Auckland Mayor Phil Goff plans to water down a controversial targeted rate on hotels and other accommodation providers to avoid a humiliating defeat over the key budget issue.
Goff wants to raise $27.8 million to fund tourism and events promotion, but it is doubtful he has the numbers to pass the rate, dubbed the "pillow tax", and vehemently opposed by the hotel and hospitality industries.
Last night, Goff conceded the targeted rate was "not over the line yet" and there were changes he wanted to make on the basis of the evidence he had heard.
I'm convinced we will find the numbers for it
Camping grounds, backpackers and motels on the fringes of the city which do not gain much from marketing and events could be excluded from the targeted rate, Goff said.
This would leave some motels paying the targeted rate and others being excluded, but Goff said it was too early to know where any geographical lines would be drawn.
Goff is pinning his hopes on the targeted rate to replace ratepayer spending by Auckland Tourism, Events and Economic Development (Ateed) to attract visitors and fund major events. It would free up $28 million to fund transport and housing infrastructure and help Goff's election pledge to hold rates to 2.5 per cent.
The Herald understands Goff is struggling to get the numbers to pass the targeted rate in its current form and faces the humiliating prospect of losing a key plank in his first budget.
Councillors Mike Lee and Greg Sayers said they were keeping an open mind but were unconvinced on the merits of the targeted rate when the council has serious problems controlling its costs.
Councillor Daniel Newman, who has been highlighting concerns of moteliers through social media, said the onus was on Goff to demonstrate the targeted rate was defensible, credible and equitable.
Goff said 75 per cent of the feedback so far on the draft budget supported the targeted rate.
"I'm convinced we will find the numbers for it," he said.
Last night, Tourism Industry Aotearoa chief executive Chris Roberts said the targeted rate would be a disaster for Auckland and should be withdrawn.
He said visitors to Auckland spend $7.5 billion a year, of which the accommodation sector only accounted for 9 per cent but which is being asked to pay 100 per cent of the targeted rate.
The council insisted the rate could easily be recovered by hotels and the like by adding $6 to $10 to the bill, but this was wrong, Roberts said.
He said the targeted rate would be paid by building owners, not hotel operators, and complex commercial arrangements often meant the costs could not be passed on. Additionally, only a quarter of visitors stayed in commercial accommodation with the majority staying with family or friends, or in other accommodation like Airbnb.
Last week, motel owner Troy Clarry told councillors his Whangaparaoa 14-room motel's rates would rise from $13,600 a year to just under $40,000.
In 2015-16 he made $529,000 from the motel on 65 per cent occupancy and after taking a $52,000 salary for two people net profit before tax was $27,000.
Much of this was reinvested in the business but the new rate would swallow nearly all of this.