Auckland Mayor Wayne Brown has issued a super-sized payment demand to central government, saying antiquated laws around non-rateable properties and tax mean the cash-strapped city is missing out on half a billion dollars in revenue each year while Wellington gets a “free ride”.
Brown has written to Finance Minister Nicola Willis calling for reform of rules governing who pays rates and how the money is allocated, including returning all GST charged on rates to local authorities.
Today, Willis said the Government was “committed to introducing financial incentives” for Auckland Council to enable more housing and developing policy options for doing this.
One option under consideration was directly sharing a portion of GST collected on new homes with the local council.
The request is endorsed by the council’s Governing Board and Independent Māori Statutory Board, and also has the backing of Christchurch Mayor Phil Mauger and Wellington Mayor Tory Whanau.
Many local authorities face a revenue crisis as they try to fund costly infrastructure projects and services on limited ratepayer bases.
Auckland Council is wrestling with a budget hole of more than $300 million, forcing it to cut services, hike rates and sell assets.
Brown said council financial experts estimate Auckland is missing out on $36m in annual income on government buildings such as hospitals and schools which are currently exempt from paying rates.
“It’s unfair the government doesn’t pay rates like everyone else, even though it uses council services.
“Why should central government get a free ride? They use our infrastructure but don’t pay the bill.”
Brown said that money should be returned to Auckland Council to help pay for the upkeep of services to state-owned properties.
The proposed changes were a “key plank” in his manifesto for an Auckland deal. He believed there was public and political support.
In Christchurch, Mauger has also written to the Finance Minister calling for central government to pay its share for local services.
And Whanau says she strongly supports a proposal to share GST which would boost council revenue to help fund pressing infrastructure problems like Wellington’s dilapidated water pipes and slash the rates burden on local residents.
Brown’s letter is also critical about the number of properties exempt from paying rates under the Local Government (Rating) Act, including airports, port land, wharves, jetties and churches.
He said old laws like this were allowing private enterprises to get a free ride when Aucklanders were struggling to make ends meet.
“It seems odd to me, that a multi-billion dollar listed company such as Auckland International Airport Ltd is sitting on hundreds of millions of dollars’ worth of non-rateable land, when everyday Aucklanders are doing it tough.”
Law reform was needed to bring the antiquated rating system up to date, Brown said.
In terms of taxation, council staff estimated central government was creaming $415m a year in GST charged on rates.
Brown said returning that money to Auckland would result in a 15 per cent rates reduction for the city’s property owners - the equivalent of a 7.5 per cent rates cut for the average ratepayer next year instead of the 7.5 per cent hike proposed in the long-term plan.
Brown said the government took far more than its fair share from the nation’s biggest city.
“Aucklanders are being shortchanged. We put more into Treasury’s coffers than we get in return. We want a fair share of the revenue Auckland generates, and in this instance the Government is smart enough to recognise this. I’m looking forward to the discussions here.”
The council is also calling for a share of the GST that central government charges on new builds as the city struggles with the costs of residential growth.
“We have to foot the bill for the infrastructure and other amenities needed for new builds, yet the money goes to Wellington,” Brown said. “I’m also looking forward to the conversations here.”
Brown said returning GST and the government paying rates on its own property were recommendations from the 2023 Future for Local Government review, which recognised local government funding and finance systems were under pressure and not sustainable.
Willis said increasing investment in Auckland was a priority for the Government alongside introducing financial incentives for Auckland Council to help enable more housing. This included looking at directly sharing GST collected on new residential builds in the city.
“Our transport plan prioritises central government investment in a dozen major transport projects for Auckland including Mill Road, the Eastern Busway and the North West Alternative State Highway.
She said new incentives would support Auckland Council spending on local roads, pipes and other essential infrastructure.
“We are developing policy options for doing this and we welcome discussion with the Mayor of Auckland about what would work for the council.
“One option, proposed in the National-Act coalition agreement, would be to directly share with Auckland Council a portion of the GST collected on new residential builds in the city,” she said.
In a letter to Willis yesterday, Mauger backed Brown’s demands, saying GST on Christchurch rates would top $100m this financial year - amounting to a potential saving of nearly $500 per ratepayer.
He also wanted a share of GST on new builds returned to councils.
Removing a “tax on a tax” would ensure money collected locally funded the delivery of core services millions of New Zealanders relied on every day, Mauger said - “their streets, water supplies, rubbish collection and more”.
Whanau estimated the Government would pocket nearly $80m in GST on Wellington rates this year - equating to a potential reduction in average rates of 16.5 per cent.
“If we were able to get this back it would be a much-needed boost of revenue that could go directly to fixing our pressing infrastructure issues.”
Auckland Airport responded to Brown’s claims.
While some airport land like runways were exempt from rates, the airport said it was a significant ratepayer, with a council rates bill of over $25 million annually.
“Auckland Airport manages and pays for all its own roading, footpaths, utilities networks, rubbish and recycling collection – services normally covered by council, so the benefit to Auckland ratepayers is two-fold.”
Updated: This story has been amended to correct a figure supplied by Auckland Council.
Lane Nichols is a senior journalist and deputy head of news based in Auckland. Before joining the Herald in 2012, he spent a decade at Wellington’s Dominion Post and the Nelson Mail.
Emergency services were called to the scene about 4.40pm.