Auckland Mayor Phil Goff says he’s keen to explore using value uplift tax to help pay for new infrastructure projects in the city. But the amount of work required to set out the ability to do so equitably means the move could still be some time off.
The funding method would eventually sit alongside a new regional fuel tax the Labour government will allow Auckland to impose. Goff argued that a fuel tax was more sensible than raising rates or applying a congestion charge for driving through the city.
Goff made the comments while addressing media alongside Prime Minister Jacinda Ardern after a Thursday morning meeting regarding Auckland’s housing and transport problems that also included Grant Robertson and Phil Twyford.
Read his and Ardern’s comments on housing here. They were also quizzed on who would pay what for the $5 billion expected cost of Labour’s light rail (or trams) desires for the city, including city-to-airport, to the West and eventually lines East and North.
Auckland transport costs
Ardern said the Auckland Transport Alignment Project process to date had been helpful bringing together government and Auckland Council priorities. The process would be refreshed to integrate the new government’s priorities and work through some issues around funding.
Goff added: “Look, we’re adding 800 cars a week to the roads of Auckland. That is absolutely unsustainable.” Different models around the world showed it was very clear that Auckland had to have a mass transit system.
“What we’re doing in rail is really good – it’ll make a big difference. But we need to have light rail,” Goff said. “And I absolutely applaud the government for its commitment to light rail, initially across the Isthmus…and through to the airport. Equally to the West, ultimately to the East and the North of Auckland.”
This would combat growing congestion and gridlock. “These things take time to build, but there are clear models for it.” Light rail was not an outdated technology, Goff argued: “It’s what countries all over the world are doing, and doing successfully.”
The matters were timing, and what Auckland could contribute to the cost. “And with a regional fuel tax, we can contribute, over a 10-year period something between $1.2-and-$1.5 billion. If we did not have the regional fuel tax, we would have to put rates up by probably around 15%, which would be totally unsustainable,” Goff said.
“Or we would have to introduce a congestion tax which I think in London at the moment is running at $21 a day. The regional fuel tax is, on average, probably $2.60 a week for the average motorist. That is absolutely sustainable.”
Asked whether he was saying that the council would be stumping up $1.2bn of the expected $5bn cost for light rail projects talked about for Auckland, Goff said: “Light rail from memory to the airport will be something between…$2.5-$2.8bn, and to the West it will probably be maybe…$300 million more than the alternative cost of a busway.”
Ardern said the ATAP process would be used to have these ongoing funding split discussions. “We’ve acknowledged the role that central government needs to play, but it comes on both sides,” she said. The discussion Thursday was around what Council could do to make sure it finds efficiencies to be in a position to fund projects to a greater degree to what it’s able to.
“We’ve talked also about the mechanisms we can offer. We’ve always acknowledged that Auckland should have some skin in the game, and that Aucklanders know we have problems we need to resolve. The regional fuel tax allows us to do that, and that’s a mechanism we’d be happy to offer to Council to enable them to deliver these projects,” Ardern said.
Value uplift tax
Goff was also asked whether council could charge targeted rates on value uplift capture around the new transport projects to help fund them. “That’s a concept that I think really needs to be explored,” he said.
“Sometimes when the ratepayer and the taxpayer put in new infrastructure, it creates a massive uplift in the value of properties [around that infrastructure]. And I think in principal it’s fair…if you’re getting a massive uplift in the value of your property that you make a contribution to the infrastructure that lets that happen.”
Goff said he’d talked about the measure in London. “It is quite a complex area, but it’s an area that I think both government and council are committed to exploring.”
It wasn’t something council could bring in immediately. “If you’re going to do it, you would need to do it right, so that it was equitable, and that it was done well. But it’s a concept that certainly should be followed through on by council,” Goff said.
He said he thought there was general agreement across the political spectrum that, “if you get a windfall profit, then you should be contributing some of that towards the cost of the infrastructure that enabled that to happen.”
See this note from Motu on value uplift tax - AKA value capture or betterment tax. It relates to the uplift in land values that can result after a new public infrastructure work is put in which benefits that land. The idea is that those land-owners who benefit from the value uplift from the project - hence standing to profit from it - contribute to helping repay the initial funding for the project.
For example, in Auckland, the inner city rail-loop would have been a prime contender with the value of land near new stations set to rise. I touch upon it in my column earlier this year regarding the government's Auckland infrastructure Mexican stand-offs.
Here's a section of my interview with Productivity Commission chair Murray Sherwin back in March, following the Commission's report on New Zealand's urban planning system, in which it recommends use of value capture tax.
One potential revenue source for councils is the imposition of value uplift taxes. Take an example of any unserviced block of land. Add three-waters and roads, and the value of that land jumps because it’s now usable for dense development.
“So why shouldn’t the council that’s funding the infrastructure claim a slice of that to fund the cost of that infrastructure?” Sherwin asked.
Another example of where value capture tax could work in Auckland is the inevitable rise in values of properties close to new city rail link stations. Could Council target these properties? “Absolutely.”
Melbourne has done this quite nicely with a graduated tax on properties that are near one of their inner city rail loops, Sherwin said.
“Property values went up, the marketability and the rents in those properties went up, so the council gets a part of that to help fund the infrastructure.”
42 Comments
WTF is an UPLIFT TAX ?
I Googled it ...... there is no such thing , its just another imaginary TAX dreamt up by these looney lefties who run the circus .
And why is the left so obsessed with TAX ?
Between the Mayor and the new administration , the word TAX has been used as often as Donald Trump used the word CHINA during the US election
Also called betterment tax elsewhere - it's the opposite of compensation for worsenment (i.e., value gains and value losses arising from planning actions);
http://www.spains.com.au/Detailed%20Essays/David%20Spain/SR%20&%20Town%…
I agree, the LUAS had a lot of limitations. It was just too small to cater to the numbers wanting to get out to Sandyford.
Trams are fine for moving around inside city centres (Melbourne and many Central European nations show how they work). They are not designed for serving major arterial commuter routes, and/or airport connections.
The times I had to get it, the LUAS was simply too busy and quite often you were simply stuck waiting for the next one to come along.
As for AKLD Airport. Utter lunacy. I doubt the planners could comprehend the number of passengers let alone the fact they would have to factor in 1-2 giant wheely cases for each of them.
... All these greedy ... talk about is where they are getting extra revenues from, no mention of cutting council waste. $2.5bln here $1 bln here, do they think it is a game of monopoly? How about introducing a Poll Tax so maybe households with 15 people start paying the share they avoid by over crowding? That is fairer to use a weasel lefty term. (Comment edited with inappropriate language removed. Ed).
There is a value uplift tax already. Rates are based on the capital value of your house. If my house goes up in value more than the next door neighbours then I will end up paying more rates when it gets valued at the next valuation. If they all go up by the same percentage then rates only go up if they increase them. If they build a rubbish dump in the reserve next door then my rates will probably go done as the value of the house will drop
Way back when I briefly lived in UK they had a Betterment Levy which applied if land of low usage value like farm land was to be allowed to have its use lifted to housing. The levy was I understand 40% of the 'betterment' . Effectively it was a tax on the capital gain. That would upset the land bankers here especially if their land use is currently based on farm land value but they had paid a premium based on expectations.
Further to this the betterment was envisaged as a tax that would be used to pay for the infrastructure over not only the local area but the extra load created elsewhere by the new area.
An explanation and history in UK is below. The tax was once as high as 80% of the actual gain from changed status.
https://www.ft.com/content/0f72b534-9ccb-11e4-971b-00144feabdc0
It could be applied in Auckland but maybe at a low rate and based on the change from before speculation had lifted values. There could be a time limited delay in imposition to allow the owner to liquidate the asset prior to the tax being payable.
Maybe there is something that I am missing, but as I understand it light rail is just another word for trams. If so, it seems to me that they compare very poorly with rail and little if any better than buses. So if we put in a light rail system it will be constrained to the speed of the road traffic???? and or it will reduce the carriageway available to road traffic. So is it really going to make much improvement? I would have thought it better to add to the existing rail system rather than set up a whole new system. Trains have a low cost of incrementing capacity. Just a few more carriages, the rest is all paid for. With trams we have to create a whole new infrastructure and organisation from scratch, and it is incompatible with rail. I can't see that it is a very smart idea. Better to do the job properly than run to a quick, cheap, and not so good solution.
So in 5-10 years autonomous vehicles will be here, legal, and in sufficient numbers to make all current public transport entirely redundant? I doubt that very much. In the 15-20 year timeframe, maybe, if all of the technical, legal, and cultural issues around autonomous vehicles can be resolved by then.
I asked someone who supposedly knows about this stuff (works for AT so no guarantees) and they said you can get a lot more people on light rail. It sounds like trams with carriages. If it isn't that that it is a bus with tracks and that is a stupid idea. It could work if done right. If they can set up decent light rail stations and find efficient ways of getting people to them that would be a start. The northern busway is great except it is quicker to get a bus direct to the city than a bus to the nearest northern busway station.
So you can get more people on light rail. So. You can get more people on more buses. And with more buses you could schedule them every 3 minutes. (or every two minutes).
I like the airport bus now already 15 minute intervals (i think). Every three minutes would be just neat.
Simpson humour... brilliant! Sadly true...
https://youtu.be/ZDOI0cq6GZM
It can be useful when needed. Land tax allowed you to own a house.
If we'd drop income and business taxes and rebalance some onto land tax we'd see more productive investment and returns than the current situation National has nurtured for the last years, where we're subsidising wages and property prices via WFF, the Accommodation Supplement and the FHB grant.
Hi all - have just linked to a Motu note in the article on the concept. We used to have this in New Zealand - quite an interesting history. From memory, I think it helped pay for the original rail line through the Hutt Valley. It opened up swathes of land for development, and those who benefited helped pay for it.
Cheers
no argument here - the Auckland ratepayer already subsidies public transport in auckland $250 million a year - for a pretty ineffective and inefficient service - that the majority of us cant possibly use - so a light rail option that is four times dearer than the heavy rail option - and will also add to road congestion as it is going to take away lanes is not one favoured by many - even some green voters i know preferred the easier rail link and further extension to rail instead of a completely new type of infrastructure - i dont see why the rest of the country should pay for it either - let Auckland ratepayers vote on it - do you want a light railway link - cost is a 15% increase on rates - yes or no ......
Light rail has been chosen because it's the easiest way to link mass transit along Dominion Road and various other places down to the airport, and because the northwest motorway will also use light rail, as well as the north shore busway, when it's eventually converted.
I can't see light rail can offer better than the quite nifty bus that runs already to the airport along Dominion Road. I like to use it when I come to Auckland because the bus works very well.
Why spend one dollar on replacing it with a tram (light rail) for no improvement. And just nuts to spend a billion.
I could understand a full rail link to the Airport, (in addition to the great bus). A connection via Puhunui is flat simple and can't be that expensive.
Dear Phil Goff,
Your stance is wrong.
- For the economy to be efficient and for resources to be allowed efficiently in the market user pays should apply as must as possible with relevant social policies added to ensure the poor are not disproportionality disadvantaged.
1) Implement a congestion tax reviewed every 6 months like Singapore. The users that cause the congestion should pay for the congestion: This will
1a) Produce a revenue stream
1b) Defer/delay future capital expenditure as peak travel by car will be dampened
1c) Improve PT patronage & reduce the required cross subsidy
1d) Increase the number of people cycling and walking and peoples health
2) Get the government to review the funding split between ratepayers and road users. A previous paper indicated that ratepayers over pay for transport. This is still likely the case.
2a) This would meant a higher excise tax on petrol, which would shift more people to PT and cycle/walk
2b) The ratepayers money not then used for transport could be used to fund the infrastructure deficit and/or bring forward some transport projects
3) The value uplift tax can simply be a land tax. We don't need a separate uplift tax to complicate things, infrastructure bonds & targeted rates maybe.
3a) Change the rating base to land value only. Some of the land tax might be central government revenue and some local rates. (If there is a central govt land tax then other taxes can drop)
3b) Uplift in value is always thought the change in price of the land. The building value doesn't effectively change.
3c) The land tax has a huge advantage in that it will naturally encourage more efficient and denser development. The land value wont be in direct proportion to the density so the unit rate of land tax will be lower for more dense developments.
4) And finally remove developer contributions and use targeted rates or infrastructure bonds instead. It is not the developers that cause the demand for services. It is the users.
4a) Developer contributions substantially push up the up front capital cost of buying a house & thus what people have to pay and the size of upfront mortgage. Its far better to do this thought cashflow over time as users actually use the services.
How do they figure a 150 year old technology that runs on rails is better than say buses on dedicated lanes like the North Shore busway?
1. Trams and train services are not open to competition. There are a few companies providing bus services on the Northern busway. This helps keep fares down and for example when NZ Bus drivers went on strike last year Ritchies simply added more buses so passengers were unaffected.
2. If a train or tram breaks down the entire line is affected by delays. If a bus breaks down the other buses simply steer right slightly and pass the broken down bus.
3. A person walking along the lines or object on the line halts all trains on that line (happened recently out West). Buses simply slow down and pass the jaywalker or the object blocking the lane or take an alternative route.
Please can someone enlighten me why trams to the airport are a better solution than dedicated busways and don't say diesel emissions because buses can be electric and/or connected to overhead wires (trolley)?
Light rail is 150 year old technology? So what about buses?
"The first mechanically propelled omnibus appeared on the streets of London on 22 April 1833."
In practice, and in spite of your concerns, hundreds of cities operate heavy and light rail services. You might want to read up about some of them.
The Auckland council owns billions of dollars worth of infrastructure and provide so many amenities and services to people who live in Auckland and also others who visit the city. Is it not fair to ask every one who lives in the city to pay towards the costs of the services provided ? Why should only the rate payers foot the bill? The rent the tenants pay hardly covers the interest and with the negative gearing gone and Capital Gain Tax coming there is hardly any incentive for the ratepayers. If the council makes it mandatory to dispose your own rubbish each week, just imagine how much you will pay for it. If every resident (Ratepayer and tenants) pay for the services then there should no problem to improve the infrastructure which is badly needed. Also there was no need for the council to take lead in paying a living wage when the financial situation is not that good. Apart from that the salaries paid to a number of employees is questionable. Can the council also give the exact amount of compensation paid towards leaky buildings as at today's date. The council will be better of in getting a thorough investigation in its staffing requirements and reviewing the budget with the help of experienced accountants in the city.
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