The Auckland Council and the Government are considering a "toilet tax" to pay for a $1 billion sewer tunnel running deep below the city.
The prospect of a new tax for Auckland comes days after the introduction of a regional petrol tax of 11.5 cent a litre and is seen alongside a sell-down of assets by the council as a way of freeing up money for new infrastructure.
Papers released under the Official Information Act outline a novel way of paying for the tunnel and previous scenarios for a partial sale of council-owned Watercare.
Auckland Council will probably consider a toilet tax for Aucklanders if this same Government provides a green light for them to do it
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Known as the central interceptor, the 4.5m diameter tunnel will run 13km from Western Springs to the Mangere wastewater treatment plant. It will significantly reduce sewage and stormwater overflows into the Waitemata and Manukau harbours and allow for future growth.
An alternative way of funding infrastructure, known as a special purpose vehicle (SPV), is being worked on by the council, Watercare, consultants and Treasury as observers, to pay for the billion-dollar project.
The project would be owned by a Crown entity and paid for through a fixed charge collected by the council over 25 to 40 years. The papers say it is possible the cost to Aucklanders will be greater than if the central interceptor is built and funded by Watercare.
"Using a SPV to deliver the central interceptor will be regarded by Aucklanders as (Auckland Mayor) Phil Goff and (Transport Minister) Phil Twyford inventing new ways to tax families to flush the toilet," said National MP Judith Collins.
Both Collins and Manurewa-Papakura councillor Daniel Newman have called the new charge for the central interceptor a "toilet tax".
In a letter sent to Goff and councillors, Newman said: "I fear the proposed SPV will likely be judged as a form of privatisation to repay debt holders that will not win public support."
Goff said the council has workshopped a number of options on a SPV for the central interceptor, none of which have been recommended or decided yet.
He said the council could not afford to borrow more because it is right up against a debt ceiling that, if breached, would lead to a credit rating downgrade and higher borrowing costs.
If the council could move the cost of the central interceptor from its books to appear on the SPV books that would free up $1b to invest in other areas of public need, Goff said.
The mayor ruled out another suggestion in the papers to sell down shares in Watercare to a Crown-related entity that has been discussed with Treasury officials in the past.
Two scenarios were floated to sell down 51 per cent of the shares in Watercare to a Crown-owned entity for either $4b or $2b with 5 per cent rates of return paid for through higher water bills.
Goff said Watercare was a strategic asset: "We are not in the business of selling off Watercare."
Setting up a SPV would require a change to legislation that says Watercare must set a minimum price for water and wastewater and is prohibited from paying dividends.
Newman said it would be unprecedented and hugely controversial for Parliament to set up a non-elected agency with the power to rate the people of Auckland.
Finance Minister Grant Robertson would not say if the Government would change the law to make the SPV work, saying through a spokesman that ministers are working through advice on options and no decisions have been made.
The spokesman said the minister has been very clear he supported the investigation of alternatives ways of funding infrastructure in order to get more private funding involved.
The previous National Government began work on alternative ways of financing infrastructure, but Collins said the model was designed to cut the council some slack for developers to build infrastructure for housing.
"Using a SPV for the central interceptor means Auckland Council would be privatising an entire regional asset for a generation and charging the cost back to Aucklanders, which is dramatically different from the original purpose and intent of the SPV," she said.
Collins said using an SPV for water raised the question of whether Watercare had failed, which it has not.
Watercare delivers projects and services on time and within budget and cannot charge Aucklanders more than the minimum price which provides certainty and protection from rapid price escalations, she said.
"The Labour Government is looking at the SPV model for water because Phil Twyford has got a taste for outsourcing his dirty work to local government.
"Auckland Council has just imposed an 11.5c per litre fuel tax mandated by the Labour Government. Auckland Council will probably consider a toilet tax for Aucklanders if this same Government provides a green light for them to do it," Collins said.
Responding to Collins' comments, Twyford said it was a matter for the Auckland Council and he had no involvement in the project.
"This is just negative politicking," he said.
A Watercare spokesman said the issues of structures and ownership were a matter for its shareholder, the Auckland Council, to comment on.