A controversial "bed tax" on hotels and motels goes to the vote tomorrow, with Mayor Phil Goff unsure if it will sneak through or be thrown out.

The Herald understands Goff has support for a 2.5 per cent rates rise and the introduction of the living wage for council staff in his first budget, but furious lobbying on both sides of the bed tax has not produced a clear outcome.

The issue has divided councillors. At a run-through for the budget meeting today, an opponent of the bed tax, Dick Quax, was accused of leaking material to a lobbyist for the hotel industry.

Win or lose, I am clear this is the right thing to do

Quax said he did email the lobbyist, James Bews-Hair, from the confidential meeting but it was an "innocuous comment", saying "I'm confident I haven't breached any confidentiality, nor have I compromised my own position and ability to vote on the matter tomorrow".


Goff said tomorrow's vote on the bed tax was "going to be very close" and a first test of councillors' resolve to broaden council's revenue base instead of loading everything on the ratepayer.

He said the targeted rate was hardly oppressive at about $3 to $6 a night for most hotels and $1 to $3 for motels.

Following the original furore from the hotel and hospitality sectors to the targeted rate, Goff watered it down in May to appease industry and political concerns by excluding backpackers, camping grounds and areas on the fringes of the city.

The rate is now expected to raise $13.5m, rather than the original $27m to fund spending by Auckland Tourism, Events and Economic Development(Ateed) to attract visitors and events and free up investment for transport.

"Win or lose, I am clear this is the right thing to do and I have made it as fair as possible, both to the ratepayer and to the accommodation providers," Goff said.

Writing in today's Herald, Tourism Holdings chief executive Grant Webster repeated the industry argument that of the $7.5 billion visitor spend in Auckland, just 9.3 per cent was spent on accommodation with the tourism dollar spread far and wide.

"A sector that gets 9 per cent of the benefit from growing the visitor economy should not be asked to bear 100 per cent of the cost," said Webster, adding the impact of the targeted rate means some hotel projects would no longer add up financially.

"The targeted rate would be disastrous for Auckland," he said.

Goff said he has three priorities for his first budget - rating stability by reducing the budgeted rates increase of 3.5 per cent 2.5 per cent for households and business; support to vulnerable Aucklanders through the Living Wage and $500,000 for the homeless; and targeted rates on the accommodation sector and large-scale developments to accelerate investment to relieve transport and housing pressures.

The three main points in the budget

Rates, Dollars and Cents

Goff is delivering on his promise to hold rates to 2.5 per cent this term. No-one expects him to lose this vote, despite some councillors wanting a 2 per cent or 3 per cent rates increase.

This is the second year running average household rates have increased by 2.5 per cent, and will result in a rates bill of about $2470 for a home valued at $750,000.

Some business groups, like Heart of the City, are miffed at Goff for pausing a commitment this year to gradually reduce business rates, which are 2.73 times higher than residential rates.

Officers have issued a warning about the council's debt ceiling, which, if breached, could lead to a credit downgrade and higher interest payments on $8.2b of debt. The "debt to revenue" ceiling could be exceeded in 2021/22 and 2022/23 and officers are suggesting council look at selling some non-strategic assets and finding additional revenue. They have also recommended fully drawing down a $335m asset portfolio to manage the debt ratios and keep funding capital works. Last year, the plan was to draw down $200m over two years.

Bed tax

The feathers have not stopped flying since Goff proposed a "bed tax" on hotel and accommodation providers to fund spending by Auckland Tourism, Events and Economic Development(Ateed) to attract visitors and events. Huge opposition from the hotel and hospitality industries to the bed tax, or targeted rate, resulted in Goff reducing the scope and halving the expected income to $13.5m. Fierce lobbying, led by Tourism Industry Aotearoa, has convinced many councillors to question the practical and legal consequences.

Living Wage and homeless

Goff has the numbers to pass a Living Wage policy for 2064 council staff over three years, many of whom work in libraries, customer services and arts, communities and events. The current living wage published by the Living Wage Movement for 2017 is $20.20 an hour.

The first step for council staff, including council-controlled organisations, will be an increase in the coming financial year to $18. There was 71 per cent support for the policy through the public consultation process on the budget. The Living Wage is estimated to cost about $9 million to implement, including $1.9m in the first year funded through savings. Goff says low paid staff provide important services to Auckland but struggle to afford to live in the region. He is also providing $500,000 to co-ordinate agencies supporting the homeless.