Auckland's working class could cop $1000 light rail tax being considered by Government

Transport Minister Michael Wood reveals details of what’s ahead for Aucklanders with the new light rail projects announced Friday morning. Video / NZ Herald

The Government is considering a possible Auckland light rail tax of $1000 a year that will hit working-class families in several Labour seats.

The tax on homes within walking distance of about 18 stations is one of the funding sources being considered by Finance Minister Grant Robertson as he looks at options to pay for the $14.6 billion project, which under one scenario could balloon to $24b.

The 24km route for light rail from Wynyard Quarter in the central city to the airport travels through some of Auckland's most deprived suburbs, including Māngere and Mt Roskill.

Transport Minister Michael Wood. Photo / Alex Burton

Robertson declined to answer questions about a $1000 annual flat tax on households along the route regardless of income, referring the matter to Transport Minister Michael Wood, who did not rule it out.

"As of now, no decisions have been made about the exact funding mechanism and we will consult on the options with a focus on a fair and equitable approach," said Wood.

He did not know how many properties would be caught in the tax net, but in his electorate alone there are 12,000 households, 4300 households in the Maungakiekie electorate of Labour MP Priyanca Radhakrishnan and 4300 households of mostly Pasifika and Māori in the Māngere electorate of Labour MP Aupito William Sio.

Finance Minister Grant Robertson is considering a tax that will hit the poor to help fund light rail. Photo / Mark Mitchell

The Māngere MP said his community had long been advocating for light rail and always supported targeted rates in the past when the benefits were laid out and well known.

Sio said homeowners would want to participate before any final decisions were made, and was confident there would be a detailed consultation process.

Māngere-Ōtāhuhu Local Board chairwoman Lydia Sosene said the community could only pay what they could afford, saying the fairness and equity principle had to be applied.

Light rail is planned for Mangere town centre but it could cost residents $1000 a year in tax. Photo / Supplied

In the Labour seat of Maungakiekie, where light rail will have a stop at Onehunga, Radhakrishnan said her understanding was that value capture tools in the corridor, like the proposed levy, were intended to ensure that significant public investment would not result in disproportionate benefit for a small group of people.

"I also understand that levies like this are common in similar projects internationally but that no final decisions have been made at this stage with regard to this particular project," she said.

The proposed tax would also cover part of Prime Minister Jacinda Ardern's Mt Albert electorate around Kingsland and Sandringham Rd.

A spokesman for the Prime Minister said the light rail indicative business case made a wide range of recommendations for Cabinet's consideration, but no decisions had been made about funding mechanisms.

A detailed business case is under way which will provide ministers with further advice on funding options, he said.

The idea for an annual $1000 tax is contained in the indicative business case prepared by the independent Light Rail Establishment Unit chaired by former Manukau City Council chief executive Leigh Auton.

Auckland mayor Phil Goff says a $1000 tax on all properties is not equitable. Photo / File

It says given the scale of the capital and operating costs of light rail, a mix of funding sources will be required, including contributions from the Government, Auckland Council and businesses and people who benefit.

Among the options is a "levy" or "targeted rate" that could be collected by the council of $1000 a year on properties within walking distance of stations along the route.

Another option is "value uplift" - a charge on businesses and developments that benefit from the project.

The unit said ratepayer "affordability and acceptability" is an important consideration, but added the $1000 annual tax is within the affordable threshold set out in the 2007 Local Government Rate Inquiry report.

It also suggested a postponement scheme to allow people to defer the tax until after their property is sold.

A targeted rate of $1000 would see the average rates bill of $3107 rise to $4107, an increase of 32 per cent. The council also plans to raise rates by a further 40 per cent over the remaining years of the 10-year budget.

Artist impression of light rail running in dual tunnels in Auckland. Photo / Supplied

Mayor Phil Goff has championed light rail, but is reluctant to commit ratepayers' money beyond playing a role providing infrastructure as part of plans to build 66,000 new homes around the project.

"The example of a flat $1000 levy on all properties within station catchment - which implies a flat charge regardless of the value of the property - does not seem equitable," he said.

Goff believes any charges should apply to businesses or property owners who profit from the benefits of light rail.

Wood said value capture is common in similar projects around the world, but it won't be until the next stage of design and a detailed business case that the Government will refine the options to fund light rail.

Robertson has said the Government will fund the "lion's share" of the project, but is being guarded about other funding options, including the $1000 tax and the council's "capacity" to contribute, details of which are redacted in the indicative business case.

The indicative business case also shows the day one operating and maintenance costs for light rail is $119.3 million and fare revenue in the first year is $19.3m. These costs are likely to be passed on to Auckland Council and Auckland Transport, who will qualify for subsidies from Waka Kotahi, NZ Transport Agency.

National Party transport spokesman Simeon Brown. Photo / Brett Phibbs

National's transport spokesman, Simeon Brown, called on the Government to rule out the $1000 tax on properties along the light rail corridor.

"This tax will either have to be paid for by the homeowner or the person renting the property, and will punish working-class families in suburbs such as Mt Roskill and Māngere.

"Taxing people for living along the corridor smacks of a Government which is quickly realising how expensive this project will be and is desperately trying to find new ways to raise tax revenue to pay for its pet project," said Brown, who has promised to scrap light rail if National wins the 2023 election.