borrowing and existing headroom

54.     The Recovery Budget emphasised the current high levels of uncertainty and the potential impacts this could have on future budgets (Volume One, page 27) and the budgets did contain some borrowing and operating headroom for future shocks.

55.     The council could choose to use some of this headroom at this time but this would impact the ability to respond to both the risks identified above (including patronage, inflation and interest rates) and to other unforeseen shocks in the future.

56.     While the council does have existing borrowing headroom when looked at specifically in terms of our debt-to-revenue position, a number of other factors must also be considered. These include the ongoing operating impacts of servicing and repaying additional borrowing and the policy implications (in terms of our Revenue and Financing Policy and Section 101 of the Local Government Act) of using borrowing to address operating cost challenges.

57.     The council could choose to use borrowing to address some of the temporary operating pressures it is facing, acknowledging that this will spread the impact of a one-off financial shock over a longer period and increase future operating costs.

58.     Borrowing to fund operating costs effectively passes these costs on the future ratepayers who will not generally benefit from that expenditure, raising issues of intergenerational equity.

59.     Addressing operating cost pressures with additional borrowing would likely raise questions around our commitment to long-term financial prudence and sustainability. This commitment is particularly valued by credit rating agencies and financing providers. A weakening of this commitment could lead to a credit rating downgrade which would increase interest costs and make it more difficult for council to access capital funding when needed to help deliver on key strategic objectives.

60.     Attempting to address the structural changes to our cost base with additional borrowing would require additional debt every year and staff advice is that this is not a sustainable or recommended option.

61.     Financial modelling indicates that using all of the existing operating headroom and some additional borrowings to cover all but the last $30 to $40 million of the estimated operating gap might be consistent with our financial policy parameters under the most optimistic scenario. However, given the high degree of financial risk and uncertainty, there is a high probability of quickly moving outside those policy limits triggering the need for urgent action. 

62.     Staff advice is that to ensure financial prudence and provide a suitable buffer to address some of the risks discussed, solutions other than borrowing would need to be found of around $70 to $80 million. This would reduce the chance of urgent action being needed early in 2022 as risks materialise.

Asset sales

63.     Large asset recycling targets were set in both the Emergency Budget 2020/2021 and in the Recovery Budget. These targets were supported by analysis of surplus, non-service properties that are available for disposal. While staff believe these targets are still achievable, it is not recommended that further surplus, non-service property sales are targeted as the timeframes remain challenging, particularly in a COVID-19 environment.

64.     Staff have been asked to provide advice on options around ownership of strategic assets.

65.     Attachment B provides an overview of strategic assets and a framework for reviewing the need for ownership or control.

66.     The assets identified by the council as strategic through its Significance and Engagement Policy are identified as such on the basis that ownership is necessary in order for the council to achieve outcomes that are important to the current or future well-being of the community. In addition to these there are three groups of assets that are defined as strategic by the Local Government Act, these are land or buildings owned to provide affordable housing, equity securities in a port company and equity securities in an airport company.

67.     Attachment B also includes further advice focused on options around ownership of the council’s shareholding in Auckland International Airport Limited. This asset was focussed on as affordable housing is currently managed through a joint venture (Haumaru Housing) with long-term goals and redevelopment plans, and ongoing discussions around port services both regionally and nationally mean that any consideration of Ports of Auckland Limited would require wider work. The shareholding in Auckland International Airport Limited, however, is a comparatively liquid asset with an NZX listing that also enables relatively simple valuation and analysis.

68.     Any change to the ownership or control of a strategic asset would need to be provided for in the council’s long-term plan and therefore action would require an amendment to our current plan (with associated special consultative procedure and audit review).

Capital investment timing

69.     The Recovery Budget included $2.9 billion of capital investment for the council group in the 2022/2023 year, and a total of $8.9 billion over the next three years.

70.     To reduce operating cost pressure the council could choose to delay capital expenditure. The reduced level of borrowing would have consequential impacts on financing costs while the slower delivery of assets would reduce depreciation expense and, in some cases, consequential operating costs (maintenance, utilities, staffing etc).

71.     Recent lockdowns and the current supply chain disruptions will naturally see capital investment delayed from the current financial year into next financial year.  However, this will not be sufficient to address the ongoing operating cost pressures we are facing.

72.     To significantly contribute towards the ongoing budget challenges the amount of investment delayed would need to be in the hundreds of millions of dollars, and the delay would need to be for around seven years.


 

73.     The supply chain disruptions are also increasing the cost of capital projects which are not yet under contract. It is likely that sizeable amounts of capital investment will need to be delayed to just address the rising capital pressures, before we can even start to address the operating budget challenge.

74.     The key implications of delaying capital investment are increased asset risk (from deferred renewals), higher costs (inflationary impacts of the delay), and the slower delivery of climate change, environmental and community outcomes than that planned for in the Recovery Budget.

75.     Further analysis of this option is included in Attachment C.

Cost reductions

76.     Auckland Council has achieved significant operational savings (over $2 billion) since its formation in November 2010. These have largely been in the form of efficiency savings where the same, or improved, services are delivered for less. If these savings had not been made, the total rates requirement would have been 14 per cent higher over these years.

77.     The Recovery Budget included locking in at least $90 million of permanent ongoing annual savings. This followed the achievement of $126 million of savings in 2020/2021. Achieving these cost reductions is requiring a relook at how the council delivers some services to the community. This will take time and will cause significant disruption for staff.

78.     Staff consider that the amount of further efficiencies and cost reductions included in the future years remains an appropriate and challenging target. To the extent that the $90 million target is not achieved, there will be further pressure on the operating budget challenge. At present around $40 million of this target for 2022/2023 and 2023/2024 is yet to be solutioned.

79.     Operational cost savings beyond the current target would require the consideration of service level adjustments and/or ceasing the provision of some discretionary services.

80.     Further analysis of this option is included in Attachment D.

Rates

81.     The Recovery Budget provides for an overall average general rates increase for 2022/2023 of 3.5 per cent.

82.     As noted earlier, addressing the entire $85 million operating budget challenge would require an additional increase of 4.5 per cent (a total of an 8 per cent average general rates increase). This is before factoring in any changes to targeted rates.

83.     Given the primary driver of the ongoing operating cost pressures is a permanent step change in the net cost to deliver planned services across the group, the most logical options to address this (based on our Revenue and Financing Policy) would be to either reduce those costs (through increased efficiency if possible or by reducing planned services) or to increase rates as the associated funding source.

84.     A key consideration for the council when looking at levels of general rates is affordability and acceptability of the increases to the community. This needs to be considered alongside any other proposals to increase charges.

85.     Rates affordability was considered in depth in the Report of the Local Government Rates Enquiry 2007. This report indicated that affordability problems arise when rates, including water charges, exceeded 5 per cent of household incomes. Auckland Council rates and Watercare’s water and wastewater charges will stay under the 5 per cent of household income level if the council adopts all the proposed changes to rates being considered for the Annual Budget 2022/2023, including the introduction of a Climate Action Targeted Rate. Under the proposals being considered total rates for the median value urban residential property will be 3.34 per cent of median household income for homeowners. Even if an additional 10 per cent were added to the proposed general rates increase, 3.5 per cent, the ratio would still only be 3.54 per cent.

86.     Addressing $70 to $80 million of operating budget challenge through higher general rates alone in 2022/2023 would require an additional general rates increase of around 3.5 to 4 per cent. One option to manage the impact on ratepayers of a higher rates increase would be to phase it in over two years.

Government funding

87.     A number of different central government funding schemes are currently being developed or implemented. These include the Housing Acceleration Fund, COVID-19 stimulus funds and potential funding under the Three Waters Reform Programme.

88.     If these funding schemes could be accessed to support operating expenditure requirements in 2022/2023 then that could provide temporary mitigation to allow time for the organisation to properly develop the options suggested above and detailed in attachments B to D. Taking more time to work through these options could enable the development of a medium-term plan to achieve the required pathway to financial sustainability which is better informed and which has had a broader range of input from interested parties and stakeholders.

89.     As the use of government funding is not a lever directly under the council’s control, relying on this lever at this stage would require the council to be reasonably certain of the likely availability, timing and conditions attached to any such funding.

90.     A key potential source of additional government funding is the first tranche of the Three Waters Reform Programme “Better Off” funding which could see $127 million of funding being made to Auckland Council from as early as 1 July 2022.

91.     Each local authority will be expected to engage with iwi/Māori in determining how to use its funding allocation. The funding can be used to fund either operating or capital expenditure that supports the three waters service delivery reform objectives and other local wellbeing outcomes and aligns with the priorities of central and local government, through meeting some or all of the following criteria:

·    supporting communities to transition to a sustainable and low-emissions economy, including by building resilience to climate change and natural hazards;

·    delivery of infrastructure and/or services that:

enable housing development and growth, with a focus on brownfield and infill development opportunities where those are available,

support local place-making and improvements in community well-being.

92.     The availability of the funding is subject to government approval of a funding proposal and execution of any associated funding agreements.

93.     Payment of any agreed funding will be subject to yet to be defined conditions and milestones. This suggests that payment will not be a lump sum payment to be made on or around 1 July 2022.

94.     To be able to rely on this funding lever at this stage of the annual budget process would require the council to be reasonably certain that there is sufficient at risk operating expenditure that is currently planned that could instead be successfully funded through this mechanism. This means having a reasonable degree of certainty that this expenditure would meet the agreed criteria, would be approved by government, would be made available within the 2022/2023 year and that any necessary conditions could be met. If there is not a reasonable degree of certainty around these matters, then staff advice is that it would be desirable to maintain flexibility around the use of the other levers through public consultation to allow for the possibility that government funding is unavailable.

95.     The one-off nature of this funding will not provide mitigation for the structural changes to the council’s operating cost base and therefore staff advice is that it would need to be accompanied by other actions or commitments that demonstrate a clear pathway to long-term financial sustainability.

Tauākī whakaaweawe āhuarangi

Climate impact statement

96.     The Recovery Budget reconfirmed the council’s commitment to climate action through both the continuation of existing programmes and additional investment in a specific package of further actions.

97.     The existing programmes that play a role in reducing emissions include investment in walking and cycling infrastructure, support for public transport, planting in parks, wetlands and on roadsides, and reduction in waste to landfill. The additional investment planned in the Recovery Budget totals over $150 million and includes further planting, new electric and hydrogen buses, and increasing our zero-waste resource recovery network.

98.     Options for further increased investment to accelerate action in response to climate change as part of this annual budget are presented in the report setting out the Mayoral Proposal also on this agenda (Appendix 2 of Attachment 1).

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

99.     The budget information set out in this report and its attachments is based on budget information submitted by organisations from across the council group. Each of the council’s council-controlled organisations (CCOs) engaged with their board of directors on their initial budget submissions.

100.   Further information and input will be sought from across the council group as the annual budget progresses.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

101.   Information about the work on the annual budget has been shared with local boards throughout this process. Local board chairs have been included in a series of Finance and Performance Committee workshops to discuss this work. 

102.   Local boards have been invited to provide their specific views on the budget issues and challenges to the committee. Formal feedback resolved by local boards on regional issues including budget issues and challenges has been captured in a separate report on the agenda today.

103.   Part of the process for finalising the annual budget (including 21 local board agreements) will include further engagement with local boards.

Tauākī whakaaweawe Māori

Māori impact statement

104.   A commitment to focusing on better delivery of Māori Outcomes was a key part of the Recovery Budget and a budget of $150 million was allocated to support this.

Ngā ritenga ā-pūtea

Financial implications

105.   Financial implications are discussed in the body of this report, with further details set out in the attachments.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

106.   The high-level financial, operational and strategic risks associated with the annual budget are discussed in the body of this report.

107.   There are a large number of financial risks that could impact the Annual Budget 2022/2023 and potential mitigations for these risks are set out in this report and its attachments. Staff advice is that it is important to address these risks to maintain long-term financial prudence.

Ngā koringa ā-muri

Next steps

108.   On 8 December 2021, the Finance and Performance Committee will consider the Mayoral Proposal for the Annual Budget 2022/2023 along with other reports from staff and recommend items for public consultation to the Governing Body.

109.   Staff will then prepare draft consultation materials based on the Mayoral Proposal and the decisions of the Finance and Performance Committee and Governing Body. The Governing Body will be asked to adopt the consultation materials in February 2022.

110.   Finance staff will continue to review key assumptions and budgetary information to ensure final annual budget decisions are based on the latest information.

111.   After public consultation is complete, the Finance and Performance Committee will consider the results of the public feedback, the views of local boards and the latest information from internal and external sources to make final budget decisions in May 2022. The Governing Body will then adopt the final annual budget by 30 June 2022.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Budget update

185

b

Strategic assets - Auckland International Airport Limited

195

c

Capital investment prioritisation

221

d

Operating costs and service prioritisation

229

     

Ngā kaihaina

Signatories

Authors

Michael Burns - Manager Financial Strategy

Ross Tucker - General Manager, Financial Strategy and Planning

Pramod Nair - Head of Group Financial Planning

Authoriser

Peter Gudsell - Group Chief Financial Officer

 


Finance and Performance Committee

08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

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08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

Annual Budget 2022/2023: Kerbside refuse charging policy review

File No.: CP2021/15888

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To recommend public consultation on an amendment to the Auckland Waste Management and Minimisation Plan 2018 for a move to a region-wide rates-funded refuse collection service, with a choice of three bin sizes to accommodate different household needs.

Whakarāpopototanga matua

Executive summary

2.       Te Mahere Whakahaere me te Whakaiti Tukunga Para i Tāmaki Makaurau the Auckland Waste Management and Minimisation Plan 2018 (the waste plan) sets out the Zero Waste Vision for Tāmaki Makaurau / Auckland and actions to achieve it.

3.       To minimise kerbside household waste the Waste Plan commits to:

·     the introduction of a region-wide “three-bin” collection system to enable maximum diversion of waste from landfill

·     implementing a region-wide Pay-As-You-Throw (PAYT) charging system for refuse collections.

4.       Prior to implementing this change, a review has been initiated to determine whether PAYT remains the best policy direction.

5.       The review compared three options: region-wide PAYT, region-wide rates-funded, and continuation of the current hybrid model against to identify which option best delivers on the outcomes council seeks to achieve from the refuse collection service in terms of waste minimisation, climate change emissions, equity and fairness, and cost effectiveness.

6.       New evidence from the comprehensive review supports the adoption of a region-wide rates-funded system for kerbside refuse collections instead of continuing with a user-pays (PAYT) policy direction because a rates-funded service:

·     achieves the best waste minimisation outcomes, as it enables influence over the region’s domestic waste stream, while still allowing for a choice of bin sizes

·     is the most cost effective, lowest risk, and most financially resilient for the council to deliver

·     provides Auckland Council with the greatest opportunity to respond to the climate emergency and meet the commitments set out in Te Tāruke-ā-Tāwhiri: Auckland’s Climate Plan, by reducing and mitigating emissions and retaining the flexibility to adapt to climate impacts into the future

·     delivers the greatest certainty for Aucklanders by enabling Auckland Council to provide a universally available, equitably priced service across the region regardless of location or income.

7.       The preferred option recommended by this review is therefore to amend the current waste plan to move to a region-wide rates-funded refuse collection service, with three refuse bin size options (80-litre, 120-litre and 240-litre) to accommodate different household needs.


 

8.       Under this option households in legacy Manukau City and Auckland City areas would continue to pay for their refuse collection through their waste targeted rates. Households in current PAYT areas would no longer be required to buy tags and would shift to paying through a targeted rate via a staged implementation. This could start in the last quarter of 2023/2024 in Papakura and Franklin and continue for the North Shore and Waitakere areas throughout 2024/2025, with a rates-funded refuse service starting in Rodney at the same time.

9.       Although changes in rates would not come into effect for the North Shore, Rodney and Waitākere until 2024/2025, operational lead times require certainty of decision-making well in advance of that time.

10.     The recommended option requires a change to the Waste Management and Minimisation Plan 2018, which requires consultation using the special consultative procedure (SCP) set out in section 83 of the Local Government Act 2002[2]. Staff propose that consultation on the amendment to the waste plan 2018 is included in the consultation on the Annual Plan 2022/2023 together with the consultation on the harmonisation of waste services and charges (covered by a separate report on today’s agenda: Other Rates and Fees Issues).

Ngā tūtohunga

Recommendations

That the Finance and Performance Committee:

a)      agree to recommend to the Governing Body that it agree that the consultation on the draft Annual Budget will include a statement of proposal for consultation on amendments to Te Mahere Whakahaere me te Whakaiti Tukunga Para i Tāmaki Makaurau - the Auckland Waste Management and Minimisation Plan 2018 for a move to a region wide rates-funded refuse collection service with a choice of three bin sizes to accommodate different household needs

b)      note that section 44(e) of the Waste Minimisation Act 2008 requires that any amendment to the Waste Management and Minimisation Plan be consulted on using the special consultative procedure set out in section 83 of the Local Government Act 2002 and that the most recent waste assessment undertaken by the council be notified with the statement of proposal (which will be included in the annual plan consultation materials).

Horopaki

Context

The role of Auckland Council in waste minimisation

11.     Aotearoa has one of the highest rates of waste generated per person in the developed world[3] and low rates of waste recovery, including recycling, anaerobic digestion (energy recovery) or composting[4]. This has been recently highlighted in the Ministry for the Environment consultation on their draft national waste strategy. 

12.     Auckland Council plays an important role nationally in influencing domestic waste reduction. Although domestic waste only accounts for 15-20 per cent of Auckland’s waste streams, with the potential to be collecting refuse, recycling, and food scraps from close to one-third of the nation’s households, the decisions council makes are significant for Aotearoa New Zealand’s domestic waste footprint.

The commitment to standardise services

13.     When Auckland Council amalgamated from seven legacy councils in 2010, kerbside refuse and recycling services were delivered using a range of methodologies, including charging through rates in legacy Manukau City and Auckland City and user-pays or Pay-As-You-Throw (PAYT) systems in legacy Waitākere, North Shore, Papakura and Franklin, with no council service offered in Rodney.

14.     In the first Auckland Council Waste Management and Minimisation Plan (WMMP) 2012, a commitment was made to standardise the service levels and charging methodologies across the region. It was anticipated a standardised service would be more equitable (i.e., everyone can access the same service level), reduce the cost of delivery by spreading the cost across the greatest number of customers, and make it easier to communicate with customers about how best to use the services.

15.     Progressive changes have been introduced over the past decade to standardise service provision; however, the charging mechanisms for refuse collections remain inconsistent across the region. Currently, households in legacy Manukau City and Auckland City areas see an additional charge on their rates bill for refuse collection (currently $150.06 for a 120-litre bin), whereas the remaining 45 per cent of households in PAYT areas do not have this charge on their rates bill as they pay for their refuse collections by buying a council bag (only in specific areas) or council tag to attach to their bin each time they set it out.

Waste Management and Minimisation Plan 2018

16.     In 2018, Auckland Council reviewed the WMMP and subsequently adopted Te Mahere Whakahaere me te Whakaiti Tukunga Para i Tāmaki Makaurau the Auckland Waste Management and Minimisation Plan (the waste plan) as required by the Waste Minimisation Act 2008.

17.     The waste plan is guided by the vision ‘Auckland aspires to be Zero Waste by 2040, taking care of people and the environment and turning waste into resources’ and sets out over 100 actions to achieve this vision. The actions relate not only to domestic kerbside waste but also to waste generated from the commercial and industrial sectors.

18.     The waste plan also commits to implementing a region-wide ‘user-pays’ or PAYT charging system for refuse collections as part of the drive to standardise waste services across Auckland. This would involve a change for the 55 per cent of Auckland’s households in the legacy Auckland City and Manukau City areas who currently pay for their rubbish collections through a targeted rate (refer Figure 1).

19.     The rationale for introducing a region-wide PAYT charging system was based on international evidence[5] that at the time indicated a user pays or ‘polluter-pays’ system would drive greater household waste minimisation behaviour and in theory, a PAYT system creates a financial incentive to save money by reducing waste.

Figure 1: Current rubbish charging by legacy area

Impact of harmonisation to date

20.     When the 2012 WMMP was adopted, tonnage data from the legacy council areas indicated that households in user-pays areas using 60-litre refuse bags (Waitākere, Papakura, Franklin and North Shore) were setting out less waste per person than households in legacy rates-funded areas using 120-litre bins (Auckland City) and unlimited black bags (Manukau City).

21.     Subsequently, all council services in urban areas (apart from Auckland city centre and rural areas) have transitioned from refuse bags to bins due to health and safety concerns of most refuse collection service providers. Unexpectedly, per capita waste tonnages in the user-pays areas have stabilised to a similar level to rates-funded areas.

22.     This is particularly notable in legacy Waitākere, where a move from limited bags to a 140-litre bin has resulted in a steady increase in per capita tonnages as customers have utilised additional bin capacity. Whereas, in legacy Manukau City where capacity has been constrained through the replacement of unlimited black bags with a 120-litre bin, per capita tonnages are declining over time.

23.     The previous lower waste tonnages in user-pays areas are now understood to have been influenced by the capacity limit of bags rather than payment methodology, indicating that constraining available capacity can have a positive impact of reducing waste generation under any payment method.

24.     In light of this evidence, prior to moving the entire region to a PAYT model, staff have conducted a review of the evidence supporting the link between council’s refuse collection charging mechanisms and waste minimisation.

Tātaritanga me ngā tohutohu

Analysis and advice

Assessment method overview

25.     The review has involved commissioning independent research, detailed analysis of current and historical data by staff, as well as consulting with council’s current contracted service providers, Kāinga Ora, and councils and territorial authorities across New Zealand who have recently changed their kerbside collection systems. Cost scenarios for three options (refer Table 1) using either a weekly or fortnightly collection frequency were also modelled and analysed in detail.

Table 1: Description of the three refuse payment options assessed

Description

What this involves (by legacy area)

Option 1: PAYT region-wide

Current policy (the Waste Plan).

No further consultation required.

No change: Waitākere, North Shore, Papakura and Franklin

New refuse service: Rodney

Transition from Rates-funded to PAYT: Auckland City and Manukau City

Option 2: Rates-funded region-wide

Deviation from the Waste Plan. Special Consultative Procedure required.

No change: Auckland City and Manukau City

New refuse service: Rodney

Transition from PAYT to Rates-funded: Waitākere, North Shore, Papakura and Franklin

Option 3: Hybrid model (rates-funded and PAYT)

Deviation from the Waste Plan. Special Consultative Procedure required.

No change (rates-funded): Auckland City and Manukau City

No change (PAYT): Waitākere, North Shore Franklin and Papakura

New refuse service (PAYT): Rodney

 


 

26.     Staff also commissioned independent researchers Colmar Brunton to seek the views of householders who have lived in both PAYT and rates-funded areas through a variety of targeted focus groups and follow-up telephone surveys of over 2,000 residents across all local board areas.

27.     The way Māori live, where they live, and the way they engage with waste services has specific implications for this decision for Māori in Tāmaki Makaurau / Auckland under each of the different funding models being analysed. In August and September 2021 specialist community facilitators Rākau Tautoko and Waste Solutions community partners Māngere East Family Services, Talking Trash and English Language Partnerships hosted targeted focus groups with Māori and Pacific communities to seek their views on different refuse collection payment mechanisms. These were completed by phone during October 2021 due to COVID-19 restrictions.

28.     Scenarios were modelled and analysed in detail, enabling staff to estimate the number of customers and likely impacts on waste minimisation. However, costs within the current 10-year contracts for providing ‘three-bins’ services are based on moving to region-wide PAYT. In the past month, revised service cost estimates of shifting to a region-wide rates-funded model for refuse have also been provided by council’s contractors and fed into the council model, replacing earlier modelled costs. This has enabled staff to predict both the cost to council and the cost to customers under both region-wide scenarios with some certainty.

29.     The review of the service delivery costs undertaken by council staff found that cost to serve under a regional PAYT model is more expensive than a regional rates-funded service.

30.     All results are estimated for a shift in 2024/2025 after the introduction of the food scraps collection service and include the impact of harmonising the kerbside waste services and charges as outlined in the Other Rates and Fees Issues paper, also presented today.

31.     The result is a strategic review of three payment options (refer Table 1), to identify which option best delivers on:

·     waste minimisation targets of the waste plan

·     climate change objectives of Te-Tāruke-a-Tāwhiri: Auckland’s Climate Plan

·     equity and fairness for the greatest number of people in Tāmaki Makaurau

·     cost effectiveness to deliver at the least risk to council.

32.     The review also incorporated several additional considerations: household responsibility / accountability, health and safety, technology, reputation, downstream impacts on the collections industry and amenity. Collectively, these describe the outcomes council seeks to achieve from the refuse collection service. The additional considerations are included in Attachment A.

Waste minimisation

Overview

33.     Waste minimisation was a strong driver for the original acceptance of the PAYT model in Auckland and elsewhere, largely based on international evidence.

34.     The initial comparison of options concluded:

·     all options are ranked equal for waste minimisation when supported by easy access to diversion services and community education 

·     all options can have negative consequences that must be managed.

35.     Quality diversion services with easy access, community education and restricting refuse volumes appear to be the larger drivers of waste minimisation, whether the refuse is collected under a PAYT or rates-funded model. 


 

36.     Auckland Council can most easily influence domestic waste tonnages of customers who are using the council service. This is because council can control the size of refuse bin provided and the frequency of collection to make it more convenient and efficient for the household to use the recycling and food scraps services.

37.     The council model shows that the rates-funded option has the greatest potential for council to influence waste tonnages overall, because it retains the greatest number of customers on the Auckland Council service.

38.     The review also concluded that PAYT is difficult to implement in Aotearoa New Zealand because requirements of the Commerce Act 1986 mean that council operates in a ‘side-by-side’ competitive residential refuse market where it cannot solely influence kerbside waste minimisation. 

Impact of operating in a ‘side-by-side’ competitive market

39.     Auckland Council has less opportunity to influence waste reduction in households that use private waste collections. Further, private refuse collection services can undermine council’s other waste minimisation initiatives and diversion services, given private operators have no legislated responsibility to achieve waste minimisation targets. 

40.     Private waste operators operate ‘side-by-side’ with council services, notably in areas where council has a PAYT system. Customers in these areas can easily opt for a private service. It is understood that approximately 70 per cent of private collection services are subscription based (typically an annual service for a fixed price). Aggregated data from 2019 market share surveys show that more customers using private services opt for a larger 240-litre bin (34 per cent of private customers compared with one per cent of council customers).

41.     This side-by-side service provision impacts the way PAYT operates in Auckland and introduces several challenges not experienced by PAYT case studies overseas. This impact was not well understood when the policy was first agreed in 2012.

42.     In PAYT areas, council cannot drive price or frequency of collection to motivate households to put less waste in their refuse bin or as an incentive to use their food scraps bin, as households can alternatively choose a private service that is cheaper and more frequent.

43.     Furthermore, customers with bigger bins are more likely to dispose of material that are not appropriate for kerbside bins and could otherwise be recovered through a recycling centre, for example appliances, building products/offcuts, textiles and green waste. Many anecdotal examples of this were provided during recent local board workshops.

Low correlation between payment method and waste minimisation 

44.     In addition to understanding how constraining capacity can drive waste minimisation, Waste Solutions commissioned independent waste consultants Morrison Low to examine the extent to which the PAYT charging mechanism influences waste volumes. In theory, by having a user-pays charge, households have a more direct relationship with the cost of waste disposal each time they set out their bin.

45.     The Morrison Low review (Attachment A: Refuse Collection Advice – Summary of Findings) found PAYT’s potential for motivating behaviour is influenced by the size of the cost driver, the amount customers pay per set out. Because Auckland Council operates in a side-by-side competitive market, it cannot set the price at a level high enough to motivate the majority of customers to reduce their waste generation.

46.     The evidence for this was found following a 2021 analysis by WasteNot Consulting which compared refuse volumes in two PAYT and two rates-funded areas and found no significant difference between the per capita refuse tonnages across both charging models. A further analysis of refuse per capita across many New Zealand territorial authorities showed little correlation between per capita waste tonnages and the method of payment for collection (provided as Appendix C of Attachment A to this report).


 

47.     Further evidence was produced in a 2021 Colmar Brunton customer focus group survey, which targeted Aucklanders that have lived in both rates-funded and PAYT areas. The survey found that while customers in PAYT areas think about their waste volumes, they are not financially incentivised to a point where it would drive them to significantly change consumption habits to reduce waste.

48.     The September 2021 Rākau Tautoko customer focus group survey of rates-funded and PAYT customers in Manurewa and Papakura found that PAYT had not encouraged households to reduce waste, but it had created difficulties in managing waste.

49.     There is also no evidence that payment methodology in its current state is influencing the rate of contamination of recycling bins. A 2021 analysis by Sunshine Yates Consulting Ltd, which compared recycling contamination in household recycling from two PAYT and two rates-funded areas showed similar contamination levels across all areas.

50.     Auckland’s price per set out would need to be much higher to change how households consider the amount of waste they are generating. Not only would a higher priced council service create equity and access issues for low-income households, it is also unlikely to be effective in influencing behaviour due to side-by-side competition in Auckland’s domestic refuse collection services. As explained above, customers could simply switch to a cheaper service that does not have the same incentive to reduce waste.

Evidence suggests reducing bin sizes and collection frequency promotes waste minimisation

51.     Evidence from other cities in New Zealand including Hamilton (which has weekly food scraps and fortnightly refuse and recycling) and overseas[6] shows that positive waste minimisation outcomes can be achieved when efforts are focused on: 

·     increasing access to services that divert waste away from landfill such as the recycling and food scraps collection services that are easy to use

·     having community education programmes to maximise awareness and knowledge about using the services properly and creating a sense of responsibility

·     reducing access to available refuse volume to encourage use of diversion services by restricting collection frequency and/or bin size.

“We have now reduced our landfill volumes by half and most of that is down to the success of the food scraps service.” Waste Staff, Hamilton City Council (June 2021)

52.     Participation in the weekly food scraps collection in Hamilton, where refuse volumes are constrained to a 120-litre bin collected fortnightly, has remained high at around 55 per cent.

53.     The current waste plan outlines a move to fortnightly refuse collections when the food scraps service is well-established. Changes to that plan could be considered in 2024.

54.     Research from food scraps collection trials in the United Kingdom and Northern Ireland found that “Refuse collection frequency was found to be a statistically significant factor in the performance of food scraps collection services….food waste yields [in] areas with fortnightly refuse collections were generally higher in comparison to trial areas with weekly refuse collections.”


 

55.     Further, research by WRAP[7] in 2016[8] reports that “Where residual waste capacity is restricted, WRAP evidence indicates that recycling services perform better, and where frequency is reduced to fortnightly, waste services are also more cost effective to deliver”. Introducing fortnightly refuse collections is one of the recommendations WasteMINZ[9] has provided to the Ministry for the Environment regarding standardising kerbside collections[10], that is, “After the implementation of a food waste collection, it is recommended that residual rubbish collections are undertaken fortnightly”.

A rates-funded model provides greater equity for Aucklanders

56.     Households in Auckland’s south are demographically some of the largest by number of occupants. Some of these households also face among the highest levels of deprivation and resource scarcity in Tāmaki Makaurau / Auckland. The recommended charging model must be able to meet the needs of this part of the community without further disadvantaging these households.

57.     A shift from rates-funded to PAYT may see costs transferred from landlords to tenants. In many cases those renting are also the larger households with the highest waste tonnages. Concerns were raised by Kāinga Ora operations and facilities managers about the ability of their customers to pay under a PAYT system, regardless of household size. For this reason, Kāinga Ora provided feedback that the organisation supports a transition to a regional rates-funded refuse service.

58.     Experience from councils that have introduced user-pays services is that no compensation is made through the lowering of rents by landlords when the change takes place[11]. This finding is in line with research by the Chief Economist Unit that there is a weak correlation between land taxes and rents. Supply and demand are much more significant drivers[12].

59.     Concerns about equity and the impacts of PAYT on larger households were raised by several local boards, both informally during the face-to-face workshops conducted by Waste Solutions staff during July and August 2021, and within the formal feedback received (Attachment B).

60.     The community as a whole is better off when the cost is shared across all wealth levels, but the considerations of households that produce the least amount of waste must also be considered. The planned introduction of an option to select an 80-litre bin service with a lower targeted rate will help to mitigate the fairness concern associated with households that produce less refuse and may not set their bin out often in a PAYT service. Smaller bin sizes have also been shown to reduce waste volumes.

Radio Frequency Identification (RFID) Trial Results

61.     The current PAYT system using bin tags was introduced as an interim PAYT solution in the absence of a viable Radio Frequency Identification (RFID) option at that time. A 2021 Colmar Brunton customer focus group survey found customers are dissatisfied with the inconvenience of purchasing tags from shops and have concerns about tags being stolen and the additional rubbish and potential litter the tags add to the waste stream. These views were also reflected in recent local board workshop discussions.

62.     A suitable online transaction system would need to be built to support any future PAYT system rolled out region-wide.

63.     A technology trial of a PAYT website was conducted by Waste Solutions between May and July 2021 to determine the viability of the IT platform as a PAYT solution. 490 out of 3,900 eligible households chose to participate, with residents able to choose a new bin with an RFID chip or have their existing rubbish bin fitted with an RFID chip.

64.     Key learnings are that although there were some teething issues with the initial bin chipping and payments, once residents were set up the service ran smoothly. Overall, feedback on the service was positive, which led to the conclusion that if PAYT were to continue an online payment system is viable.

65.     Most customers (70 per cent) reported the biggest advantage of the RFID trial was the convenience of a tag-free service offered (‘less hassle’). Other advantages related to the digital payment system, not having to remember to go to supermarkets buy the tags, avoiding having to stick tags to bins, avoiding tags being stolen.

66.     It was also important to understand why people chose not to participate. Based on limited door knocking and anecdotal evidence, the following reasons played a role in customers/households not signing up to the trial:

·        like tags as they live with many people, so it is easier to rotate who buys the tags

·        not technologically savvy

·        do not put rubbish out frequently so would not be able to use and test the RFID system

·        low motivation to change – could not be bothered to register.

67.     Although most participants (77 per cent) were happy with the payment method (debit card), a small percentage indicated that they would prefer to be able to pay at a store, by cash or by EFTPOS. It is also worth noting that, based solely on the final survey responses, the demographic population captured is skewed towards a younger, technologically savvy and English-speaking population. This may not be an option at a region-wide scale as there would be many Aucklanders, particularly those on lower incomes or who are not digitally enabled, for whom this payment method would be impractical. Concerns about this issue were raised in local board feedback on the charging options, for example the Maungakiekie-Tāmaki Local Board noted that its “local board area has an aging population with limited access to technology such as the internet and a debit card for online purchases/banking.” (Attachment B).

68.     Further developments would be required for this system to fully replace the pre-paid bin tags.

69.     RFID technology on bins can be utilised for more than managing a PAYT billing system.  Even under a region-wide rates-funded system RFID technology would be included on bins for asset management purposes.

Cost effectiveness and financial sustainability

70.     Staff have analysed two aspects related to the cost of delivering kerbside refuse services:

·    which service charging model (rates-funded, PAYT or hybrid) can be operated most cost effectively for both the council and the customer?

·    which model is most resilient and sustainable in its ability to cover the cost of delivering the service over the longer term?


 

71.     Our current waste plan mandates reducing the collection frequency of refuse from weekly to fortnightly after the introduction of the food scraps collection service to enable greater household waste diversion[13], and therefore all three options were modelled under both a weekly and fortnightly refuse collection scenario.

Removing Option 3: Hybrid Model

72.     During engagement workshops and briefings on the development of this review, councillors provided clear direction that the hybrid model should not be considered further in the final analysis. It was felt that pursuing the hybrid model would merely perpetuate the perceived and actual inequities of variable services across the region, prevent council from reducing the cost of delivery by spreading the cost across the greatest number of customers, and would continue the requirement to operate and communicate about two different charging models with customers.

73.     In the interests of standardising service provision and charging methodologies across the region, staff were directed to focus on one payment method for the whole region: either PAYT or rates-funded. Therefore, the final costs presented below are based on estimated costs for Option 1: Regional PAYT and Option 2: Regional Rates-funded, combined with weekly food scraps and fortnightly recycling.

A rates-funded service creates a more financially sustainable operating environment for Auckland Council

74.     Two distinct cost modelling exercises have been carried out to compare the costs of running weekly and fortnightly PAYT and rates-funded services. The first was completed in 2020 by Eunomia Consulting and the second in September 2021 by a project group of Auckland Council staff from Financial Policy, Commercial Finance and Waste Solutions. 

75.     Both models show that a fortnightly rates-funded collection service ensures greater uptake of the diversion options through food scraps and recycling collections.

76.     With more customers fully using the recycling and food scraps services, the cost of diverting those materials increases with the greater volumes collected. It shifts the costs from refuse to the other bins. Waste tonnages to landfill go down, leaving the environment better off, but ratepayers’ costs are relatively unchanged overall across the three-bin service.

77.     The rates-funded model enables the fixed costs of delivering services to be shared across the greatest number of customers, keeping the cost to individual households equitable. This balances out the cost of service to geographically remote areas such as rural properties and the Hauraki Gulf Islands. These objectives can also be achieved under PAYT, but any additional costs associated with geographical remoteness are shared among all ratepayers through the base rate.

78.     The Morrison Low analysis (Attachment A) found a rates-funded model is the least complex for customers and the council from a funding and payment standpoint, but weaknesses of this model are that the cost is charged to the ratepayer, who is not necessarily the householder i.e. the producer of waste.

A rates-funded model has a lower overall cost to the council and the community

79.     The Eunomia modelling and the council’s own in-house analysis considers the cost per household, and the cost that Auckland Council must recover from individual customers to cover the costs of delivering services. If this cost is too high, the service becomes financially unsustainable. Council has obligations to ensure that the refuse collection needs of those on all income levels are met, so ongoing affordability is a critical consideration.


 

80.     The cost per collection in a side-by-side competitive market does not reduce in direct proportion to a reduced number of customers due to unavoidable fixed costs associated with all collections. Fewer customers make the council’s refuse service more expensive on a per household basis, thus requiring more funding from the waste base rate, which is paid by households in both PAYT and rates-funded areas. This increases the overall costs for all households, regardless of their payment method for refuse.

81.     A PAYT model also incurs higher costs for customers as distributors of council tags (such as a supermarket) charge a profit margin before on-selling to customers. The council does not include this margin in its targeted rates. Council also incurs marketing and customer service costs that are not required for the rates-funded service.

82.     Both the Eunomia modelling and the council’s in-house analysis found that the total cost (council services plus private) to the community overall is higher in a side-by-side competitive / PAYT option (refer Figure 2). This is partly due to the cost of running two parallel systems, each with their own fixed costs and reduced customer base to spread those fixed costs between.

Chart, bar chart

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Figure 2: Total annual cost* to all Aucklanders by funding mechanism

*sum of costs of the base rate + food scraps targeted rate + costs being paid by customers using private and council refuse services

Reducing the collection frequency of refuse to fortnightly

83.     To enable maximum usage of the food scraps bin, council’s kerbside recycling service and other waste diversion services (e.g. community recycling centres, green waste collections, electronic recycling drop-off etc), evidence from other cities (such as Hamilton, Christchurch and numerous overseas examples[14]) shows that collection of refuse needs to be every fortnight.

84.     Results from council’s modelling show that the diversion of food scraps is 12,000 tonnes higher per year with fortnightly refuse collections because this encourages the uptake of the weekly food scraps service to enable households to get rid of the more odorous component of their refuse. Recycling is also expected to increase under a fortnightly refuse scenario.

85.     As discussed below, the estimated carbon emission savings when comparing weekly versus fortnightly refuse collection are between 25,000 and 50,000 tonnes carbon dioxide equivalent (CO2-e) per year, which is the equivalent annual emission of 15,000 to 30,000 average size cars.

86.     Fortnightly refuse collection also helps avoid additional amenity and health and safety issues associated with the number of bins being placed on the kerbside every week for collection.

87.     While the main reasons for supporting a fortnightly refuse collection are to drive the right waste minimisation behaviours and achieve carbon emission reductions, cost modelling estimates that a cost difference/saving in the weekly versus fortnightly rates-funded refuse collections is also achievable.

Estimated costs for the ‘three-bins’ service

Current costs to households

88.     Currently, homeowners in Manukau, Auckland, Waiheke and Aotea/Great Barrier Island pay $293 for their combined refuse (120-litre bin) and recycling kerbside collection services. This cost appears as two separate charges on the ratepayer’s rates bill. Homeowners in PAYT areas pay the same base charge of $143 on their rates bill, which includes kerbside recycling, and householders spend around $115 per year buying tags for their refuse collection. This is an estimated charge based on the weighted average bin tag price multiplied by the weighted average set out rate.

89.     These costs will continue to increase year-on-year due to increasing national waste levy costs and inflation. Moving to a regional rates service would reduce these costs (refer Table 2).

Table 2: Estimated projected annual costs per typical household (weekly refuse service) (FY2024/2025)

 

Continue current hybrid weekly refuse service**

Move to regional weekly refuse service*

DIFFERENCE

Service

PAYT

Rates

PAYT

Rates

 

Total                       (Refuse + Recycling)

$329

$323

$353

$314

+$24 (PAYT → PAYT)

+$30 (Rates → PAYT)

-$15 (PAYT → Rates)

-$9 (Rates → Rates)

Total                         (inc Food Scraps)

$391

$385

$415

$375

*includes impact of all waste proposals within Annual Budget 2022/2023

 **adjusted for inflation

90.     Currently, the council’s PAYT service is subsidised by a charge of $4.40 per year in the base rate all customers pay. This equates to around $17 per year for each customer on PAYT.

91.     The council cannot set its bin tag price high enough to ensure PAYT revenue recovers all the costs of the service. In the PAYT areas, customers can decide to use a private sector supplier. The bin tag prices are set keeping in mind market rates. If we set our price higher, we would lose customers.

92.     The council’s costs are higher because the service is made available to every customer across the entire region and cannot limit service only to profitable areas. Private sector competitors do not offer their service in all parts of the PAYT area and as a result have lower costs. Some private sector waste providers also differentiate pricing in areas that are more expensive to service. In addition, most of their competitive offering is a subscription service like the rates-funded service available in the former Auckland City Council and Manukau City Council areas and does not incur bin tag sale and administration costs. While the council makes some cost savings when a customer moves to a private competitor, this does not compensate for the fixed costs incurred.

PAYT subsidy under region-wide scenarios

93.     The need for a base charge to cover PAYT would rise to $69 per year if this funding method was adopted regionally (refer Table 3). This is because we expect many current customers of the rates funded service would prefer a similar payment method to rates and move to a private competitor offering a subscription service. As a result, revenue would fall without a complementary reduction in costs for the same reasons noted above.

94.     If this subsidy continues to be shared within the base rate by all properties who are eligible to pay the base rate, then the additional cost is estimated to be around $30 per household per year. If, however, it was decided to restrict payment of the subsidy to those customers using council’s PAYT service, this would mean an increase of $69 to the base rate of the remaining council customers under a fortnightly PAYT scenario.

95.     For this reason, the total cost to serve for council providing the three-bin kerbside collection service to an average household, using a 120-litre refuse bin, is estimated to cost more under both PAYT weekly and fortnightly scenarios than the rates-funded equivalents (refer Table 3).

Table 3: Estimated costs* to serve each average household using the council refuse service under modelled scenarios

Service

PAYT Weekly

Rates Weekly

PAYT Fortnightly

Rates Fortnightly

120-litre refuse bin

$155

$187

$106

$141

PAYT base charge

$71

$0

$69

$0

Base Rate (inc recycling)

$127

$127

$145

$145

Food Scraps

$62

$61

$80

$78

TOTAL

$415

$375

$400

$364

*all costs are adjusted for inflation

Accommodating different household needs with a range of bin sizes

96.     Waste production is driven by several factors, including household size and composition. Most households find a 120-litre bin suits their waste disposal needs, however, some larger households where there may be more under-fives with nappies, or older people needing to dispose of incontinence products for example, require a larger bin: 240-litre bins will continue to be available for households who need them.

97.     Conversely, smaller households, or households that are particularly engaged in reducing their waste may prefer a smaller bin. Council plans to introduce an 80-litre bin across the whole region to meet the needs of these households, with a corresponding reduction in cost (refer Table 4).

Table 4: Estimated annual cost to serve for ‘three-bins’ service (with a choice of small, medium or large refuse bins)

SERVICE

WEEKLY

FORTNIGHTLY

PAYT

RATES

PAYT

RATES

Base Rate (inc recycling, applicable base charge subsidies*) + Food Scraps applies to ALL properties

$260

$188

$294

$223

SMALL BIN

Graphical user interface

Description automatically generated

80-litre refuse bin

$103

$124

$70

$94

3-BIN COST (SMALL)

$363

$312

$364

$317

MEDIUM BIN

Graphical user interface, application

Description automatically generated

120-litre refuse bin

$155

$187

$106

$141

3-BIN COST (MEDIUM)

$415

$375

$400

$364

LARGE BIN

Graphical user interface, application

Description automatically generated

240-litre refuse bin

$228

$276

$228

$211

3-BIN COST (LARGE)

$488

$464

$522

$434

* PAYT base charge subsidy applied only to council PAYT customers (refer paragraphs 93-94 and Table 3)

A comparison of weekly versus fortnightly costs

98.     Total annual refuse service costs are anticipated to be $10.4 million less under a fortnightly rates-funded collection service compared with a weekly collection (refer Figure 3).

99.     Under the rates-funded model, lower waste producers will be able to save costs in their refuse targeted rate by choosing a smaller bin (estimated at $94 for an 80-litre bin, compared with $141 for a 120-litre bin and $211 for a $240-litre bin).

100.   The estimated total cost of refuse, recycling and food scraps for a low-waste producer will increase slightly from $312 to $317 between weekly and fortnightly scenario due to the increased costs in recycling (base rate) and increased costs in food scraps from increased tonnages. However, the cost of $317 per year under a full rates-funded fortnightly scenario is less than both the current cost of the three kerbside services (refer Table 2) and the future fortnightly PAYT scenario (refer Table 4).

101.   It is anticipated that medium and high-waste producers will still see a cost saving of $11 and $30 a year respectively between the weekly and fortnightly rates-funded scenarios.

102.   The cost to deliver a kerbside refuse collection is made up of refuse collection costs, refuse disposal costs, refuse service solution and ongoing supply and maintenance of bins.

103.   Refuse collection costs are split into fixed costs ($6.4 million), which do not change with collection frequency and up to three variable cost lines. The variable cost lines consist of:

·     tonnage rates for weekly collections

·     tonnage rates for fortnightly collections (for current PAYT contract areas)

·     bin lift rates for fortnightly collections (for current rates-funded contract areas).

104.   Figure 3 shows a $6 million reduction in refuse collections variable costs. This is driven by anticipated tonnage decreases under a fortnightly scenario due to diversion to food scraps and greater anticipated diversion to recycling due to better use of correct bins, as well as fewer trucks required for refuse collections.

105.   Refuse disposal costs are also anticipated to decrease by $5.3 million under a fortnightly scenario due to decreased tonnages as a result of increased diversion. A small additional cost of $0.9 million is anticipated due an anticipated shift towards a wider range of bin sizes under the fortnightly scenario.

Chart, waterfall chart

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Figure 3: Estimated comparison of weekly vs fortnightly refuse collection

A rates-funded service supports greenhouse gas reductions 

106.   Te Tāruke-ā-Tāwhiri: Auckland’s Climate Plan was adopted in July 2020 (ECC/2020/29). The plan commits to halving greenhouse gas emissions (against a 2016 baseline) by 2030 and reaching net zero emissions by 2050.  

107.   Auckland Council can make a significant contribution to our climate goals by optimising waste reduction and resource recovery, including the ability to influence a greater number of households into the future through the rates-funded model. 

108.   Over the lifetime of the proposed decision, the impact of greater diversion from landfill of both food scraps and general recycling will be the most significant components of emissions reduction, with an anticipated emissions saving of 125,000 tonnes of CO2-e per year under a rates-funded weekly service (refer Figure 4).

109.   The rates-funded option also presents the ability to influence truck fleet fuel efficiency (with a higher number of households on the service).

110.   Figure 4 also illustrates the estimated carbon emission savings when comparing a weekly refuse collection versus fortnightly model. Cost modelling indicates that the diversion of food scraps is 12,000 tonnes higher under a fortnightly option because a fortnightly refuse collection encourages uptake of the weekly food scraps service. Recycling is also expected to increase under a fortnightly refuse scenario. 

111.   A conservative estimate of greenhouse gas emissions saving is approximately 25,000 tonnes CO2-e per year, which is the equivalent annual emission of around 15,000 average size cars. Note these figures have been externally reviewed by Toitū Envirocare and are based on a number of assumptions regarding waste collection vehicles and changes in waste diversion, which will continue to be refined over time. The estimate could rise to as much as 50,000 tonnes CO2-e per year (equivalent of 30,000 average size cars) depending on refinement of the assumptions used.

112.   Methane generation from food scraps processing can be directly accounted for in terms of avoided methane generated in landfill and carbon sequestered (through the anaerobic digestion of diverted food scraps). 

113.   The impacts of improved recycling for other material streams such as plastic, glass and aluminium results in more significant emission reductions, due to upstream savings from avoiding the need to mine virgin materials and manufacture new materials (such as creating new plastics from petrochemical extraction).

Chart, waterfall chart

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Figure 4: Estimated greenhouse gas emissions saving of moving to fortnightly collections

Summary of options assessment

114.   The priority areas of consideration for this review have been waste minimisation, climate impacts, equity and fairness, and cost and affordability. Table 5 summarises the comparative impact of each of the charging mechanisms on these key considerations.

Table 5: Summary of impact of kerbside refuse charging options on key considerations

Consideration

Option 1:
PAYT

Option 2:
Rates-funded
(recommended)

Option 3:
Hybrid model
(removed)

Waste minimisation

ü

üü

ü

Climate impacts

ûû

üüü

üü

Equity and fairness

ü

üü

ûû

Cost and affordability

û

üüü

ü

 

ûûû

ûû

û

ü

üü

üüü

most negative

moderately negative

slightly negative

slightly positive

moderately positive

most positive


 

115.   Staff have also considered a broader range of impacts as part of this review, including household responsibility/accountability, health and safety, technology, reputation, downstream impacts on the collections industry and amenity. The results of these assessments are more fully addressed in the Morrison Low report (Attachment A).

116.   The preferred charging mechanism of this review for its ability to deliver on both the key and subsidiary considerations for Tāmaki Makaurau is a regional rates-funded model.

117.   As the waste plan also mandates a shift to fortnightly collections after the introduction of the kerbside food scraps service, Table 6 summarises the impact of collection frequency under the preferred rates-funded charging model.

Table 6: Summary of impact of collection frequency under a rates-funded model

Consideration

Weekly Refuse Collection

Fortnightly Refuse Collection

Notes/explanation

Waste Minimisation

üü

üüü

The fortnightly collection encourages customers to divert more using their recycling and food scraps bin.

Climate Change Mitigation

ü

üüü

Weekly collections enable some diversion of food scraps and recycling.

Fortnightly collections anticipated to increase climate emissions savings up to 50,000 tonnes CO2e, the equivalent of 30,000 cars off the road per year.

Equity and Fairness

üü

û

Weekly collections maximise volume available.

Larger households that produce more waste may struggle with capacity of fortnightly collections.

Smaller households that produce less waste will benefit from cost savings of fortnightly collections

Cost and affordability

ü

üü

Fortnightly collections are marginally cheaper than weekly collections.

 

ûûû

ûû

û

ü

üü

üüü

most negative

moderately negative

slightly negative

slightly positive

moderately positive

most positive

Timeline for decision-making

118.   Figure 5 provides an overview of the proposed timeline for decision-making, which also considers the time required to operationalise any changes in service.

119.   Before adopting the recommended policy change for the charging mechanism for refuse collections (i.e. shifting to a region-wide, rates-funded service), council needs to consult on the proposed amendment to the waste plan using the special consultative procedure set out in section 83 of the Local Government Act. It is proposed that this consultation be included in the consultation for the Annual Plan 2022/2023 together with the consultation on the harmonisation of waste services and charges (covered by a separate report on today’s agenda: Other Rates and Fees Issues). 


 

120.   This would mean that the statement of proposal for the amendment of the waste plan, along with the council’s most recent waste assessment (as required under s 44(e) of the Waste Minimisation Act 2008) would be included in the consultation materials for the Annual Budget 2022/2023. Any change to the charging mechanism for refuse collections would therefore not be implemented until 2024/2025, with the exception of a potential earlier shift for Papakura and Franklin during 2023/2024. This is to align with the delivery of the food scraps service and allow time for any operational changes by council’s contractors.

121.   The current waste plan commits to a shift towards fortnightly collections following the roll-out of a weekly food scraps collection. Food scraps collections are scheduled to start in residential parts of Waitākere and North Shore towards the end of 2022/2023 and across the region in 2023/2024.

122.   The three-bin collection contracts allow for the food scraps service to operate for at least six months before shifting to fortnightly collections. Further, Resolution STR/2019/80 as passed by the Strategic Procurement Committee in December 2019, ensures the refuse service will not shift to fortnightly until evidence (regarding effectiveness of the food scraps service and the ability of households to cope with a fortnightly refuse service) is presented to the appropriate committee for approval.

123.   If, at that point in time, the Environment and Climate Change Committee (or other relevant committee) decides the region needs to continue on a weekly refuse collection service, council will have the opportunity to consult on this option as part of the next review of the waste plan in 2024.

124.   The review process for the waste plan as set out in the Waste Minimisation Act 2008, which will take place in 2024, ensures a robust decision-making process allowing elected members to have the opportunity to review the most up-to-date information and evidence and debate any recommended changes to the refuse collections’ frequency and when such changes would be introduced.

125.   Taking into account all of the above, the earliest shift to a potential fortnightly refuse collection would not be until 2025/2026, as per timeline in Figure 5.

Shape

Description automatically generated

Monitor effectiveness of food scraps and refuse tonnage and presentation under weekly refuse collections (Mar 2023 - Mar 2024)
If decision to retain weekly - consult as part of Waste Plan (May 2024 - Sept 2024)

** Subject to consultation – potential move to rates for refuse collections
*** Subject to committee approval and Waste Plan 2024 consultation

Figure 5: Overview of proposed timeline for decision-making


 

Tauākī whakaaweawe āhuarangi

Climate impact statement

126.   The Intergovernmental Panel on Climate Change sixth Assessment Report, released in August 2021, has reported global warming of 1.5°C and 2°C will be exceeded during the 21st century unless significant reductions in carbon dioxide (CO2) and other greenhouse gas emissions occur in the coming decades[15]. Our current emissions pathway has to change.

Auckland’s climate emissions and waste

127.   Three per cent of Auckland’s current emissions profile comes from landfill gas, and according to the Climate Commission’s advice to the government in June 2021, waste accounts for nine per cent of biogenic methane emissions in Aotearoa[16].

128.   As a member of C40 cities, Auckland committed to adopting a climate action plan that will deliver action consistent with the objectives of the Paris Agreement – an integrated and inclusive plan that addresses the need to reduce greenhouse gas emissions, adapt to the impacts of climate change, and deliver wider social, environmental and economic benefits[17].

129.   Te Tāruke-ā-Tāwhiri: Auckland’s Climate Plan, was adopted in July 2020. The plan commits to halving greenhouse gas emissions (against a 2016 baseline) by 2030 and reaching net zero emissions by 2050. Specific priorities in the plan related to waste minimisation are:

·     built environment: ensuring the management of existing infrastructure increases climate resilience and reduces emissions

·     economy: accelerating the uptake of innovation that supports the delivery of a resilient, climate-proof and regenerative economy; manage our resources to deliver a zero waste, circular economy

·     food: prevent and reduce waste and maximise the value of surplus food.

130.   Auckland Council can make a significant impact on our climate goals associated with waste by keeping as much waste and diversion as possible within the direct control of Auckland Council to optimise waste reduction and resource recovery (including the ability to influence a greater number of households into the future).

Impact of charging method

131.   We anticipate that there will be further climate change-related financial risks to servicing households in Auckland, but which have not been identified yet, for example higher costs associated with delivering services during extreme weather events. The funding model that presents the greatest financial resilience to Auckland Council is the rates-funded option as this presents more opportunity to share the cost of shocks across the region.

132.   Over the lifetime of the proposed decision, the impact of greater diversion both from food scraps collection and general recycling will be the most significant in terms of emissions reduction. The rates-funded fortnightly refuse collection maximises this opportunity as outlined above.

133.   Methane generation from food scraps processing can be directly accounted for in terms of avoided methane generated in landfill and carbon sequestered (through the anaerobic digestion of diverted food scraps).


 

134.   The impacts of improved recycling for other material streams such as plastic, glass and aluminium results in more significant emission reductions, due to upstream savings from avoiding the need to mine virgin materials and manufacture new materials (such as creating new plastics from petrochemical extraction).

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

135.   This policy decision specifically relates to kerbside collection services for residential properties. The rating impacts will therefore relate largely to residential ratepayers.

136.   For this reason, we have not sought the views of other Auckland Council departments and council-controlled organisations as they will not be impacted by this policy.

137.   Staff from Auckland Council’s Financial Strategy and Planning group formed part of the review team with further input sought from the Chief Economist Unit, Research and Evaluation Unit (RIMU) and the Public Law team.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

138.   Waste Solutions staff presented the review progress and findings to all local boards during July and August 2021. Formal feedback was received from all 21 local boards (Attachment B). Figure 6 shows an overview of preferred payment method expressed within formal feedback by local board area.

139.   In summary, 14 local boards expressed a preference for their area to stay or move to rates-funded, four local boards expressed a preference for their area to stay or move to PAYT and three local boards did not express a preference at this time.

Summary of views of refuse charging method

140.   The eight PAYT local boards responded as follows:

·     three local boards (Hibiscus and Bays, Devonport-Takapuna and Papakura) favoured staying on PAYT

·     three local boards (Kaipātiki, Franklin and Henderson-Massey) favoured a shift from PAYT to rates-funded

·     Upper Harbour Local Board withheld their view pending further information

·     Waitākere Ranges Local Board did not express a view either way but supported the review.

141.   The eleven rates-funded local boards responded as follows:

·     ten local boards (Puketāpapa, Ōrākei, Howick, Albert-Eden, Māngere-Ōtāhuhu, Manurewa, Waitematā, Ōtara-Papatoetoe, Aotea/Great Barrier and Waiheke) expressed a preference to stay rates-funded

·     Maungakiekie-Tāmaki Local Board did not express a preference but noted that PAYT would cause difficulties for its residents.

Map

Description automatically generated

Figure 6: Local boards preferred payment method expressed in formal feedback

142.   In addition, Rodney Local Board, who was due to receive a PAYT service, expressed a preference for rates-funded and Whau Local Board, the only area with both rates-funded and PAYT mechanisms currently, expressed a preference for moving to PAYT as it considers rates-based charging does not incentivise responsible recycling.

143.   Devonport-Takapuna Local Board supports retaining the current hybrid charging model for kerbside rubbish collections with some areas on a PAYT model and other areas rates-funded.

144.   Hibiscus and Bays Local Board supports a regional shift to PAYT whilst at the same time acknowledging that this option is neither the most equitable option, nor has always resulted in the largest reduction of waste. Reasons include that the generator of waste should be responsible for paying the true cost of managing that waste, and that a PAYT system offers choice to consumers of refuse service provider.

145.   Waitematā Local Board advocated strongly for implementing a rates-funded service across the whole region on the basis of waste minimisation, equity and climate change, noting that cost is often not a good way of prioritising better waste practices.

146.   Kaipātiki, Puketāpapa and Rodney local boards also supported a rates-funded kerbside refuse collection across the Auckland region. Reasons included that the current system of paying for rubbish collections through rates is simple and easy for residents. There is no need to remember to purchase tags or to attach them to bins for collection. There is also no risk of tags to be stolen, damaged, lost or otherwise removed from bins, resulting in bins not being emptied. However, concerns were raised by Manurewa Local Board that the existing rates-funded system needs more flexibility for larger households that cannot cope with the default bin size provided.

147.   Māngere-Ōtāhuhu Local Board supported retaining a rates-funded service, with concerns raised about the financial impact of PAYT on constituents who are often time and financially constrained disproportionate to other areas of Tāmaki Makaurau / Auckland.

148.   Ōrākei Local Board agreed that their community would be ready to move to a PAYT system once the RFID tags were ready to be implemented but did not wish to use this system under the current tag methodology.

Wider issues

149.   Within the feedback (refer Attachment B) local boards also raised wider issues relating to waste, outside the scope of this consultation. Themes are noted below and are being addressed separately.

150.   Manurewa Local Board also called for wider social and environmental costs such as illegal dumping to be taken into consideration in addition to financial costs, including the effect on residents, particularly children, of seeing large amounts of illegally dumped waste in their neighbourhoods.

151.   Whau Local Board also asked staff to investigate an efficient option of enabling shared waste disposal between neighbouring houses or multi-apartment complexes, for reasons such as encouraging recycling and kerbside amenity and health and safety.

152.   Māngere-Ōtāhuhu Local Board requested culturally appropriate, multilingual communications to engage their community.

153.   Manurewa and Devonport-Takapuna local boards also supported retaining a weekly refuse collection, rather than moving to fortnightly.

154.   A number of the local boards (Kaipātiki, Howick, Devonport-Takapuna, Waitematā) called for greater onus to be put on manufacturers and retailers to minimise product packaging or take-back of packaging from the goods they supply.

Tauākī whakaaweawe Māori

Māori impact statement

155.   The way Māori live, where they live and the way they engage with waste services has specific implications for this decision for Māori in Tāmaki Makaurau / Auckland under each of the different funding models being analysed.

156.   According to the 2018 census, 53 per cent of the Māori population of Tāmaki Makaurau / Auckland currently live in a rates-funded area, primarily in south Auckland and 47 per cent live in PAYT areas, primarily in Papakura, Henderson-Massey and Franklin.

157.   Statistically, Māori in Tāmaki Makaurau / Auckland have lower rates of home ownership (25 per cent) than the wider Auckland average (45 per cent). With 75 per cent of the Māori population living in rented accommodation, currently those in rates-funded areas do not pay directly for refuse services while renters in PAYT areas are more likely to be purchasing the bags or tags themselves.

158.   Leaving the region on a hybrid or split charging system creates inequities where households in PAYT areas are having to pay each time they set out their refuse, while households in rates-funded areas have the annual cost of kerbside services paid for by the ratepayer (usually the landlord).

159.   There are a number of reasons why Māori households may produce higher than average waste volumes which Waste Solutions needs to consider options for as it reviews the kerbside charging policy, including intergenerational living, shorter housing tenure/greater mobility, and fewer purchasing choices that create higher waste volumes.

Consultation with Mana Whenua

160.   Staff provided memos to both the Independent Māori Statutory Board and Tāmaki Makaurau Mana Whenua Forum summarising the review and early findings, along with the results of targeted community engagement outlined below.

161.   Staff also outlined the purpose of the review and early findings to the Infrastructure and Environmental Services Mana Whenua Kaitiaki Regional Hui on 9 July 2021 and then at a Regional Projects Workshop on 20 July 2021 in relation to the operational aspects of this review. Members of the forum raised concerns that poorer communities had fewer choices in relation to controlling their waste production. Staff acknowledged that the issues of equity and fairness are key factors in consideration of the policy review.

162.   Staff also acknowledged that multiple approaches are needed, including advocacy to central government on phasing out hard-to-recycle plastics and the introduction of product stewardship schemes.

Targeted engagement with Māori in Tāmaki Makaurau

163.   In August and September 2021, specialist community facilitators Rākau Tautoko and Waste Solutions community partners hosted targeted focus groups with Māori and Pacific communities to seek their views on different refuse collection payment mechanisms.

164.   Māori made up 50 per cent (n=19) of the participants in the first round of focus groups who shared their views and experiences. Half of the planned focus groups were conducted face-to-face, with the remainder completed via phone interviews,  due to the restrictions of the Alert Level 4 lockdown.

165.   Key feedback from the completed focus group workshops included:

·     Those with larger families, in communities that experience low income and high rental costs would not be supportive of a PAYT system, would prefer for all waste to be paid in rates, and that the PAYT system would not reduce the amount of rubbish they create.

·     Those with smaller families, and overall lower expenses fed back that they did not mind the PAYT system and could understand the importance of reducing waste.

·     The majority of the participants who stated they like the PAYT system were from one-two person households, were older and felt that they pay less because of their household situation.

·     For those in a PAYT area currently, the cost has not encouraged reduction of waste, but it has created difficulties in managing waste.

·     For those currently in a rates-funded area, there were concerns raised around the cost of PAYT being directed at the tenant instead of the property owner.

166.   The participants were all in support of reducing waste. They all acknowledged the need to change our waste management systems and reduce the amount of landfill that is being created. However, the majority of the participants did not believe that the PAYT system was a fair and equitable solution to our waste problem. The majority of the participants would prefer Auckland Council to create a more fair and equitable waste management system than the PAYT system that is currently in place in some geographical areas.

Ngā ritenga ā-pūtea

Financial implications

167.   The financial implications of the recommended changes are noted in the cost effectiveness and financial sustainability section above.

168.   While all options (rates-funded or PAYT or hybrid) are cost neutral to the council, the PAYT options poses greater revenue risk than other options as it is substantially more difficult to predict the number of council customers under full PAYT scenarios. Any reduction in council customers over and above the level currently forecasted could lead to further increases to refuse costs per council customer and this would in turn increase the overall waste collection costs facing households through higher base service charges.


 

169.   Any decision to change to fully rates-funded refuse collection will be made as part of the council’s exercise of discretion as to the choice of funding sources for its activities, under section 101(3) of the Local Government Act 2002, influenced by relevant requirements and policy considerations such as the Waste Minimisation Act 2008 and the Waste Management and Minimisation Plan 2018 (including any proposal to amend that plan, if necessary).

170.   The rates themselves will be set under the Local Government (Rating) Act 2002 pursuant to the council’s statutory obligations and powers in relation to financial management, as set out in the Other Rates and Fees Issues paper also presented today.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

171.   The key risks and mitigations relating to the decision to move the funding of the council’s kerbside refuse collection service to a targeted rate are shown in Table 7.

Table 7: Risks and mitigations of moving to regional rates-funded refuse collection

Risk

Mitigation

Auckland Council increases its number of household collections, and this is perceived to be anti-competitive.

Council procures collection contracts for household kerbside services from private sector and there is an opportunity to create competition through council services contracts.

Council does not provide collection services to the commercial sector; healthy competition exists within that sector

The perception of unfairness in offering the same service/charge to all households: households that produce large amounts of waste are favoured under the rates-funded model, whereas households that produce less waste are favoured under the PAYT model.

Staff have modelled the cost of offering three different bin sizes (80-litre/120-litre/240-litre) under the rates-funded model to accommodate different households’ needs.

Modelling shows that smaller households can make savings by choosing an 80-litre bin.

In 2019 the council entered into seven, long term, waste collection contracts that provide for a PAYT refuse collection service (or transition to such a service). If the council were to decide to move to a fully rates-funded service then it is likely that some variation to these contracts will be required and there may be some, as yet to be determined, cost implications.

Staff have continued open dialogue with all waste collection contractors and based final costings on revised costs provided by contractors.

Ngā koringa ā-muri

Next steps

172.   The recommended option requires a change to the Auckland Waste Management and Minimisation Plan 2018, which requires consultation using the special consultative procedure set out in section 83 of the Local Government Act.

173.   It is proposed that consultation on the amendment to the waste plan is included in the consultation on the Annual Plan 2022/2023 together with the consultation on the harmonisation of waste services and charges (covered by a separate report on today’s agenda: Other Rates and Fees Issues).

174.   This means that the statement of proposal for the amendment of the waste plan, along with the council’s most recent waste assessment (as required under s 44(e) of the Waste Minimisation Act 2008) will be included in the consultation materials for the Annual Budget 2022/2023 that will be presented to the Governing Body for adoption in February 2022.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Refuse Collection Advice – Summary of Findings

261

b

Local board feedback on kerbside refuse charging policy

301

     

Ngā kaihaina

Signatories

Authors

Alexandra Kirkham - Senior Waste Planning Specialist
Sarah Le Claire - Waste Planning Manager

Authorisers

Barry Potter - Director Infrastructure and Environmental Services

Ross Tucker - General Manager, Financial Strategy and Planning

Peter Gudsell - Group Chief Financial Officer

 


Finance and Performance Committee

08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

Annual Budget 2022/2023: Other Rates and Fees Matters

File No.: CP2021/15865

 

  

Te take mō te pūrongo

Purpose of the report

1.       To recommend changes to rating policy and fees for consultation as part of the Annual Budget 2022/2023.

Whakarāpopototanga matua

Executive summary

2.       The recommendations in this report bring together all the rating issues and fees material, not covered elsewhere on this agenda, proposed for consultation as part of the Annual Budget 2022/2023.

Roll out of food scraps service and standardisation of liability for waste management targeted rates

3.       To achieve the Auckland Zero Waste vision, the council is moving to standardise its waste management collection services and how these are paid for. These services include kerbside collection of refuse, recyclable materials, and food scraps.

4.       As part of this, the kerbside food scraps service will begin to be rolled out across urban Auckland starting later in the 2022/2023 year. The new areas to get the service in 2022/2023 are the former North Shore areas not currently receiving the service and the former Waitākere area. They will be charged a targeted rate for the part of the year they receive the service.

5.       The funding for waste collection services will be standardised if the proposal discussed in the report also on this agenda, to fund kerbside refuse collection with a targeted rate across the region (from 2024/2025), is adopted.

6.     Officers also recommend that the approach to charging specific properties for these services be standardised. At present, residential multi-unit developments of ten or more units and properties with several separately used or inhabited parts (multi-SUIPs) in the former Auckland City Council (ACC) area can opt-out of council services and don’t have to pay the associated rates. Every property in the rest of the city must pay a charge per separately inhabited part of a rating unit (SUIP[1]) for the waste collection services available in that area, except for pay-as-you-throw (PAYT) refuse.

7.       Officers propose that all residential (including lifestyle) properties pay per SUIP for all the available council services with the following exceptions:

·    Multi-unit residential developments of ten or more units would be able to opt-out of refuse, recycling, and food scrap services if the council cannot provide a service.

·    Residential rating units with two to nine SUIPs in the former ACC area who presently pay less charges than the number of SUIPs and multi-unit developments with less than ten rating units would continue on their current arrangements until they change owners.


 

8.       With the exception of some multi-unit developments, council is able to provide suitable kerbside waste collection services to all residential properties. This proposal would ensure that the council maintains maximum control of the waste stream to better enable achievement of the objectives of the council’s Waste Management and Minimisation Plan. With the maximum properties contributing to costs, the overall rates will be able to be set lower. It also ensures fair treatment of all residential properties, both multi-unit and detached.

9.       Officers recommend that non-residential properties, excluding lifestyle properties, be able to opt-out at their request. The council’s kerbside service is suitable for domestic waste and cannot deal with the wide range and nature of business and farm waste. The council cannot administer an opt-out system based on a case-by-case assessment of the suitability of the council’s service for these 31,000 properties so this option was rejected.

10.     All properties, residential and non-residential, will pay a minimum base charge for regional waste initiatives on a per SUIP basis, with the exception of multi-SUIP properties in the former ACC area who presently pay less charges than the number of SUIPs and the majority of business properties in the former Manukau City Council (MCC) area who currently do not receive a council service or pay a targeted rate. These properties will start paying the minimum base charge from 2023/2024.

11.     If adopted, these charging rules will apply for the food scraps service as it is rolled out and for other services from the 2023/2024 year to allow the implementation of the required administration systems.

12.     Officers note that the regionwide base rate for recycling and regional initiatives for 2022/2023 is falling by around 5 per cent due to cost savings from the implementation of new inorganic contracts and improved bin tag revenue from PAYT operation. However, the costs of rates funded refuse provided in the former ACC and MCC areas has risen by around 10 per cent. This is because of increases in the waste levy and landfill costs. The net impact on the total rate for the former ACC and MCC areas is an increase of 2.8 per cent.

Rating policy changes

13.     Officers recommend consulting on a proposal to exclude rural zoned land on Waiheke inside the Rural Urban Boundary from the Urban Rating Area. This will ensure rural zoned land is rated consistently across the region. The 30 properties affected by this proposal received a miscellaneous remission for the current year to ensure the rates they were charged were consistent with other rural rated properties.

14.     Officers also recommend clarifying that roads used as access ways for residential properties are rated as residential not business.

15.     The rating policy for the 2022/2023 financial year is also being amended to remove the collection of the Accommodation Provider Targeted Rate in light of a recent decision of the Court of Appeal. Planned expenditure on visitor attraction and major events by Auckland Unlimited for the 2022/2023 year has been adjusted to reflect the lower revenue. Despite the long-term benefits of this expenditure, given the uncertainty around border opening and the recovery of the visitor economy, officers do not recommend increasing the general rates funding for this activity given other priorities.

Fees and charges

16.     Officers recommend a three-year cycle of fee reviews to ensure that all fees are regularly reviewed. The reviews will ensure that the cost recovery decisions previously made by the council continue to be met. Advice on cost recovery levels will be provided where there have been material changes to the nature or cost of services since the original decisions were made. In the first year of the proposed cycle, officers recommend that the council consult on:

·     adjustments to animal management fees

·     minor technical changes to regulatory fees

·     standardisation of cemetery fees.

17.     As a result of the increase in the volume of dog registrations and efficiency savings, small reductions in fees are possible while still achieving appropriate cost recovery levels. Other changes are proposed to animal management and regulatory fees to recover the cost of new services and better align some fees with the complexity of service delivery.

18.     This year, it is proposed to standardise the fees for the majority of cemetery services across all locations. Next year, fees for exclusive rights to burial (plots) and related services will be reviewed and the level of cost recovery investigated for all fees.  The fee changes proposed for this year will lead to some increases and decreases. The key change is to standardise the fees for single and double depth burials at $1,700 and $1,800 respectively. Fees for disinterment are also being standardised to ensure full cost recovery and to bring them into line with the market.

19.     As provided for in the Revenue and Financing Policy, other fees and charges will increase  in line with the council’s cost of inflation where necessary to maintain cost recovery.

Ngā tūtohunga

Recommendation/s

That the Finance and Performance Committee:

a)      agree to recommend to the Governing Body that it consult as part of the Annual Budget 2022/2023 on the targeted rate to fund the extension of the food scraps collection service to the following areas from March 2023, to be applied to all residential SUIPs to which the service is made available:

i)    the former Waitākere City Council area

ii)   the former North Shore City Council area excluding those where the service is already available.

b)      agree to recommend to the Governing Body that it consult as part of the Annual Budget 2022/2023 on the standardisation of charging for the waste management targeted rates as set out below:

i)    allowing residential multi-unit developments across Auckland with ten or more units to opt out of council’s refuse, recycling and/or food scraps services and respective targeted rate charges where the service(s) cannot be provided by the council as per the standards specified in Attachment A of this report, effective from 1 July 2023 with the exception of ii) below

ii)   maintaining the existing opt-out arrangements for multi-unit developments within the former Auckland City Council area where:

A)    an approved opt-out as per the current policy is already in place, or

B)    an application for opt-out as per the current policy is received by the council on or before 30 June 2022

iii)  applying the waste management targeted rates on a per separately used or inhabited part of a rating unit (SUIP) basis to all residential and lifestyle properties with less than ten SUIPs across Auckland where a service is provided or available, effective from 1 July 2022 with the exception of iv) below

iv)  maintaining the number of waste management targeted rate charges as per the current policy for the following multi-SUIP properties with less than ten SUIPs within the former Auckland City Council area, until the property changes owners:

A)    properties with a residential or lifestyle land use that are already receiving fewer waste management targeted rate charges than their number of SUIPs

B)     properties with a residential or lifestyle land use that request to reduce their number of charges on or before 30 June 2022

v)   allowing all properties with a land use that is not residential or lifestyle to opt out of the standard refuse and/or the recycling service and respective targeted rate charges at their request, effective from 1 July 2023

vi)  applying a minimum targeted rate charge to cover the costs of council’s regional initiatives including the annual inorganic collection, the resource recovery network and subsidy for providing affordable waste services on Hauraki Gulf Islands, to all eligible rateable SUIPs across Auckland that are not currently paying this minimum charge, effective from 2023/2024

c)       agree to recommend to the Governing Body that it consult as part of the Annual Budget 2022/2023 on amending the rating policy to:

i)    exclude rural zoned land on Waiheke from the Urban Rating Area

ii)   clarify the rating of separate rating units used as an access way as residential properties.

d)      agree to recommend to the Governing Body that it consult as part of the Annual Budget 2022/2023 on changes to fees and charges as set out in this report

Horopaki

Context

Decision making

20.     The council is required to consult on changes to its rating policy and certain changes to regulatory fees and charges, including where fees are prescribed under the Resource Management Act 1991 or where the changes are considered significant under its Significance and Engagement Policy. The council can also choose to consult where it considers it appropriate to do so. The council is required to consult on changes to the Revenue and Financing Policy when proposing changes to sources of funding where the policy doesn’t already provide for that source of funding to be used for the particular activity.

Tātaritanga me ngā tohutohu

Analysis and advice

21.     The following sections set out the key issues to be considered when making a decision for each of the proposed changes to council’s rating policies and fees. More detailed analysis of each issue is set out in the attachments to this report. Each attachment is presented in the format that will be used for the supporting information for consultation if the council decides to consult on the issue. The material will be updated to reflect the decisions the council makes on the issues for consultation.

Standardisation of liability for waste management targeted rates

Introduction

22.     Auckland’s Waste Management and Minimisation Plan– Te Mahere Whakahaere me te Whakaiti Tukunga Para I Tāmaki Makaurau 2018 (the waste plan) sets out the Auckland Zero Waste Vision and actions to achieve it. The waste topics in this year’s annual budget are to deliver on the commitments within the waste plan to standardise services across the region in support of that vision.

23.     To minimise kerbside household waste, the waste plan commits to the introduction of a region-wide “three-bin” collection system to enable maximum diversion of waste from landfill. This system will include a weekly food scraps collection and alternating fortnightly collections for recycling and refuse.

24.     At present, Auckland Council provides the following three kerbside waste collection services:

·     a weekly collection of general refuse paid for by targeted rates or bin tags depending on the area

·     a fortnightly collection of recyclables, and

·     a weekly food scraps collection that is currently available in Papakura and parts of North Shore.

25.     The council also invests in regional waste initiatives such as the operation of the resource recovery network (RRN) and an annual pre-booked collection of inorganic materials that don’t fit into the general refuse bin.

26.     The kerbside refuse and recycling services provided by the council are mainly designed for household waste needs. They may not be suitable for less accessible sites (such as a high-rise apartment block or a shopping mall) or managing the volume and nature of some business waste.

27.     The council is standardising its kerbside refuse and recycling services for urban areas. The kerbside food scraps service is scheduled to be rolled out to most of the region over 2022/23 and 2023/2024.

28.     Plans are now in place to complete the standardisation of funding for waste services. The report ‘Kerbside refuse charging policy review’ also on this agenda recommended that the kerbside refuse service be funded by a targeted rate on all properties across the region from the 2024/2025 year.

29.     However, while services and funding are being standardised, the way in which charges are applied still varies across the region and different rules apply as to who can opt-out of council services and paying the associated targeted rates. Officers recommend that the council implement a standardised charging approach for waste management services across the region. This will ensure equity and support the waste minimisation goals set out in the waste plan. A regionally consistent charging approach will also assist the council in delivering its services at affordable costs to all Aucklanders.

30.     The following sections of this report:

·    provide an update on the extension of the food scraps service and targeted rate over the next two financial years

·    propose an approach to standardising the current rules around service (and associated rate) opt-outs.

Food scraps service and targeted rate

31.     Following consultation as part of the 10-year Budget 2018-2028, the Governing Body agreed in May 2018 to the provision of a foods scraps collection service to all urban households funded by a targeted rate. The targeted rate applied to every residential SUIP within the service area. The service and the targeted rate were first introduced in Papakura in 2018/2019 and then parts of North Shore in 2019/2020.

32.     In late 2019, the council approved the contracting for regional scale food scraps processing facilities and kerbside collection. The facilities are currently being constructed and once completed will be able to support the regional food scraps service roll-out.

33.     The annual targeted rate is currently set at $69.88 per SUIP for the serviced areas. The targeted rate for 2022/2023 is proposed to be set at $71.28 per SUIP.

34.     From March 2023, the council will start extending the food scraps service to cover most of Auckland. The new areas that will start receiving this service in the 2022/2023 financial year will be charged the food scraps targeted rate on a pro rata basis – with a lower amount that reflects the number of months the service is available to them during the 2022/2023 rating year. The new areas that will start receiving this service during 2022/2023 are the former Waitākere City Council (WCC) area and the former North Shore City Council (NSCC) area where the service is not already available.

35.     Other parts of Auckland will only start to receive the service after 30 June 2023, so they will not be charged for the service for the 2022/2023 financial year. In future, once all areas are receiving the service, all areas will be charged the same rate each year as set out in each year’s annual budget.

36.     The following table shows the targeted rate amount proposed for 2022/2023 for each area with a different service start date. The targeted rate will apply to all properties including those that already undertake their own composting. It is impractical to administer a system exempting these properties from the service (and associated rate) due to the cost of checking compliance.

Area

Scheduled start date of food scraps collection

Proposed targeted rate for 2022/2023 (incl. GST)

WCC area A

6 March 2023

$23.76

WCC area B

27 March 2023

$17.82

NSCC area A

1 May 2023

$11.88

NSCC area B

15 May 2023

$5.94

NSCC area C

29 May 2023

$5.94

37.     The current and proposed service areas are set out in the map in Attachment A: Standardisation of liability for waste management rates proposal.

Standardising how charges are applied

Current application of charges

38.     The following table sets out of the 2021/2022 targeted rate charges.

Waste base service

(region wide)

Recycling

Regional waste initiatives (inorganic collection, resource recovery network, HGI subsidy[18])

Total

$88.90

$53.80

$142.70

Standard refuse

(ACC and MCC only)

$150.06

39.     Different rules apply in different parts of Auckland around the opt-out of the waste management services and associated targeted rates reflecting policies inherited from the former councils. In the former ACC area, certain properties have the ability to opt out of council services and the requirement to pay the associated targeted rates. Properties in other areas can choose not to use the council provided services, or contract with a private supplier, but must continue to pay the targeted rates.

Standardisation principles and recommendation

40.     The inconsistencies in opt-out rules have caused confusion among ratepayers and are often perceived as unfair by apartment or multi-SUIP property owners and body corporates outside of the former ACC area. Officers have considered options for addressing these issues. The following principles were used to evaluate the options.

·    Waste minimisation – supporting waste minimisation goals including maximising council’s ability to influence waste reduction behaviour

·    Fairness and equity – paying for services supplied or available

·    Affordability – affordable waste service for every Aucklander

·    Administrative efficiency – a straightforward charging mechanism that is easy to understand and administer

41.     To allow for the administration of rates until the council has introduced all the standard services and aligned funding, the waste management targeted rate will be set in four parts; refuse, recycling, food scraps and minimum base rate for regional initiatives. Applying the above principles to the options analysis has led to the following overarching approach to the standardisation of service and associated targeted rate opt-out rules. The new rules will apply from the 2022/2023 year for food scraps. Rules for other services will apply from the 2023/2024 year to allow time for the administrative systems to be put in place. The proposed rules are:

·    apply the relevant targeted rate (refuse, recycling and/or food scraps) to each SUIP where a suitable kerbside service can be provided

·    allow opt-out on request of service charges for multi-unit residential developments of ten or more units where a suitable kerbside service cannot be provided

·    allow opt-out of services on request for non-residential properties, except lifestyle, as it is administratively impractical to determine serviceability on a case-by-case basis

·    apply a minimum charge (via a targeted rate) to each SUIP to recover costs for regional waste initiatives.

42.     Residential developments with more than one SUIP under one title in the former ACC area who presently pay less charges than the number of SUIPs would continue on their current arrangements until they changed owners. Residential multi-unit developments of ten or more rating units in the former ACC area with an existing opt-out arrangement would also be exempt from the change.

43.     It is proposed to charge all properties where the council can deliver a suitable service to enable the council to have the most influence over the waste stream in order to better enable the achievement of our waste minimisation goals. As noted in the report also on this agenda, ‘Kerbside refuse charging policy review’, Auckland Council can most easily influence domestic waste tonnages of customers who are using the council service. This is because council can control the size of refuse bin provided, and the frequency of collection, to make it more convenient to recycle and divert food scraps. Limiting residential opt-outs to properties we can’t service has the greatest potential for the council to influence waste tonnages overall, as it retains the greatest number of customers with Auckland Council. This approach also shares the costs of providing services over all the properties who can be serviced allowing the rates to be set lower.

44.     As the regional initiatives benefit all properties, this charge will be applied universally. The charge for this element will be applied per SUIP to ensure equity between similar properties with a different rating status.  For example, a shop in a shopping mall is treated the same as a shop on the main street, and a retirement village unit is treated the same as an apartment.

45.     Properties that require similar policy consideration have been grouped into three categories:

·    multi-unit developments with ten or more residential dwellings

·    multi-unit properties with two to nine residential units

·    non-residential properties (mainly businesses and farms).

46.     The opt-out rules for each category are discussed below.

Multi-unit developments (MUDs) with ten or more residential dwellings

47.     These include

·    residential blocks containing ten or more attached rating units (such as a block of terraced houses or a mid/high rise apartment building)

·    single residential rating units (one title) that contain ten or more SUIPs (such as a retirement village with detached or attached dwellings).

48.     In the former ACC area, both categories of property can opt-out. When opting-out each rating unit in a residential block of more than ten units and each rating unit must pay the base charge for regional waste initiatives. In the other areas, all properties pay one charge per SUIP.

49.     There are an estimated 1,900 residential MUD sites containing a total of 79,000 dwellings in Auckland. In the former ACC area, around 16,000 MUD units are receiving both refuse and recycling services from the council and around 37,000 MUD units have opted out of one or more council services. In areas outside of the former ACC area, while all MUDs are paying the full number of waste base service charges and refuse charges (where applicable), it is estimated that around 8,500 MUD units are not using a council service despite paying a targeted rate for it.

50.     A MUD’s decision to opt out of council services could be due to restricted access and/or limited space for waste storage making it unsuitable for council service, or a preference for an alternative provider for other reasons. The council can service most of the residential MUDs in Auckland.

51.     The current threshold for approving MUD opt-out in the former ACC area is low. An apartment block will be allowed to opt out provided the council is satisfied that it is receiving an alternative service, even if the council can deliver the same service.

52.     Officers do not recommend retaining the status quo as it would retain the current inequitable treatment of properties. Not allowing any properties to opt-out is also not recommended as the council cannot provide the service to some and officers consider that it is fairer to only charge the targeted rate where a service is available / can be provided.

53.     The council could allow properties across the region to opt-out if they could show they had a suitable alternative service. However, this would likely reduce the number of properties served by the council, raising costs for everyone else and impacting on the ability to achieve our waste minimisation goals. These properties would be treated unfairly in comparison to detached dwellings who would not have this choice.

54.     Officers recommend that all MUDs with ten or more units across the region be able to opt-out where the council is unable to provide a service. The council will offer non-standard services for properties where the standard service is not suitable. This will be charged at the same rate as the standard service as the cost differences are small. Retaining all eligible properties as council customers will enable council to maximise its influence on waste behaviour as well as making its service more affordable for all. If all the eligible properties outside the former ACC area opt-out, the revenue loss will add around $1 to the waste base service targeted rate and $1 to the standard refuse targeted rate for all other properties. Attachment A provides further details on the proposed opt-out criteria under this option.

55.     Officers also recommend that:

·    where council’s food scraps service becomes available, the food scraps service and associated targeted rate be included in the opt-out policy (that is, an opt-out would only be approved if council cannot provide the service)

·    changes to the policy be implemented from the 2023/2024 financial year, allowing time for development of full policy detail in consultation with stakeholders. It will also allow time to set up the administrative framework required to operate the new policy

·    the council exempt the existing opt-out arrangements in the former ACC from the recommended change (i.e., only MUDs outside of the former ACC area and new MUDs built in the former ACC area will be subject to the new opt-out policy).

Multi-SUIP properties with two to nine residential SUIPs

56.     Only properties in the former ACC area can opt-out and choose to receive less services than the number of SUIPs. As the council can service these properties, they must pay a minimum of one charge for all services, refuse and the waste base service. In other areas, all properties pay one charge per SUIP. The council can provide a service to these developments. There are around 25,500 multi-SUIP residential rating units in Auckland with less than ten SUIPs. 2,700 multi-SUIP residential properties in the former ACC area have opted out of some or all of the council’s services.

57.     Officers recommend the council consult on removing the option for these properties to opt-out but allowing those properties in the former ACC area to retain their current arrangements until they change owners. This policy would be implemented from the 2022/2023 year.

58.     Per SUIP charging maximises the council’s customer base, its ability to influence waste behaviour and maximises revenue to ensure lowest cost for all ratepayers. This approach also minimises change for current opt-out properties in the former ACC area.

Non-residential properties (mainly businesses and farms)

59.     Only properties in the former ACC area can currently opt-out and must pay a minimum of one charge for all services. In other areas where a service is available, all properties pay one charge per SUIP. In the former MCC area, business properties generally do not receive a council service, nor do they pay targeted rate. There are 31,000 non-residential rating units in Auckland. 2,400 in the former ACC area have opted out of some or all of council’s services.

60.     The council’s refuse and recycling services are designed mainly for household waste. While some business and farm properties may be able to benefit from them to a certain extent, many have chosen to use alternative, bespoke services that better meet their individual needs.

61.     Officers recommend the council consult on standardising the opt-out rule for this category of properties by:

·    allowing non-residential properties across the region to opt out of the standard refuse service and the recycling service and respective targeted rate charges

·    applying the minimum base service charge to all eligible properties on a per SUIP basis, to cover the cost of council’s regional waste initiatives.

62.     Per service charging for the refuse service and recycling service across the region improves fairness and equity as no property will be paying for a service that the council cannot deliver, and all properties are treated equally regardless of location. The minimum base service charge per SUIP ensures every business and farm makes a minimum contribution towards the regional activities the council undertakes.

63.     Introducing this new policy for non-residential properties will decrease targeted rate revenue as properties outside of the former ACC area will then be able to opt-out and former ACC properties will no longer have to pay at least one refuse and recycling charge. It is estimated the loss in revenue from properties that opt-out will add around $6.50 to the refuse targeted rate and around $2.50 to the recycling targeted rate for every other property[19].

64.     Officers consider that it would be unfair to require payment when the council cannot provide the service. The option of assessing opt-out requests on a case-by-case basis is also not recommended as it would be impractical to administer for over 30,000 non-residential properties with widely varying waste needs.

65.     It is also recommended that for multi-SUIP properties within the former ACC area that have already opted out of one or more of the minimum base service charges and business properties in the former MCC area that do not currently pay a targeted rate, the introduction of the per-SUIP minimum base service charge be implemented from 2023/2024, to reduce the immediate financial impact on these ratepayers.

Conclusion and recommendations and waste management rates for the 2022/2023 year

63.     Officers recommend that the proposals for the standardisation of charging for waste management services set out above be adopted for consultation. It is also recommended that the council consult on the introduction of the food scraps targeted rate in the areas where the service is being introduced in the 2022/2023 year.

64.     The following table sets out the key elements of the standardised policy, when they will come into effect and the proposed exemptions.


Categories

Standardised policy

2022/2023

2023/2024

Standardisation for residential MUDs
(10+ units)

Can opt-out of:

·     refuse

·     recycling

·     food scraps

if council unable to provide service

Must pay one minimum base charge for regional waste initiatives per SUIP

ACC MUDs currently opted out continue on current basis

 

Other ACC MUDs may apply under new policy

Other areas MUDs cannot opt-out

Other areas MUDs can opt-out under new policy

Standardisation for residential Multi-SUIP properties
(2-9 units)

Cannot opt-out

ACC properties currently opted out stay on current basis until sale of property but must pay one minimum base charge per SUIP from 2023/2024

Standardisation for non- residential properties

(note food scraps service not available to non-residential properties)

Can opt-out of:

·     refuse

·     recycling

on request

Must pay one minimum base charge for regional waste initiatives per SUIP

ACC properties currently opted out stay on current basis until 2023/2024 when they must pay one minimum base charge for regional waste initiatives per SUIP

Other areas cannot opt-out

Other areas can opt-out from 2023/2024

MCC properties, which are currently mostly unserved, must pay one minimum base charge for regional waste initiatives per SUIP

65.     The proposed waste management targeted rates for the 2022/2023 are set out in the table below. The cost of the base services which includes recycling and regional initiatives has fallen by around 5 per cent, due to cost savings from the implementation of new inorganic contracts and improved bin tag revenue from PAYT operation. However, the costs of rates funded refuse provided in the former ACC and MCC areas has risen by around 10 per cent. This is because of increases in the waste levy and landfill costs. The net impact on properties in the former ACC and MCC areas is an increase of 2.8 per cent ($8.20).

 

Service

Area

Proposed TR 2022/2023 (incl. GST) $

TR 2021/2022
(incl. GST) $

Base service

All areas

135.62

142.70

Base service excluding recycling

ACC

50.86

53.80

Standard refuse

ACC/MCC

165.34

150.06

Large refuse

ACC/MCC

77.71

70.53

Additional recycling

All

84.77

88.90

Food scraps

PDC & NSC former trial areas

71.28

69.88

Food scraps

WCC area A

23.76

 

Food scraps

WCC area B

17.82

 

Food scraps

NSC area A

11.88

 

Food scraps

NSC area B

5.94

 

Food scraps

NSC area C

5.94

 

Rating policy: Excluding rural zoned land on Waiheke from the Urban Rating Area

Proposal

66.     Officers recommend amending the definition of the Urban Rating Area to exclude rural zoned land on Waiheke.

Consideration

67.     Prior to 2021/2022, land with a farm (rural industry) or lifestyle land use located in the Urban Rating Area was charged the farm-lifestyle differential. This meant that these properties paid 80 per cent of the rate charged to their residential neighbours, even though these properties received a similar level of services.

68.     Last year, as part of the 10-year Budget 2021-2031, the council amended its rates differentials so the farm-lifestyle rates differential only applies to farm or lifestyle properties in the rural area. Farm and lifestyle properties inside the Urban Rating Area now pay urban residential rates.

69.     The Urban Rating Area is defined in terms aligned to the rules in the Auckland Unitary Plan (unitary plan). It includes all land within the Rural Urban Boundary as identified in the unitary plan, but excludes land in Warkworth and land that is zoned future urban[20]. Land zoned future urban was excluded from the Urban Rating Area as this land is unable to be developed or used for urban development, unless it is rezoned through a plan change, or a resource consent is applied for. Under the unitary plan rules, all rural zoned land is outside the Rural Urban Boundary, so is automatically outside the Urban Rating Area.

70.     Zoning rules on Waiheke Island are set by the Hauraki Gulf Island (HGI) Plan, not the unitary plan. Under the HGI plan, there are 30 properties located inside the Rural Urban Boundary but have rural zoning so can’t be developed unless rezoned through a plan change, or a resource consent is applied for. These properties have always been inside the Urban Rating Area but were previously charged the farm-lifestyle rates differential as they have a lifestyle land use. Under the current rating policy, these properties are now charged urban residential rates.

71.     Officers consider the treatment of the Waiheke rural zoned properties as urban is inconsistent with the treatment of rural and future urban zoned land elsewhere in the region. To address this inconsistency in the current year, officers have applied miscellaneous remissions to the properties, so they pay no more than they would have if they had been charged farm-lifestyle rates.

Recommendation

72.     Officers recommend that the council consult on amending the definition of the Urban Rating Area to exclude rural zoned land on Waiheke.

Rating of residential access ways

Proposal

73.     Officers propose to amend the rating policy to clarify the rating of residential access ways.


 

Consideration

74.       Officers are proposing to clarify the rating of residential access ways. Multi-unit developments will often be accessed through a shared driveway or private land that is jointly owned by all owners of units in the development. Increasingly, these access ways are being established as separate title, that are owned through a body corporate for the development. In this case, the access way will be a separate rating unit, which is classed as having a transport land use. Transport land use is normally classified as a business use for rating purposes.

Recommendation

75.       Officers recommend that council consult on adding a note to the differentials definitions table in the rating policy, stating that “Separate rating units used as an access way to residential properties will be treated for rating purposes as residential use.”

Accommodation Provider Targeted Rate

76.     The Accommodation Provider Targeted Rate (APTR) which funded 50 per cent of Auckland Unlimited’s expenditure on visitor attraction and major events was suspended for the 2020/2021 and 2021/2022 years with a consequent reduction in expenditure. Reinstatement of the rate and an associated increase in expenditure was planned for the 2022/2023 year subject to review via this annual budget.

77.     How long the disruption to Auckland’s visitor economy caused by COVID-19 will last is uncertain. There remains considerable uncertainty about when and how New Zealand’s borders will reopen and how the visitor economy responds once the borders are open. This may impact on the focus and amount that we want to spend on visitor attraction, major events, and destination marketing activity.

78.     In light of the ongoing disruption and uncertainty and the recent decision of the Court of Appeal on the APTR, this rate will be removed from the rating policy for the 2022/2023 financial year.

79.     Without the rate, planned funding for this activity is $14.8 million from general rates and $5.1 million that Auckland Unlimited is planning on securing from the Government Regional Events Fund for the 2022/2023 year. If the council wants to continue to retain the full planned expenditure levels for Auckland Unlimited’s visitor attraction and major events activities, the only option (under the council’s current Revenue and Financing Policy) would be to increase the amount of general rates funding by around $14.8 million.  This would equate to an average general rates increase of 0.8 per cent.

80.     Officers do not consider that additional general rates funding for expenditure on visitor attraction and major events is a priority given the other financial pressures the council is facing. Despite the longer term benefits from this expenditure, the substantial uncertainty around the border opening and the pace of recovery of the visitor economy makes the timing and realisation of these benefits equally uncertain.

Recommendation

81.     Officers recommend that the budget for visitor attraction and major events be reduced to $19.9 million.

Rating policy: Business Improvement District Programme

82.     There has been no expansion or new establishment proposed by any Business Improvement District associations for 2022/2023.


 

Revaluation 2021

83.       Legislation requires the council to set rates based on the value current at the date of the revaluation. Valuations must be carried out at least every three years.  This ensures that properties of the same value pay the same rates as values move over time. The requirement for Auckland Council to undertake a revaluation in 2020 was deferred until 2021 due to the uncertainty in the housing market caused by COVID-19.

84.       The 2021 revaluation is underway. Initial results (subject to final approval by the Valuer General) show that properties in Auckland have risen in value by an average of 32 per cent. The change in property values is not uniform and varies widely over the region.

85.       Increases in property values do not lead to an increase in the rates paid by individual ratepayers. Property values are used to share the rates requirement amongst ratepayers. If a property’s value increases by the average for the region, then their rates will only increase by the underlying increase in general rates and capital value based targeted rates. A property whose value rises by more than the average will have a rates increase above the general rates increase. The opposite is true for a property with a value change below average.

86.       For 2022/2023, Auckland Council is planning to collect 31 per cent of its general rates from the business sector and 69 per cent from the non-business sector (residential and farm/lifestyle properties)[21].  For both the water quality and the Natural environment targeted rates, the planned shares for the business and the non-business sectors are 25.8 per cent and 74.2 per cent. Movements in relative valuations are therefore quarantined within each of the two groups.

87.       Initial valuation results indicated that values for farm/lifestyle properties have risen slower than residential properties and as a result it is estimated that rates for:

·     farm/lifestyle properties will on average rise by 1.8 per cent (2.0 per cent less than they would without revaluation)

·     residential properties will on average rise by 3.95 per cent (0.15 per cent higher than they would without revaluation).

88.       Around 111,200 residential ratepayers are estimated to have rates increases[22] of more than 10 per cent and 190,000 are estimated to have decreases. Around 60 per cent of residential ratepayers will likely have changes either in a range between plus or minus 10 per cent or between +$200 and -$200 per year (less than $4 per week).

89.     Lower value properties across the region have risen faster in value than the average. As a result, they will have rates increases higher than the underlying percentage increase in general rates. Many of these properties are located in local boards with lower household incomes.

90.     For 2022/2023 the proposed combined annual rates, including waste management, and water and wastewater charges for a median value residential property are estimated to be $3,789. This will be 3.3 per cent of the median household income for owner occupied dwellings of $115,128 (Census 2018 median income of $110,700 inflated by 4 per cent for income growth since 2018). This is below the affordability threshold of 5 per cent of income set out in the Funding Local Government, Report of the Local Government Rates Inquiry. On a weekly basis, the average combined increase for 2022/2023 will be around $3.42 per week.

91.     The council could mitigate the impact of revaluation by using a rates remission that capped increases. The lost revenue from capping rates for these properties would have to be made up by increasing rates for all other properties. For example, capping rates increases at 10 per cent for residential and farm/lifestyle properties would result in rates for other residential and farm/lifestyle properties being an additional 3.2 per cent higher than they would otherwise be. Around 61,000 residential and farm/lifestyle properties would also experience an increase of more than 10 per cent in the following year (2023/2024).

92.     Setting the 2022/2023 rates based on the 2021 property valuations (no cap) will mean:

·     all the change in rates will occur in 2022/2023

·     properties of the same type (e.g. business or residential) and value will continue to pay the same amount of rates

·     the rates impact of revaluation is dealt with in one year so all properties have similar rates increases to one another in 2023/2024 and 2024/2025

·     rates will not have to increase further for uncapped ratepayers.

93.     Lower income ratepayers may be eligible for the Department of Internal Affairs rates rebate scheme administered by the council. Auckland Council also tops up the rates rebate scheme to account for water and wastewater charges being billed separately by Watercare.

94.     Residential ratepayers who struggle to manage the increase in rates may be able to postpone their rates if they have owned their property for more than two years and have more than 20 per cent equity. Ratepayers who opt to pay via direct debit can also select payment timing options that suit their own circumstances. Ratepayers who are struggling are advised to contact council to make sure they are able to access all support options available.

Proposed fees and charges changes

95.     Officers have developed a fee review work programme that will ensure all fee areas are reviewed once every three years. This will provide a predictable and structured process to ensure that the fees are meeting the objectives set when they were put in place and that they continue to fairly recover the costs of the services they fund. The proposed fee review cycle is set out below:

·     2021 for implementation in the 2022/2023 financial year

­       cemetery fees first step of two-step process

­       regulatory fees: animal management and minor technical adjustments to resource and building consents

·     2022 for implementation in the 2023/2024 financial year

­       cemetery fees second step

­       active leisure

­       alcohol, street trading and environmental health licensing

·     2023 for implementation in the 2024/2025 financial year

­       venue hire and minor fee adjustments

­       consenting.

96.     Some out of cycle fee reviews will continue to be necessary to address any material change in circumstances.

97.     As provided for in the Revenue and Financing Policy, fees not subject to review in a particular year will be increased in line with the council’s projected cost of inflation where necessary to maintain cost recovery. Preliminary work on revenue budgets to inform consultation on the Annual Budget 2022/2023 has been based on a 2 per cent estimate for the council’s cost of inflation. However, given the current level of economic uncertainty this could be considerably higher.


 

98.     On 24 November the Reserve Bank released inflation forecasts of 5.2 per cent for the 2021/2022 year and 2.5 per cent for the 2022/2023 year. As a result, when contracts are renewed for the 2022/2023 year costs may be higher than earlier projections and further fees increases may be needed to maintain cost recovery.

99.     Each of the proposed fee changes resulting from our review rather than from just inflationary adjustments are discussed below and are set out in detail in Attachment C: Fees and charges changes proposal.

100.   The alternative to the fee changes proposed is to retain existing fee levels and fund the additional costs from general rates. Officers recommend adjusting fees and charges to reflect the level of cost recovery for the relevant activities, as agreed by the council in previous decisions and set out in the Revenue and Financing Policy.

Regulatory fees

Animal management fees

101.     When the council standardised funding for its dog registration activity, it determined that 60 per cent of the cost of should be recovered from dog owners through dog registration charges and 40 per cent from general rates. The council considered this an appropriate funding balance in recognition of the:

·     costs imposed by dog owners through the council registration system and other animal management services

·     wider public benefit from animal management.

102.     Officers consider the policy is still appropriate and no changes to this approach are proposed for the 2022/2023 fees.

103.     Due to an increase of approximately 6,000 registered dogs over the past 12 months, revenue is forecast to exceed the underlying increase in costs. As well as the increase in the number of dogs, cost reductions of $0.4 million as a result of the implementation of the online dog registration improvements programme are able to be passed on to dog owners. These improvements went live in June, resulting in an increase in customers paying earlier and through the online portal for dog registration renewals. Change of details, including addresses, as well as advising of deceased dogs, can now be made through the online portal, resulting in lower administration costs and lower call centre volumes.

104.     Officers therefore propose to make a small reduction in the registration charges for responsible dog owners. Officers also propose introducing a fee of $75 for after-hours impoundment of dogs. This is in addition to the current charge to reflect the higher costs incurred. A range of other fees are being adjusted by percentages slightly higher than council’s cost inflation to ensure appropriate cost recovery.

Building consent fees

105.     Officers propose to only require a building consent for the installation of rainwater tanks that are connected to internal plumbing systems and to introduce fees for this service. There will be a base fee of $560 for processing and a deposit of $174 for inspections, if required.

Resource Consent and other regulatory Fees

106.       The Resource Management (National Environmental Standards for Freshwater) Regulations 2020 regulates activities that take place within or near natural wetlands. A new application deposit fee of $1,000 to recover the cost of processing permitted activity notices is proposed.

107.       Adjustments to some other regulatory fees to better reflect the complexity of work required are also proposed.  These proposed amendments are also discussed in more detail in Attachment C: Fees and charges changes proposal.


 

Cemetery Services

108.       The council manages 30 operational cemeteries and three crematoria through its Cemetery Services unit.  The range of services provided and percentage share of revenue include:

·        Exclusive right of burial memorial (75 per cent)

·        Cremation and burial services (19 per cent)

·        Facility services (4 per cent)

·        Other revenue (2 per cent)

109.       Fees and charges for cemetery services have undergone several minor reviews. However, a significant review of fees and charges across all locations has not been undertaken and there are still significant variations in charges for services across the region.

110.       Officers are now reviewing cemetery fees. The following criteria have been used to guide the fee review:

·        consistency across sites

·        clear and easily understood fees

·        ensuring an appropriate level of cost-recovery where required

·        alignment with the market where appropriate

·        provision of affordable options for essential services.

111.       The review is being undertaken in two stages. In the first stage, a cemetery fees framework has been completed, and fees for the majority of services will be standardised across all locations. The remaining fees for burial plots and related services will be reviewed in the second stage. This second stage of the review will also investigate the appropriate level of cost recovery for all fees. This process will enable the council to transition towards providing a consistent regional service.

112.       A new cemetery fee framework is proposed which includes:

·      consolidation of 22 fee groups to nine with 1-4 sub-groups

·      renaming of 52 products and services to simplify and improve consistency

·      categorising cemeteries into a tiered system

·      grouping of ash plots into standard, standard+ and premium options.

113.     In the proposal, fees will be standardised by tier. The tier categories are:

Tier 1 - Main

Manukau Memorial Gardens, North Shore Memorial Park and Waikumete Cemetery

Tier 2 – Satellite

All other cemetery sites, excluding Aotea/ Great Barrier cemeteries

Tier 3: Great Barrier cemeteries

 

Āotea/Great Barrier Local Board have delegation of cemeteries located on Aotea Great Barrier Island. These cemeteries have been included in this review for local board decision making.

114.   All fees and charges are proposed to change due to the wide variety of charges currently in place across all locations. The overall financial impact of the proposal is expected to be neutral as there will be a minor increase in burial and disinterment revenue and a minor decrease in facility hire and cremation service revenue. 

115.   A full schedule of proposed fees is in Attachment C: Fees and charges changes proposal. The following table shows examples of the impacts of changes to fees, showing the current fees for the lowest and highest charges.

Fee

Current fee range

Proposed fee

Explanation

Burial rights transfer - historic

New

$120.00

New fees to recognise additional resource required to process historic burial rights records

Surrender burial rights - historic

New

$160.

Burial Fees Tier 2 - Satellite - Single depth

$1,515 (Swanson Cemetery)

$2,192 (Tapora Cemetery)

$1,700.

Standardise across all locations

Burial Fees Tier 2 – Satellite Double depth (including reopen)

$1,515 (Swanson Cemetery)

$1,974 (Helensville Cemetery)

$1,800.

Body Burial Tier 1
Child 1 - 12 years

$603

$650.

Increase to reflect cost-recovery and standardise across all locations

Body Burial Tier 2 and 3
Child 1 - 12 years

$592-$603

$750.

Disinterment of Body - Adult plot

$2,479-$2,509.00

$5,000.

Reflect market and standardise across all locations

Disinterment of Body - Child plot

$1,436 (Wellsford Cemetery) -$2,509.00 (Swanson and Tapora, Cemeteries)

$3,000.

Tauākī whakaaweawe āhuarangi

Climate impact statement

116.   Recommendations in this report have a neutral climate impact as they primarily 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

117.   The proposals in this report have been agreed on by the following departments or business units of the Auckland Council group:

a)      Waste Solutions

b)      Regulatory Services

c)      Customer and Community Services

118.   The proposals in this report have been reviewed by Legal Services.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

119.   Local board representatives have participated in the workshops leading up to the Mayoral Proposal and expressed their views through this process including a specific opportunity to feedback on regional issues at a workshop held on 17 November 2021. The views of local boards have been formalised within a separate report on this agenda: Annual Budget 2022/2023: Regional topics for consultation – Local Board Input.

120.   Local boards will have opportunities to express their views on the impacts of regional decisions on their local community before final decisions are made in May 2022.

121.   There are no proposed changes to business improvement districts (BIDs) for 2022/2023 and therefore no local board approvals for BID changes are required this year.

Tauākī whakaaweawe Māori

Māori impact statement

122.   The council does not hold information on the ethnicity of ratepayers or fee payers 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.

123.   Consultation on the Annual Budget 2022/2023 includes engagement with the 19 iwi authorities. Targeted engagement to include mataawaka is also being planned for.  This approach is still being finalised and will be presented to the Finance and Performance Committee on 8 February 2022 ahead of public consultation.

Ngā ritenga ā-pūtea

Financial implications

124.   The financial implications of the recommended changes are noted in the relevant sections above.

125.   The proposed food scraps targeted rate will cover the cost of the introduction of the service in areas where it is to be introduced in the 2022/2023 year. The financial impact of the standardisation of the basis for charging the waste management targeted rate is discussed in the “Standardisation of liability for waste management targeted rates” section of this report.

126.   The removal of the revenue from the APTR will reduce the budget available for Auckland Unlimited’s expenditure on visitor attraction and major events to $19 million. This will require an adjustment to planned investments for the 2022/2023 years.

127.   The financial impact of the proposed climate action targeted rate is discussed in the separate Mayoral Proposal report on this agenda. The other changes to rates proposed have a minimal financial impact.

128.   The proposed changes to fees and charges will allow the council to meet its cost recovery targets for the relevant activities for the 2022/2023 financial year.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

129.     Some Aucklanders may be concerned about the proposed level of increase in their rates and/or fees under the proposals in this report. The council will write to each ratepayer potentially affected by the proposed changes to advise them of the changes the council is considering. Current customers will be alerted to the proposed fee changes and consultation will be designed to raise wider awareness. We will let affected ratepayers and customers know how they can get more information and the opportunities to make their views known both in person and in writing.

Ngā koringa ā-muri

Next steps

130.     Resolutions passed by the Governing Body at its meeting on 8 December 2021 will be used to develop the consultation material for the Annual Budget 2022/2023.

131.     In February 2022, the Governing Body will be asked to agree the consultation material.

132.     In designing the recommended consultation process, officers will develop targeted approaches to ensure that ratepayers affected by the proposed changes are made aware of the proposals and the ways in which they can provide feedback.

133.     At its meeting in February, the Governing Body will also be asked to agree consultation material for proposed amendments to the Revenue and Financing Policy.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Standardisation of liability for waste management rates proposal

357

b

Rating policy change proposal

373

c

Fees and charges change proposal

377

     

Ngā kaihaina

Signatories

Authors

Andrew Duncan - Manager Financial Policy

Eric Wen - Senior Advisor -  Financial Policy

Melva Yee - Programme Manager and Data Analyst

Aaron Matich - Principal Advisor – Financial Policy

Authorisers

Ross Tucker - General Manager, Financial Strategy and Planning

Peter Gudsell - Group Chief Financial Officer

 


Finance and Performance Committee

08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

Annual Budget 2022/2023: Rating of Whenua Māori Changes to Financial Policies

File No.: CP2021/15864

 

  

Te take mō te pūrongo

Purpose of the report

1.       To recommend consultation alongside the Annual Budget 2022/2023 on changes to the Revenue and Financing Policy, the Māori Land Rates Remission and Postponement Policy and the Rates Remission and Postponement Policy.

Whakarāpopototanga matua

Executive summary

2.       Amendments to the Local Government Act 2002 (LGA) made through the Local Government (Rating of Whenua Māori) Amendment Act 2021 (the amendment act) require the council to support Māori to retain and use their land through our Revenue and Financing, Māori Land Rates Remission and Postponement and Rates Remission and Postponement policies. The LGA does not specify the manner in which the council must provide this support.

3.       The amendment act also amended the Local Government (Rating) Act 2002 (LGRA) which now requires the council to consider rates remissions for Māori freehold land under development.

Revenue and Financing Policy

4.       Officers recommend amending the Revenue and Financing Policy to include a new funding principle: “Our Obligations to Māori”. This will embed consideration of how council supports Māori to retain and use their land in future funding decisions.

5.       It is also proposed that the Revenue and Financing Policy be amended to incorporate the Climate Action Targeted Rate funding proposals being considered as part of the separate Mayor’s Proposal report on the agenda for this meeting. In addition, officers recommend minor amendments to remove outdated references and update the funding principles for the solid waste services activity. The proposal to amend the Revenue and Financing Policy and the draft policy showing the proposed amendments can be found in attachments A and B to this report.

Māori Land Rate Remission and Postponement Policy

6.       Officers recommend amending the Māori Land Rates Remission and Postponement Policy to:

·    add an objective to support Māori to retain and use their land

·    clarify the definition of Māori land eligible for remission under the policy

·    remove the remission scheme for marae and urupā. This scheme is redundant as these properties are now fully non-rateable

·    include the remission for residents who occupy papakāinga housing under a licence to occupy scheme that is currently included in the general rates remission policy.

7.       Officers also recommend proposing a new remission scheme for Māori land under development. This would automatically remit rates for non-rateable Māori land until development is complete. Other Māori land may be eligible for remission if the development provides additional whānau housing or community facilities. Costs of this remission will depend on the number of properties developing but is not expected to exceed a few thousand dollars a year, due to limited amounts of Māori land suitable for development.

8.       The proposal to amend the Māori Land Rates Remission and Postponement Policy and the draft policy showing the proposed amendments can be found in attachments C and D to this report.

Rates Remission and Postponement Policy

9.       Officers recommend amending the Rates Remission and Postponement Policy to:

·    add an objective to support Māori to retain and use their land

·    align the definition of Māori land with the Māori Land Rates Remission and Postponement Policy

·    remove the postponement of rates for land described as Lot 2 DP 476554 or Lot 2 DP 510763 scheme, as this scheme expired on 30 June 2021

·    remove the remission for residents who occupy papakāinga housing under a licence to occupy scheme that is proposed to be included in the Māori Land Rates Remission and Postponement Policy.

10.     The proposal to amend the Rates Remission and Postponement Policy and the draft policy showing the proposed amendments can be found in attachments E and F to this report.

Engagement and Consultation

11.     The Governing Body will adopt the consultation materials for the draft Annual Budget 2022/2023 and these financial policies in February. Draft copies of the proposal documents and policies attached to this report will be further refined prior to adoption. Each of the three polices above will be separately consulted on alongside the draft Annual Budget 2022/2023. A document summarising the changes to all three polices will be sent to Māori landowners, mana whenua and mataawaka organisations.

12.     Officers will hold a Have Your Say event for these policies and will be available to meet to discuss these issues further. Formal feedback will be sought from the Independent Māori Statutory Board (IMSB) and the Kaitiaki Mana Whenua Forum. 

Ngā tūtohunga

Recommendation/s

That the Finance and Performance Committee

a)      whakaae / agree to recommend to the Governing Body that it whakaae / agree to consult alongside the draft Annual Budget 2022/2023 on amending the Revenue and Financing Policy to include:

i)       “Our Obligations to Māori” as a funding principle

ii)       consequential amendments for decisions made as part of the draft Annual Budget 2022/2023

iii)      funding principles for the solid waste services activity.

b)      whakaae / agree to recommend to the Governing Body that it whakaae / agree to consult alongside the draft Annual Budget 2022/2023 on amending the Māori Land Rates Remission and Postponement Policy to:

i)       add an objective to support Māori ownership and use of Māori land and to support achievement of Kia Ora Tāmaki Makaurau (Māori Outcomes Framework) objectives

ii)       clarify the definition of Māori land eligible for remission under the scheme

iii)      remove the remission scheme for marae and urupā, noting that this scheme is redundant as these properties are now fully non-rateable

iv)      introduce a rates remission scheme for Māori land under development

v)      insert the remission for residents who occupy papakāinga housing under a licence to occupy scheme currently in the general Rates Remission and Postponement Policy.

c)       whakaae / agree to recommend to the Governing Body that it whakaae / agree to consult alongside the draft Annual Budget 2022/2023 on amending the Rates Remission and Postponement Policy to:

i)       add an objective to support Māori ownership and use of Māori land and to support achievement of Kia Ora Tāmaki Makaurau (Māori Outcomes Framework) objectives and correct legislative references in the background section

ii)       clarify the definition of Māori land eligible for remission under the scheme

iii)      remove the postponement of rates for land described as Lot 2 DP 476554 or Lot 2 DP 510763 scheme, noting this scheme expired on 30 June 2021

iv)      remove the remission for residents who occupy papakāinga housing under a licence to occupy scheme, noting that this scheme is proposed to be included in the Māori Land Rates Remission and Postponement Policy instead.

Horopaki

Context

13.     Amendments to the Local Government Act 2002 (LGA) made through the Local Government (Rating of Whenua Māori) Amendment Act 2021 (the amendment act) require council to support the principles set out in the Preamble to Te Ture Whenua Māori Act 1993 through specified financial policies. The principles are set out below:

·    reaffirmation of the special relationship between the Māori people and the Crown established in the Treaty of Waitangi

·    recognition that land is a taonga tuku iho of special significance to Māori people

·    promotion of the retention of that land in the hands of its owners, their whānau, and their hapū, and to protect wāhi tapu

·    facilitation of the occupation, development, and utilisation of that land for the benefit of its owners, their whānau, and their hapū.

Which Financial Policies

14.     The following policies must be reviewed to ensure they comply with the new section 102(3A) of the LGA:

Policy

Date policy needs to comply

Māori Land Rates Remission and Postponement Policy

1 July 2022

Revenue and Financing Policy

Rates Remissions and Postponement Policy

Whichever is earliest:

·     The next review after 1 July 2021

·     1 July 2024

15.     Officers propose reviewing all three policies now. Considering the policies together enables council to develop a unified policy response to the issue of supporting Māori to retain and utilise their land. It also enables us to undertake targeted engagement with Māori on all three polices as a package.

16.     The council is also required to review its contributions policy to ensure it complies with the new section 102(3A) of the LGA. This review has been undertaken as part of the development of the draft Contributions Policy 2021.

17.     The council is also now required to consider applications for remission of rates for Māori freehold land that is or will be developed, under a new section 114A of the Local Government (Rating) Act (LGRA). Council is not required to grant a remission, but the legislation identifies the factors that must be considered when making a decision.


 

18.     The council is also required to undertake a full review of our Māori Land Rates Remission and Postponement Policy this year under section 108 (4A) of the LGA. This requires council to review its policy on remission and postponement of rates on Māori freehold land every six years, using a consultation process that gives effects to the requirements of section 82 of the LGA. The council last undertook a full review of its Māori Land Rates Remission and Postponement Policy in 2015/2016.

What does support mean?

19.     In order to provide support, officers recommend that council take positive action to remove barriers to development and full utilisation of Māori land, in order to strengthen the position of Māori landowners to retain ownership of the land and to use the land for the benefit of themselves, their whānau, and their hapū.

What is Māori land?

20.     Te Ture Whenua Māori Act defines Māori land as land which has the legal status of Māori customary land or Māori freehold land. However, the preamble to Te Ture Whenua Māori Act does not explicitly refer to Māori land. Instead, it refers to “land is a taonga tuku iho of special significance to Māori” that should be retained in the hands of its owners.

21.     There is very little land in Auckland with Māori customary land or Māori freehold land status. Customary land consists of 28 fully non-rateable offshore rocks and islets. There are 260 rating units with Māori freehold land title. The majority of this land is located in remote areas, with less than 1 per cent of land by area zoned for residential or business use. Just under half of Māori freehold land properties are non-rateable, either as marae, urupā, reserves or as unused land.

22.     Some Māori owned general title land has similar characteristics to Māori freehold land. Land returned to iwi under settlement for cultural redress often has legal restrictions on its use. Around 80 per cent of 105 cultural redress properties in Auckland are non-rateable public reserves. Land returned for commercial redress or purchased directly by iwi is not in general subject to legal restrictions on its use or sale. The majority (90 per cent) of commercial redress properties in Auckland is leasehold land, where the leasee is the ratepayer.

23.     There is also some former Māori freehold land that is retained in Māori ownership. This may include land converted to general title under Part 1 of the Māori Affairs Amendment Act 1967. This legislation compulsorily converted all Māori freehold land that had less than five owners to general title, regardless of whether the owners agreed. The council is now barred from undertaking rating sales of such land where it remains in the ownership of the original owners or their descendants. It is not possible to identify how much land has this status in Auckland.

Tātaritanga me ngā tohutohu

Analysis and advice

24.     The level of support council must provide to Māori land is not defined or constrained by legislation. This means a broad range of options are available to council. It is appropriate to consider the type and level of support provided in the wider context of all council’s policies and activities that support the development and full utilisation of the Māori land. The legislation does not require council to provide support through any specific mechanism. The council can provide support through grants, remissions or in other ways.  However, each of our policies should be clear about what level of support is available and how it is provided.

Revenue and Financing Policy

25.     The purpose of the Revenue and Financing Policy is to provide predictability and certainty about sources and levels of funding available to the council. It explains the rationale for, and the process of selecting various tools to fund the operating and capital expenditures of the council.

26.     This policy identifies the principles that guide decisions on the use of rates, fees and charges and other sources of funding. These principles incorporate the matters set out in Section 101 of the LGA 2002.

27.     Officers recommend amending the Revenue and Financing Policy to include a new funding principle relating to our obligations to Māori. This principle will require council to consider our obligation to support the principles set out in the Preamble to Te Ture Whenua Māori Act 1993 under Section 102(3A) of the Local Government Act 2002 when making decisions on the funding and financing of our activities.

28.     Some proposals being considered as part of the Annual Budget 2022-2023 will require consequential amendments to the Revenue and Financing Policy. The proposed Revenue and Financing Policy for consultation will be amended in accordance with the decisions on the Annual Budget 2022-2023 made by the Governing Body in February 2022. For example, the proposal to introduce a climate action targeted rate will require the new rate to be inserted into Table 3.1.5 “Services to be funded by targeted rates” in the policy.

29.     Officers also recommend two minor changes to the policy:

·    removing the outdated reference to integration of the policies of the former councils from the “Minimise the effects of change” funding principle. Officers propose amending the rationale for this principle to: “Decisions that change funding methods can lead to major changes in the incidence or rates and user charges for services. Funding and financial policies should seek to minimise or manage the impact of these changes.”

·    inserting “solid waste services” service into the Groups of Activities: Regional council services table. This activity was previously included in the Revenue and Financing Policy as part of the environmental services activity but was inadvertently left out when the activities were separated in 2018.

Māori Land Rates Remission and Postponement Policy

Policy Objective

30.     The objective of our current policy is to increase equity in rating by recognising limitations on the use, development and sale of Māori land compared to other land. These limitations include:

·     restrictions on the sale of Māori freehold land under Te Ture Whenua Māori Act 1993. This makes it difficult for owners to borrow against the land to develop it. Other types of Māori land may also have restrictions on their sale or use under Settlement Act legislation

·     Māori land often has large numbers of owners. Former owners may not have been succeeded to. This can make administering the land difficult

·     the small amount of Māori land remaining in Auckland tends to be in remote and poorly serviced areas and is sometimes landlocked, limiting the potential for it to be developed.

31.     Officers recommend that the following objectives be included in the policy to reflect council’s new legislative obligations:

·     meet our obligations to support the principles set out in the preamble to Te Ture Whenua Māori Act 1993 by supporting Māori ownership and use of Māori land

·     support achievement of council’s Kia Ora Tāmaki Makaurau (Māori Outcomes Framework) objectives.

Definition of Māori land

32.     Council’s current Māori Land Rates Remission and Postponement Policy is available to Māori freehold land that is in multiple ownership. The policy also applies to other types of Māori land that is in multiple ownership, including land returned under settlement, and land converted from Māori freehold land title under the Māori Affairs Act 1967, where the council considers it just and equitable to do so.

33.     Officers recommend amending the definition to clarify the particular categories of eligible land as follows:

·    Māori customary land[23]

·    Māori freehold land1 that is in Māori ownership

·    Crown land reserved for Māori1, where the ratepayer is Māori or a Māori entity

·    general land that ceased to be Māori land under Part 1 of the Māori Affairs Amendment Act 1967; where the land is beneficially owned by the persons, or by the descendants of the persons, who owned the land immediately before the land ceased to be Māori land

·    general land that is beneficially owned by more than ten Māori either individually or through a whānau trust, Māori incorporation, Māori trust board, marae committee or other similar legally incorporated Māori entity, which previously had the status of Māori freehold land, where the land is beneficially owned by the persons, or by the descendants of the persons, who owned the land immediately before the land ceased to be Māori land

·    general land owned by an iwi authority, settlement trust or subsidiary entity, but excluding land returned by the Crown as commercial redress or purchased by the owners except where the land:

is set aside and protected for cultural, historic or natural conservation purposes or because it is wāhi tapu (under Part 1 of the policy)

used for the community benefit of Māori (under Part 4 of the policy)

used for papakāinga housing with licence to occupy tenancies (under Part 6 of the policy).

Remission schemes

34.     The council currently provides five remission schemes under the Māori Land Rates Remission and Postponement Policy.

Current Remission Scheme

Provides remissions for:

Remissions 2020/2021

Unused Māori land

Provides full remission of rates on Māori land that is unused and undeveloped. A partial remission can also be applied where part of the land is unused. Fully unused Māori freehold land is now non-rateable under the Local Government (Rating) Act.

$85,000 for 49 properties[24]

Adjustment of Māori rateable land values

The property values used for rating are based on how much the land would be worth if sold. This scheme remits a portion of the rates on a property, so the rates better reflect how the Māori owners are able to use the land

No applications

Marae and urupā greater than two hectares in size

Previously, only the first two hectares of marae and urupā were non-rateable. This scheme remitted any remaining rates on properties over two hectares. The law has now changed so that all marae and urupā are fully non-rateable.

No applications

Māori land used for non-commercial purposes for the community benefit of Māori

Remission of land value portion of the rates for Māori land used for community benefit on a non-commercial or not for profit basis including papakāinga housing, community facilities, marae and associated infrastructure.

$7,000 for six properties

Previous years rates arrears on Māori land

All rate arrears and penalties can be remitted if the current year’s rates are paid for three years.

Five applications in progress

35.     Officers have reviewed all Māori land remission schemes and make recommendations as set out in the following table. Further details of the review of these remission schemes can be found in Attachment C to this report.

Current Remission Scheme

Officers’ recommendation:

Unused Māori land

Retain for partly used Māori freehold land, and Māori land not in Māori freehold land title.

Adjustment of Māori rateable land values

Retain. Current lack of utilisation reflects that most Māori land potentially eligible for this scheme is currently non-rateable.

Marae and urupā greater than two hectares in size

Remove as now redundant. All properties previously given remissions under this scheme are now fully non-rateable.

Māori land used for non-commercial purposes for the community benefit of Māori

Amend to include examples of qualifying community activities, and to clarify eligibility for “papakāinga housing” as follows:

“papakāinga housing may be considered where accommodation is provided free of charge or for a peppercorn rental to individuals who maintain the land or cultural practice, such as caretaker accommodation or kaumātua housing”.

Previous years’ rates arrears on Māori land

Retain. While council wrote off uncollectable rates (as per the new requirement in s 90A of the LGRA), used Māori land will still attract rates and penalties in the event of non-payment. This remission scheme encourages owners to recommence payment of rates on accounts that are in arrears.

36.     The cost of amending the Māori land remission schemes as proposed is negligible.

Remission for Māori land under development

37.     Officers recommend introducing a remission scheme for Māori land under development. It is proposed that Māori land under development is eligible for a remission under the following circumstances if the land is currently:

·    non-rateable, or receiving a remission as unused land, rates can be remitted until the development is complete (able to be occupied or used)

·    used and attracting rates, rates can be remitted if the development is for either additional housing for the owners or their whānau or community facilities. Rates will be remitted for the rating year after a building consent is issued and for subsequent rating years until the development is complete (able to be occupied or used).


 

38.     The cost of this remission scheme will depend on how many properties are under development. Remissions are unlikely to exceed more than a few thousand dollars a year. Most Māori land has rural zoning and limited development potential. Land that is currently non-rateable or receiving a remission as unused land will only rarely be liable for rates before development is complete. This is because in most cases the change in land use that triggers liability for rates will only be recorded at the completion of development.

39.     Offering a remission scheme for Māori land under development does not remove council’s obligation to consider any applications made under section 114A of the Local Government (Rating) Act 2002. Owners of Māori freehold land that is being developed, or is planned to be developed, can still apply for a rates remission even if they do not qualify under council’s rate remission policies. The council must then consider the application using the criteria set out under section 114A of the Local Government (Rating) Act 2002. The act does not require council to grant a remission.

40.     The advantages of offering a remission scheme for Māori land under development are:

·    reduces administrative costs for both council and landowners by identifying qualifying circumstances

·    enables remissions to be offered to land that is similar to Māori freehold land but which does not have Māori freehold land title.

Remission for residents who occupy papakāinga housing under a licence to occupy

41.     Officers recommend moving the remission for residents who occupy papakāinga housing under a licence to occupy scheme which is currently contained in the council’s Rates Remission and Postponement Policy to council’s Māori Land Rates Remission and Postponement pPolicy. As this scheme is now restricted to Māori housing developments, it should be located in the Māori Land Rates Remission and Postponement Policy. 

42.     The purpose of this remission scheme is to recognise that residents occupying their property under a licence to occupy tenancy may be required to pay rates but are unable to access the central government’s rates rebate support scheme as they are not the ratepayer for the property. This remission scheme was previously offered to retirement villages as well as to papakāinga, as these types of developments often use licence to occupy tenancies. Legislative changes in 2018 enabled residents of retirement villages to access rates rebates but did not extend rebates to residents of papakāinga.

Rates Remission and Postponement Policy

43.     Officers recommend the following amendments to the Rates Remission and Postponement Policy to reflect council’s new legislative obligations:

·    introduce two new objectives to explicitly identify council’s obligations to Māori:

support the principles set out in the Preamble to Te Ture Whenua Māori Act 1993 by supporting Māori ownership and use of Māori land

support achievement of Kia Ora Tāmaki Makaurau (Māori Outcomes Framework) objectives

·    insert a reference to identify the Māori Land Rates Remission and Postponement Policy as the primary mechanism for rates assistance for Māori land

·    amend the remission of uniform annual general charges and targeted rates assessed as fixed charges on rating units scheme to clarify that Māori land has the same definition as in our Māori Land Rates Remission and Postponement Policy

·    move the remission for residents who occupy papakāinga housing under a licence to occupy scheme to the Māori Land Rates Remission and Postponement Policy (as set out above).

44.     Officers also recommend the removal of the postponement of rates for land described as Lot 2 DP 476554 or Lot 2 DP 510763 remission scheme. This scheme expired on 30 June 2021 and is now redundant.

Engagement and Consultation

45.     Each policy will be consulted on separately alongside the draft Annual Budget 2022/2023. Draft proposal and policy documents for consultation can be found in the following attachments:

·    Revenue and Financing Policy: Attachment A and B

·    Māori Land Rates Remissions and Postponement Policy: Attachment C and D

·    Rates Remission and Postponement Policy: Attachment E and F

46.     The above documents are drafts for consideration that will be further refined through internal review processes prior to adoption by the Governing Body in February 2022.

47.     Targeted consultation will be undertaken for Māori landowners, mana whenua and mataawaka organisations. A summary consultation document and feedback form covering all three policies will be issued to Māori landowners, and mana whenua and mataawaka contacts. A Have Your Say event targeted to Māori will be held for the policies. Members of the Financial Policy team will also be available to meet to discuss the issues raised by landowners and mana whenua.

Tauākī whakaaweawe āhuarangi

Climate impact statement

48.     Recommendations in this report have a primarily 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

49.     The issues in this report do not impact on the wider council group.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

50.     Local board representatives have participated in the workshops leading up to the Mayoral Proposal and expressed their views through this process including a specific opportunity to feedback on regional issues held on 17 November 2021. The views of local boards have been formalised within a separate report on this agenda: “Annual Budget 2022/2023: Regional topics for consultation – Local Board Input.

51.     Local boards will have opportunities to express their views on the impacts of regional decisions on their local community before final decisions are made in May 2022.

Tauākī whakaaweawe Māori

Māori impact statement

52.     Issues related to Māori land and how that is rated have high significance for Māori landowners. The advice provided in the report has also considered other views including Ngā Mātārae, the Māori Housing Unit in the Development Programme Office, officers of the Independent Māori Statutory Board, and Māori outcome leads across council.

53.     Officers’ approach to engagement with Māori is set out in the report. Officers also note the importance of ensuring Māori landowners can effectively access the new remission schemes. The council website will be updated to make information on Māori land remissions more accessible and to provide contacts for assistance. 

Ngā ritenga ā-pūtea

Financial implications

54.     The financial implications of the recommended changes are noted in the relevant sections above. Any changes to rates revenue as a result of changes to rates remissions will be managed within existing budgets.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

55.     It is not possible for officers to identify a comprehensive database of all land that could qualify as Māori freehold land that was compulsorily converted to general title under the Māori Affairs Amendment Act 1967. This creates uncertainty regarding the potential cost of remissions.

56.     Officers have undertaken an initial review of property data and identified around 200 properties that are potentially former Māori freehold land (as identified by a Māori land designation in the legal description) and which have common owners with other Māori land. Council is unable to formally identify such land now. To do so requires the agreement and assistance of landowners to establish the relationship between the current and original owners of the land. Such land is only likely to be identified gradually which reduces the risk of sudden changes in rates remissions. Any financial cost is not expected to be material and spread over time.

57.     This report has been reviewed by Legal Services to ensure that the recommended proposed policy changes are compliant with the relevant provisions of the LGA.

Ngā koringa ā-muri

Next steps

58.     Resolutions passed at this meeting will be used to finalise the material for consultation alongside the draft Annual Budget 2022/2023.

59.     On 8 February 2022, the Governing Body will be asked to agree the finalised consultation material.

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Draft proposal to amend the Revenue and Financing Policy

401

b

Draft Revenue and Financing Policy

403

c

Draft Proposal to amend the Māori Land Rates Remission and Postponement Policy

421

d

Draft Māori Land Rates Remission and Postponement Policy

427

e

Draft Proposal to amend the Rates Remission and Postponement Policy

437

f

Draft Rates Remission and Postponement Policy

439

Ngā kaihaina

Signatories

Authors

Beth Sullivan - Principal Advisor - Fin Policy

Andrew Duncan - Manager Financial Policy

Authorisers

Ross Tucker - General Manager, Financial Strategy and Planning

Peter Gudsell - Group Chief Financial Officer

 


Finance and Performance Committee

08 December 2021

 

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08 December 2021

 

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Finance and Performance Committee

08 December 2021

 

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08 December 2021

 

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08 December 2021

 

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08 December 2021

 

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[1] Our financial modelling suggests that utilising existing borrowing capacity and available operating headroom to cover all but the last $30 to $40 million of the estimated operating gap might be consistent with our financial policy parameters under the most optimistic scenario.

[2] Section 44(e) of the Waste Minimisation Act 2008 (WMA) requires that any amendment to the Waste Plan uses the special consultative procedure (SCP) set out in section 83 of the Local Government Act 2002 (LGA), and that the most recent waste assessment undertaken by the council be notified with the statement of proposal.

[3] 49 per cent higher than the Organisation for Economic Co-operation and Development (OECD) average

[4] Source: https://data.oecd.org/waste/municipal-waste.htm

[5] Auckland Council Waste Assessment 2011, Appendix A

[6] WRAP (2009) Evaluation of the WRAP Separate Food Waste Collection Trials. Final Report.

[7] WRAP is a UK-based charity, working with governments, businesses and citizens around the globe to generate evidence-based solutions that create a world in which resources are used sustainably.

[8] WRAP (2016) The case for greater consistency in household recycling - supporting evidence and analysis. Report prepared by WRAP, Banbury;  

[9] WasteMINZ is the largest representative body of the waste and resource recovery sector in New Zealand. Formed in 1989 it is a membership-based organisation with over 1,000 members – from small operators through to councils and large companies.

[10] WasteMINZ (2019). Recommendations for standardisation of kerbside collections in Aotearoa. Report to the Ministry for the Environment.

[11] Auckland Council Waste Assessment 2012. Appendix A. Part 2 Funding Discussion Paper Background. P17.

[12] Chief Economist Unit (2020) Insights. Topical commentary on the Auckland economy. Landing on the right ratings base for Auckland (June 2020).

[13] Waste Management and Minimisation Plan 2018 (Priority Action 6 (p.14, p.76), Figure 13 (p.40), p.72, Action 5 p.79)

[14] WRAP (2009) Evaluation of the WRAP Separate Food Waste Collection Trials. Final Report.

[15] https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_Headline_Statements.pdf

[16] https://www.climatecommission.govt.nz/our-work/advice-to-government-topic/inaia-tonu-nei-a-low-emissions-future-for-aotearoa/chapter-summaries/

[17] https://www.aucklandcouncil.govt.nz/plans-projects-policies-reports-bylaws/our-plans-strategies/topic-based-plans-strategies/environmental-plans-strategies/aucklands-climate-plan/Documents/auckland-climate-plan.pdf

[1] The council defines a separately used or inhabited part of a rating unit (SUIP) as ‘any part of a rating unit that is separately used or inhabited by the ratepayer, or by any other person having a right to use or inhabit that part by virtue of a tenancy, lease, licence or any other agreement’. An example would be a rating unit that has a shop on the ground floor (which would be rated as business) and a residence upstairs (rated as residential).

[18]The council subsidises the provision of waste services on the Hauraki Gulf Islands (HGI) to ensure these are affordable for residents.

[19][19]This is based on the number of registered bins recorded in our system. Actual use of council services may vary and would require field investigations that cannot be undertaken under the current Covid-19 restrictions.

[20] Land in the Hall’s Farm and Ockleston Landing Urban Rating Area maps is also excluded.

[21] The Long-term differential strategy provides for 31 per cent of the general rates requirement to be raised from the business sector in 2022/2023 reducing in equal steps to 25.8 per cent in 2037/2038.

[22] For the purpose of the analysis of the impact of revaluation the term “rates” is defined as the sum of all rates that are applied region-wide and are fully or partially determined by capital value - the general rates, the water quality targeted rate and the natural environment targeted rate. For the measurement of affordability against median income, the calculation of the median annual rates includes the waste management targeted rate as well as the three rate types mentioned above.

[23] Māori customary land, Māori freehold land, Crown land reserved for Māori are as defined in Te Ture Whenua Māori Act 1993

[24] Decrease from $144,000 for 95 properties in 2020/2021 due to fully unused Māori freehold land rating units becoming non-rateable.