Kiwis back a tourist bed tax, LGNZ says

Wednesday, 21 August 2024

Prime Minister Christopher Luxon is set to deliver councils a dose of his Government’s fiscal rectitude today in Wellington’s $185 million Tākina convention centre.

Luxon will speak to the Local Government New Zealand (LGNZ) conference on Wednesday afternoon, delivering a speech in which it’s understood he will urge mayors and council leaders to “rein in the fantasies” and get “back to the basics” of collecting rubbish, and fixing pipes and potholes.

The location for the speech could not be more pointed: LGNZ is hosting its annual conference at a Wellington convention centre criticised for its expense and $5.7m cost overrun, built as the city’s water infrastructure reached breaking point.

Luxon will also emphasise the Government’s efforts to reduce costs to ratepayers, through its new water reform policy that lifts debt-to-revenue ratios for new council-controlled water providers, and regulatory changes in places including traffic management.

The Government will also be removing the “four wellbeings” — social, economic, environmental, and cultural — from the purpose of councils under the Local Government Act. The provisions were reinserted by Labour in 2019, after a prior National government removed them from law to instead focus councils on cost-effective local infrastructure and public services.

Luxon’s message to the local government sector comes as LGNZ continues its campaign urging the Government to provide councils with new funding streams.

In advance of its annual conference, on Wednesday morning the advocacy group published the results of a Curia Research poll it commissioned, demonstrating public support for new funding tools and a levy on tourists — or “bed tax” — to fund council infrastructure and services

On Tuesday, the Auditor-General published a review into local government that showed councils’ total revenue had increased in the past two years by 18%, to $17.8 billion in 2022/23, mostly due to severe weather recovery funding and stimulus provided under the now-defunct Three Waters scheme.

But councils’ operating expenditure increased by 23% to $15.8b in 2022/23, the key reason being inflation.

“The current funding system for local government is broken, and everyone can see that given rates rises this year,” said LGNZ president Sam Broughton, who is also mayor of Selwyn.

“Councils have been through their budgets, line by line, to prioritise and find savings … Rates shouldn’t be footing the bill for everything. But with limited levers available, councils have no other options.”

The Government has committed to delivering greater “funding tools” to councils, however policy details are yet to be revealed. Mayors and council leaders assembling for the conference this week will be hearing directly from Luxon and Local Government Minister Simeon Brown, among Cabinet ministers speaking at the event.

On Tuesday, Brown said councils could not implement a bed tax because there was no legislation allowing it. He would not be drawn on whether the Government was considering legislating to allow such tourism levies, saying only that he was focused on delivering a framework for the city and regional deals between Government and councils.

“Regional deals is more about, how do we actually have a longer term relationship between local government and central government to deliver outcomes? Obviously, funding and financing is one of the key issues within that.”

The Curia poll asked people whether they thought councils would be more or less effective with “a wider range of funding tools other than general rates”. More than half, 58%, said councils would be more effective, 11% said less effective, 14% said there would be no change, and 17% said they were unsure.

Asked how local infrastructure and services that tourists use should be paid for - by rates or tourist fees and charges - the minority, 8%, said it should be by rates alone. Instead, 34% supported tourist fees and charges, and 45% a combination of such fees and rates; 13% were unsure.

LGNZ said this showed 79% of people thought tourists should be contributing to infrastructure they used.

Queenstown Lakes District Mayor Glyn Lewers said his council continued to work on a visitor levy that would fund infrastructure investment for his district’s high tourism load.

“We'll keep working away at it. I think we've got a very good case for it, a very good economic case for it. We can grow international visitor spend by a billion [dollars] over the next 10 years if we have additional funding to actually invest in those mixed-use infrastructure.

“The city-regional deal opportunity opens up a pathway for having that discussions, whether that’s on the table or not - we’ll cross that bridge when it comes.

“We're not interested in a sugar hit. We're more interested in sustained infrastructure planning and investment.”

Ministry of Business, Innovation, and Employment surveys of international visitors showed one-in-three visited the Queenstown district.