Government advised to give cash-strapped local councils new revenue tools to fix transport and tourism infrastructure and provide a climate change war-chest
It takes Auckland’s deputy mayor three hours to get to the council chambers and back – and he says there are plenty more Aucklanders suffering the same pain from congested roads, the gridlock that contributes to air pollution and climate emissions, and the utter failure to find financing solutions to solve the problem.
This year Bill Cashmore handed over his farm at Ōrere Point to his son and daughter-in-law. He turned 65 on Saturday, and is retiring from council at next month’s election. If he leaves a legacy he hopes it is good progress on fixing the infrastructure problems in New Zealand’s biggest city. “We have to incentivise people to do the right thing, so I’m a great believer in free public transport,” he says.
Similarly, he wants a bed tax that is reinvested in tourism infrastructure and marketing. “I’m a great believer in a bed tax. Everywhere else you go in the world there’s a bed tax – you don’t even notice it.”
Auckland Council has won Government backing to move forward on an inner-city congestion charge, which it expects to tick several boxes: to get business moving again, to address environmental problems, and to make up a shortfall in rates revenue. It has also sought to set in place a hotel visitor levy for visitors, but that is now locked up in a legal challenge, awaiting a Supreme Court ruling.
Councils such as Auckland and Queenstown have been working in isolation, with only wavering support from government – until now. A review, commissioned by Local Government Minister Nanaia Mahuta, is backing new revenue streams including road congestion charges and bed taxes.
Today the Government was looking forward to announcing $2 million new investment in strengthening the tourism and hospitality workforce, but it faces an angry response from a hotel industry that accuses central and local government of an orchestrated attack on the sector.
“We consider local government also needs the ability and flexibility to create new revenue-generating tools, like bed taxes or congestion charging.”
– Jim Palmer, review chair
The Hotel Council says councils are inconsistent, variously demanding bed taxes to meet infrastructure shortfalls, to fund more tourism and destination marketing, to bankroll conservation efforts and climate change mitigation, or to build “war chests”.
The Review of the Future for Local Government is to report back to Mahuta next month. Its chair, Jim Palmer, says the draft report will propose “a major change in funding” especially through central government’s co-investment in community outcomes.
It is championing new tourism and road revenue streams – solutions that Auckland and Queenstown have fought for, and now have a green light for the whole country.
“We consider local government also needs the ability and flexibility to create new revenue-generating tools, like bed taxes or congestion charging,” Palmer told mayors, at the Local Government NZ conference in Palmerston North.
He also said Government must come to the party to finance local responses to climate change. “To address the ongoing, intergenerational challenge that climate change will bring to the country and communities, we think there needs to be a substantial war-chest available to fund the needed action,” he said. “While the securing of the funds must be led nationally, decisions about the application of these funds needs the joined-up consideration that can only really happen at place.”
Bill Cashmore is welcoming the review panel’s advice to Government. He says the revenues from congestion charges and visitor levies can’t just top up council coffers, though. They have to be reinvested in the sectors they came from. “With the congestion charging, let’s make the roads better, let’s make the rail better. Let’s make people’s lives better by being able to travel smarter, cleaner and also more efficiently.”
The same is true of the bed tax. “Auckland is a perfect case in point, because we are the entry and exit point for most people coming into New Zealand. So why don’t we have a bed tax that we use to encourage people to spend a bit more time in Auckland to enjoy the city, before they go on down to Queenstown to go skiing?”
In Queenstown, mayor Jim Boult agrees. He says he and his Auckland counterpart, Phil Goff, have been working together to persuade the Government of the merits of a visitor levy.
Queenstown held a referendum; 81 percent of locals backed a bed tax. “And why wouldn’t you if you live here? It’s just a very logical move from our point of view.”
“Such a cost threatens to undermine the wellbeing of our communities.”
– Jim Boult, Queenstown Lakes mayor
Much of the infrastructure in Queenstown, Wānaka and the wider district is built and maintained primarily for the tourism industry, he says. But hotel beds are one of the few things that can be levied without also having an impact on locals.
Boult is quoted in a new Ministry of Business and Innovation report, commissioned from Morrison Low, saying Queenstown’s significant growth pressures and increased visitor numbers put a huge strain on local infrastructure and the council is simply unable to support growth in Queenstown Lakes through rates alone. “Such a cost threatens to undermine the wellbeing of our communities.”
The report says there is “broad agreement” that tourists, as beneficiaries of mixed-use infrastructure, need to contribute financially to tourism infrastructure and asset upkeep.
“Ideally at the same time, tourists would contribute to the broader social and economic impacts of tourism on local infrastructure. The magnitude of this task is difficult for councils. Councils must adhere to externally imposed lending restrictions, and manage rates to affordable levels, while balancing a range of issues including environmental regeneration, climate adaptation, water quality, and population growth to name a few.
“Councils are generally already doing well, and can fund the costs of operating, maintaining, and replacing existing tourism related infrastructure. However, the burden of covering these costs is often borne entirely by ratepayers due to there being no easy collection point for charging.”
“Politicians are gaslighting New Zealanders when they say that tourists don’t already cover the costs of their visit. We don’t have a revenue shortfall with tourist taxation in New Zealand, but we do have an allocation and reinvestment problem because politicians treat the sector like the goose with golden eggs.”
– James Doolan, Hotel Council
The Morrison Low report points to local government’s desire to consider the wider economic issue of tourism infrastructure with costs not limited strictly to funding and operating, prompting novel proposals such as Queenstown Lakes visitor levy in the form of a bed tax – initially backed by Government, until Covid hit. “For other councils, without significant visitor bed nights for example or where a public toilet is in the middle of nowhere, the user-funding mechanism may be much harder to design,” it says. “Wider costs compensating for the environmental impacts tourism might impose are difficult to extract with funding tools.”
Hotel Council Aotearoa strategic director James Doolan says local and central government are working together on ways to impose even more taxes and charges on tourists and tourism businesses, without improving the experience. “It’s an extraordinary way to kick an industry still down after Covid-related border closures and lockdowns,” he says.
“Regulators have turned down repeated requests from Hotel Council Aotearoa and other industry groups to come together and discuss tourism sector funding in an open and transparent manner, including researching tourism taxation levels and best practice overseas.
“The orchestrated call for bed taxes ignores the fact that overseas destinations usually have sales taxes that are much lower than New Zealand’s 15 percent GST. Central government took almost $3.8 billion in GST from tourism in the year before Covid, but failed to properly share that windfall with local authorities or make adequate reinvestment into tourism infrastructure.
“Instead, tourism tax earnings disappear amongst general government spending. Politicians are gaslighting New Zealanders when they say that tourists don’t already cover the costs of their visit. We don’t have a revenue shortfall with tourist taxation in New Zealand, but we do have an allocation and reinvestment problem because politicians treat the sector like the goose with golden eggs.”