Our Auckland Council isn't broke but it sure looks broken. This year, Auckland Council plans an annual 3.5 per cent rate rise including a one-off rate rise of 5 per cent - all compounding annually of course.
In addition, council borrowing is being increased to a higher ratio of 290 per cent of revenue. Precious assets are being sold off to achieve an extra $70 million per year. Plus, assets such as community facilities and playgrounds have had their maintenance stretched out, a process council officers call "sweating the assets".
All these measures, and more, are in response to a reduction in council income of $450m and projected accumulated losses of an additional $1 billion by 2024. Although landlords face the initial burden of the rates increase, tenants will feel the ongoing increases as well. But, importantly our communities are losing precious facilities and services.
A few years ago, council found the answer to transport funding shortfalls by convincing the government to impose an Auckland fuel tax. I suggest that council now look at the possibilities of requesting an extra 1 per cent GST tax on the Auckland region, increasing GST to 16 per cent. IRD advises that the current 15 per cent GST take for the Auckland region was an estimated $7.7b in 2018, $7.8b in 2019 $8.5b in 2020.
Bearing in mind that the IRD figures aren't exact, an increase of GST from 15 per cent to 16 per cent could realise approximately an additional $500m. This small increase would cover council's current shortfall and remove the drivers for Auckland Council to sell some of our parks, defer maintenance, defer important infrastructure and increase debt. Philosophically, the community load would be spread across all users of council facilities and not just ratepayers.
One drawback is that GST is a regressive tax, impacting harshly on the most vulnerable. But policymakers could allow for this aspect. Such a proposal could be introduced nationwide and assist other councils across the country that also face increased financial strains.
This nationwide approach would also prevent company relocations solely for the purpose of avoiding Auckland's extra 1 per cent.
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Any increase in GST would not be popular and I have opposed such regressive taxes in the past. But Covid-19 has placed harsh limits on our council at a time when increased community benefits are called for.
We have seen a dramatic increase in the need for community parks for exercise and social distancing. We see an increasing need for additional and improved services in our community to help support each other. User pays has its limits as it reduces access to those most vulnerable who are most in need of public services. I fear such community needs will not evaporate with the vaccine.
There is a limit to the crippling rates and debt increases and to the reductions in council services. We need alternative forms of funding our council services and a 1 per cent Auckland levy on GST might provide one of the answers.
Now we just need our council to consider the proposal and discuss it with their colleagues in government. Remember, a similar proposal was enacted by the Government with the Auckland fuel tax, so a regional GST levy is not impossible.
But, not being an economist nor an accountant, I am sure there are many other aspects to such a proposal and I welcome feedback from those professions and others.
Grant Gillon is a former MP, North Shore City councillor and local board member