Council looks more closely at bed tax

Published 6 November 2005

Auckland City Council is looking at a bed tax on the hospitality industry again, although it doesn’t appear on the agenda for the next year’s annual plan, which councillors will discuss on Thursday, 10 November.

Tourism Auckland chief executive Graeme Osborne warned councillors against a bed tax when he reported last week to the economic development & sustainable business committee. Mr Osborne said a targeted rate (as in a set charge on all households, not targeting a sector of the community) would be a better option.

He expressed the industry’s concern that a bed tax model was being considered, saying the major beneficiary of the tourism spend was the retail sector. There was no discussion on his comments.

Bed tax gets raised from time to time as a mechanism which can be applied locally, and the city council is examining the possibilities in that light now. Strategic policy analyst Deborah James & contractor John Williamson mentioned bed tax as a possible events funding stream when they presented a report, Local government funding, to the council’s finance & corporate business committee in October.

The finance committee accepted the report, agreed to focus its efforts in seeking new funding on 7 specified streams (including events funding) and will get an update in February. The difficulty of keeping track of what’s going on at the city council is well illustrated by this subject: the economic development & sustainable business committee mentioned it at its August meeting and noted a report was being prepared for that committee’s December meeting on a slightly different aspect: “how to best promote & fund tourist initiatives including Tourism Auckland, including possible options such as a targeted rate or bed tax.”

2 parts of council looking at it

At one part of the council it’s for events funding, at another it’s for tourism initiatives. Apart from the overall review of how to finance the city council, a bed tax does have the support of the economic development committee chairman, Richard Northey, who tried to get one put in place when he was on the minority side of the council in 2002.

Cllr Northey said in his report promoting the tax then that it almost made it into law through the new Local Government Rating Act, but accommodation industry pressure kept it out. However, he said Local Government NZ had advice that definitions in the new act would probably be liberal enough to allow the tax to be introduced.

On that occasion, the finance committee chairman at the time, Doug Armstrong, said council staff would prepare a scoping paper, “setting out a range of options for raising additional revenue for investment in essential infrastructure & services.” And he said the council would “be looking at ways of resourcing proposed major new initiatives like the convention centre.”

Tourism Auckland’s Graeme Osborne told the economic development & sustainable business committee on 2 November: “The major beneficiary (of the tourism spend) is the retail sector, so I’m not sure that a bed tax is the best solution for the problem. We (the industry) still think a targeted rate is the best approach, given the community broadly benefits from an event. Ideally we’d like to see this being a regional approach, but we imagine it will be more Auckland City.

“We’re talking about a bed tax on cbd hotels, and they argue that puts them into an uncompetitive position.” For the industry’s preferred alternative of a targeted rate, he said, “$18/household is what we thought would be a nice little number.”

The report on local government funding, accepted by the finance committee, said that seeking the financial assistance of other parties, including central government, “should be limited to specific cases where a strong rationale exists to support this.” The authors said that where the council had a funding constraint impeding its ability to meet community needs & statutory requirements, the responsibility for addressing the constraint lay with the council. And in any joint funding arrangement, the council needed to preserve its fiscal autonomy.

In light of that, the committee agreed the council should focus on constraints in these areas:

grants in lieu of rates on Crown land ($14 million/year in rates not collected from Crown-owned sites)
funding contributions from the Government to local/regional projects which generate national benefits for appropriate Auckland City projects
transport funding
water pricing
events funding
leaky buildings.

The whole topic of local government funding is being worked on at a national level through the local authority funding project, set up by Cabinet & Local Government NZ. The first phase, of assessing the magnitude of pressure, resulted in a report (on the Internal Affairs Department website, see link below) in July. A final report setting out options will be delivered to the Central/Local Government Forum in December.

For that project, Auckland City Council is working on events funding options, including bed tax, and the Auckland Regional Council is developing a regional events funding strategy.

Website: Local authority funding project


Earlier story:

16 August 2002: Councillors opt for bed tax report


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