Guest Post: Why I Oppose the Pillow Tax

A guest post by Auckland Councillor Greg Sayers:

When there is a vote for the Mayor’s targeted rate on hotels to fund the Council owned ATEED organisation odds-on I will be voting against this measure. Introducing a new form of rates is a cop out for an organisation that should spend more time concentrating on efficiencies and cost savings and less time trying to take more money out of ratepayers pockets.  

The targeted rate is flawed in its design. It is not a bed tax which travellers may be familiar with seeing overseas whereby an itemised surcharge is added onto the bill. The revenue raised is then ring fenced for building city infrastructure which visitors can use. Such a tax would have to be central government initiated and I would support this. As I am sure my constituents would.

With a bed tax the amount charged overseas is a percentage of the room cost. Auckland Council, however, is planning to use the capital value of a property as the calculation tool for introducing a new kind of rate, called a targeted rate. This is a blunt and highly inappropriate financial instrument and is the second major flaw in the model.

All the money will go to ATEED, the arm of Council which promotes Auckland as a tourism destination. This benefits a wide range and a large number of diverse businesses. However, the Mayor is asking for 100% of the targeted rate to be paid entirely by the hotel and motel sector – a sector which gains only 9% of the benefits. This is grossly unfair. The model is again fundamentally flawed.

Essentially the Mayor is asking a few businesses to fund all of Auckland’s promotions and advertising. Using smoke and mirrors the Mayor then promises more money will be allocated to fixing traffic congestion.

It is really just a money grab and Aucklanders need to understand the deceitfulness behind it. This has included direct threats from the Mayor if I don’t vote with him “there will be future consequences” for myself and my electorate.

So, what about the tourism and accommodation industry providers themselves – what do they say? They say the Mayor’s campaign is built on untruths, uneducated assumptions, distorted facts and public consultation documents that harbour clear biases. They are telling me they are thinking Mayor Goff is becoming more like Mayor Brown by the day.

Bottom line, the test for Mayor Goff’s leadership is not whether he can get enough of us as Auckland Councillors to vote with them. It is whether he does the right thing.

This targeted rate is definitely not the right thing. It is a poorly conceived tax on a small number of businesses that allows the Mayor to continue freely spending ratepayer’s money. He should drop this targeted rate, and go back to consult transparently with the people affected. Properly understand how the visitor industry works without a predetermined outcome. Gain buy-in to a workable solution and a fair way of charging visitors to pay their fair share towards Auckland’s growth challenges.

The fight over this targeted rate raises a broader issue about Auckland Council’s costs. Those supporting the Mayor tell us that costs are under control, and that adding targeted rates is a solution to the underlying problem of Council not having control of its spending. The Mayor and his supporters have decided to increase rates and also introduce new rates rather than aggressively attack Council’s waste and overspending.

The Council has an proposed annual budget of approximately $4.2 billion, up from $3.8 billion. The Council staff have come back with a proposal to make $17 million in savings this year on Len Browns budget. This is a fractional savings goal of the total Council budget. This would be completely unacceptable in the commercial sector whose Board of Directors would be looking for 10% savings as a minimum if their company’s debt and financial performance looked anything like Auckland Councils.

Any accountancy firm or Chief Financial Officer presenting savings this low in the private sector would be sacked. Before entering politics I spent a good part of my career looking at cost savings and efficiencies in businesses. My experience is that all organisations can find efficiency gains, however, it is only by setting tough goals that they do find these gains.

Auckland’s Mayor and Council are too weak. The bureaucrats are running the show in the vacuum. Ratepayers remain the soft target being hit with more rates increases, rather than Council initiating a thorough cost cutting process to find savings that can be passed onto ratepayers.

When I was running for Auckland Council I made a series of pledges, including to adhere to rates increases of no more than 2%. I am standing by that pledge, and will be voting against the new targeted rate to fund ATEED. I will consistently call on the Mayor to present options for cutting wastage and cutting overspending not increasing revenue, and I believe he should be more effective in managing the costs across all of council.

Bolding is done by me.

Great to see a Councillor living up to his pledge not to vote for a rates increase of greater than 2%. Goff is proposing a 4%+ rates increase. If Councillors who made that pledge vote for it, they will be targeted for defeat at the next election and their constituents reminded of their broken pledge.