Auckland Council is pressing on with its controversial ‘pillow tax’, or targeted rate on hotels to pay for visitor promotion – but is only asking for half the $27.4 million it originally sought.

In a classic split-the-difference solution to what has been the first big standoff of Phil Goff’s mayoralty, a confidential session of Auckland councillors and advisers yesterday agreed to seek just $13.7 milion from the hotels and accommodation providers under the special rate. The balance of the money, which funds the visitor spending by Auckland Tourism, Events and Economic Development (ATEED) will come from the council’s general rate.

Councillors and the mayor wanted reassurance from the council’s lawyers that the revised rate would be legally defensible and that adequate consultation had occurred, and were told they could go ahead. Some hotel operators had been mulling a possible legal challenge if the rate is introduced, on the basis that inadequate consultation has occurred.

The council needs to decide on the targeted rate in about a fortnight for it to take effect in the 2017/18 year.  

Legally, a council can only raise such money by a rate on property owners, thus the accommodation sector being targeted.

The revised rate would have to be publicised soon, to ensure those affected have the chance to give feedback. There are still issues of how rates remissions could apply to those either geographically affected (on the city fringes and arguing they don’t get tourist benefits) and how a rate on building owners rather than their hotel company leaseholders can be applied.

Some within the council believe the new plan will be so much changed from the original proposal that that previous consultation was arguably not sufficient. There is a view the whole thing should be set aside and considered properly as part of deliberations on the Long Term Plan.

One source said the mayor was determined to push on, partly to extract leverage over the central Government, which constantly tells the city to review its funding.

However the politicians are not content to leave the targeted rate and the $13.7m as the only means of finding alternative funding for Auckland tourism promotion.

It is understood some attendees at the five-hour council session want to spread the net wider for following years by approaching other segments of the visitor sector – tourism operators, the hospitality industry and others who benefit from increased tourism – to contribute to a voluntary fund, kept separate from the rates and ostensibly immune to political whims.  

The Tourism Industry Aotearoa chief executive Chris Roberts, who has campaigned hard against Goff’s proposal, said no detail of the reduced rate had been shared by the mayor or council, despite Goff discussing a reduced total in public. He said it remained unfair to charge hotel and accommodation providers, who receive 9 percent of the tourism revenues, a disproportionate level of the costs of ATEED’s work. The organisation says just 16 percent of annual visitors to Auckland stay in hotels and only 26 percent in some form of commercial accommodation.

He said any talk of spreading the net to other parts of the visitor economy was too late for this budget round, as there was no way adequate consultation could occur.

The TIA believed the whole concept of the targeted rate should be set aside and a full consultation should occur before any measure was adopted for future financial years.

The dispute between Goff and the TIA has been uncompromising so far. Roberts accused Goff of “making wild claims that are not based on the facts” and saying Goff’s talk about revising the targeted rate down was “an illogical mess”.

Goff’s watered-down proposal is expected to exempt many suburban motels and camping grounds, previously covered by the targeted rate.

Tim Murphy is co-editor of Newsroom. He writes about politics, Auckland, and media. Twitter: @tmurphynz

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