Phil Goff: Bed tax should pay for Auckland's promotion

Auckland Mayor Phil Goff talks about his vision for Auckland in the coming year. Photo / Greg Bowker

Opinion

Auckland is a vibrant city that offers its people great learning and working opportunities as well as a fantastic lifestyle.

However, we're growing at such a rapid rate that traffic congestion is on the verge of gridlock and the Kiwi dream of home ownership is slipping out of reach for many Aucklanders.

To tackle these huge challenges, we need to make major investments in infrastructure including new and upgraded roads, public transport options, waste and stormwater systems.

The problem is that a joint Auckland Council-Government report has identified a $4 billion gap in infrastructure funding over the next decade.

The council has to come up with its share of that deficit. If we lump all of the cost on ratepayers, that will push rates up by 16 per cent a year.

That is not right or fair. Ratepayers have shouldered the burden of growth for too long. It is time to look for new solutions where those who benefit most pay their fair share.

That's why I'm promoting the idea of a targeted rate on accommodation providers.

It will require hotels and other providers to pay an increased rate potentially based on the capital value of their property. The increased revenue will go towards the cost of promoting major sporting and other events.

Ratepayers currently foot the bill for those even though it is accommodation providers that profit from the increase in visitors.

The extra revenue will also enable the council to borrow to fund further investment in infrastructure without risking breaching its debt ceiling which could result in a credit downgrade and increased interest charges.

This investment could include a mass transit link between the CBD and Auckland airport which will be welcomed by locals and visitors alike.

In the Herald this week the Chamber of Commerce chief executive, Michael Barnett, bemoaned the targeted rate as unfair, claiming it would deter hotel development in Auckland.

Ironically, his commentary ran alongside an article highlighting how Auckland hotels are reaping the benefits of the booming tourism market with the price of rooms increasing by 9 per cent to an average of $197 a night.

These figures undermine the claim accommodation providers can't afford to pay a new targeted rate. Each provider must make its own decision about how to manage these additional costs - whether to pass it on to customers or absorb it into the business.

If a hotel chooses to pass it through, our calculations suggest guests might pay an extra $5 or $10 a night for their room (that is up to each hotel to decide).

An increase of this amount can be compared with how many accommodation providers already ramp up their room rates when there are big events in town.

One inner city hotel increased its room rate from $241 the weekend before the upcoming Adele concert to $669 on the night.

A huge effort has been put into consulting accommodation providers to identify any fishhooks in the plan. There may be some outliers, for example motels that might have only a few rooms but be on land with a high capital value.

There may be a strong argument for exemptions or reducing the fiscal impact on these properties. But we won't know unless accommodation providers engage openly and honestly, sharing information freely with the council.

Auckland is the country's most popular holiday destination. Accommodation occupancy rates are consistently high and we're told the boom times are set to continue. That's great for the city's economy and particularly for accommodation providers.

But the visitor influx also places enormous pressure on our already strained infrastructure.

We see this play out in the fact that it often takes longer to get from the airport to the city than it does to fly from Wellington to Auckland. This is not sustainable, or acceptable, in an international city like Auckland.

My question to the people of Auckland is why should ratepayers pay the full cost of marketing events to entice visitors to the city and for the infrastructure that enables them to fully enjoy their stay? Surely those who benefit most should also pay their fair share?

That is a question Aucklanders can help the city's elected representatives answer during the consultation process for the draft Annual Plan. I urge you all to have your say.