Agenda of Council - 11 00 2020

Council

11 February 2020

Reports

2020-21 Rating Method

Department: Finance

EXECUTIVE SUMMARY

1 This report provides Council with options to increase the proportion of rates revenue collected by way of the general rate following a request from Council.

2 The options considered in this report propose variations to the level of the community services targeted rate. They have the effect of redistributing the increase in rates across properties and property categories.

RECOMMENDATIONS

That the Council, for the purposes of community engagement:

a) Considers which of the options for the community services targeted rate be included in the rating method for the 2020-21 year.

b) Approves the current rating method for the setting of all other rates for the 2020-21 year.

BACKGROUND

3 During the Annual Plan Council meeting on 29 January 2020, the Council approved the following resolution:

Moved (Mayor Aaron Hawkins/Cr David Benson-Pope):

That the Council:

Request a report in time for the February 11th meeting, presenting options to increase the proportion of rates revenue collected by way of the general rate.

Motion carried (CNL/2020/006)

4 DCC rates are made up of general rates (53%) and targeted rates (47%). General rates are based on capital value. Targeted rates are made up of fixed charges (78%) and rates based on capital value (22%). When property values change as a result of a revaluation, the largest impact relates to the general rate.

5 Dunedin properties were revalued in 2019 and these property values form the basis for rating for the 2020-21 rating year. Overall, there has been a 33.5% increase in capital value (CV) of Dunedin properties.

6 Historically, property revaluations have not had a significant impact on how rates are distributed between properties. This time, however, the increase in capital values of certain properties in the city will have a notable impact on the overall rate increase experienced by ratepayers.

7 This is because the residential category of properties increased in CV by 39.9%, compared to the overall increase of 33.5%. Within the residential category, the CV of lower value properties (median CV of $420,000 and below) increased by 50%; while properties with a CV greater than the median CV increased by 34%. The rating effect means lower value residential properties will pay a greater share of the general rate and therefore have a higher rate increase.

8 Please note that unless specified, all rating figures in this report are GST inclusive.

DISCUSSION

9 There are a variety of ways to increase the proportion of rates collected by way of the general rate. These would be by reducing the amount of rates collected by fixed charges.

10 Rates collected as fixed charges include the community services rate, kerbside recycling rate, water rate and drainage rate. The last three of these rates directly relate to the delivery of specific services. Without a full review of the service delivery and funding of these activities, changes to these rates were not considered.

11 It is worth noting that the potential changes to the refuse and kerbside collection services from 1 July 2021 are likely to impact on the proportion of rates charged as fixed charges.

Community Services Targeted Rate (CSTR)

12 This report considers increasing the proportion of rates collected using the general rate and reducing the proportion of rates collected using the community services targeted rate (CSTR). A reduction in rates collected by the CSTR would be offset by an increase in rates collected by the general rate.

13 As specified in the Revenue and Financing Policy, the CSTR funds the Botanic Garden and part of the Parks and Reserves activity. In the 2019-20 year, $13.557 million (including GST) is budgeted to be collected using the CSTR. The following table shows the amount collected from each property category:

Property Category	$’000
Residential	11,998
Lifestyle	602
Commercial	671
Farmland	286
Total	13,557

14 The CSTR is a fixed charge on all rateable properties and is forecast in the 2018-28 10 year plan to be increased annually by an indexed amount, last year by 3% to $240.50.

OPTIONS

15 Options for the level of the CSTR, for the 2020-21 year, are provided as follows:

a) Option one – status quo, increases the CSTR by $6.50 to $247.00.

b) Option two –provides three different levels of a reduced CSTR: $150.00, $100.00 and $50.00.

c) Option three – removes the CSTR.

16 Each option incorporates the forecast rate increase for the 2020-21 year of 6.5%.

17 The following table shows the total rates income (including GST) by property category for 2020-21 and 2019-20 for each option, along with the overall increase or decrease by category. The last column in the table shows the increase or decrease for each option compared to the status quo option.

Total rates income by property category

	2020/21	2019/20	Increase (Decrease)	% Increase (Decrease)	Inc/(Dec) on Option 1, SQ
Option 1 – status quo, increase CSTR to $247
Residential	126,471,300	115,646,300	10,825,000	9.4%
Lifestyle	6,110,400	5,688,300	422,100	7.4%
Commercial	54,673,800	53,642,200	1,031,600	1.9%
Farmland	4,739,300	5,241,100	(501,800)	-9.6%
Total	191,994,800	180,217,900	11,776,900	6.5%
Option 2 (a) – reduce CSTR to $150
Residential	124,831,700	115,646,300	9,185,400	7.9%	(1,639,600)
Lifestyle	6,130,100	5,688,300	441,800	7.8%	19,700
Commercial	56,198,100	53,642,200	2,555,900	4.8%	1,524,300
Farmland	4,834,900	5,241,100	(406,200)	-7.7%	95,600
Total	191,994,800	180,217,900	11,776,900	6.5%	0
Option 2 (b) – reduce CSTR to $100
Residential	123,992,800	115,646,300	8,346,500	7.2%	(2,478,500)
Lifestyle	6,140,900	5,688,300	452,600	8.0%	30,500
Commercial	56,978,400	53,642,200	3,336,200	6.2%	2,304,600
Farmland	4,882,700	5,241,100	(358,400)	-6.8%	143,400
Total	191,994,800	180,217,900	11,776,900	6.5%	0
Option 2 (c) – reduce CSTR to $50
Residential	123,146,900	115,646,300	7,500,600	6.5%	(3,324,400)
Lifestyle	6,151,700	5,688,300	463,400	8.1%	41,300
Commercial	57,763,800	53,642,200	4,121,600	7.7%	3,090,000
Farmland	4,932,400	5,241,100	(308,700)	-5.9%	193,100
Total	191,994,800	180,217,900	11,776,900	6.5%	0
Option 3 – reduce CSTR to $0
Residential	122,304,900	115,646,300	6,658,600	5.8%	(4,166,400)
Lifestyle	6,160,600	5,688,300	472,300	8.3%	50,200
Commercial	58,549,100	53,642,200	4,906,900	9.1%	3,875,300
Farmland	4,980,200	5,241,100	(260,900)	-5.0%	240,900
Total	191,994,800	180,217,900	11,776,900	6.5%	0

18 The outcome of any change to the rating method is that some properties pay more and some properties pay less. There are around 56,000 rate accounts. As a result of any CSTR change, the impact on each account is the same (the only variable being the number of CSTR charges), however the change in general rate varies depending on the CV.

19 Some specific property examples are provided in Attachment A but there is the potential risk of unique issues and unintended consequences. Attachment A provides sample property rate impacts for each category of property, for each of the options. The table below provides a small sample list from Attachment A. It shows the impact on the average value property for each category as well as the median and mode values for residential property. Farmland and lifestyle properties include general and community services rates only. Residential and commercial properties are charged all rates.

Sample rates by property category

	CV New	CV Old	CV % Increase	2019/20 Rates	2020/21 Rates	Rate Increase (Dec)	% Rate Increase (Dec)
Option 1 – status quo, increase CSTR to $247
Residential Mode	385,000	245,000	57.1%	2,087	2,382	295	14.1%
Residential Median	420,000	285,000	47.4%	2,220	2,478	257	11.6%
Residential Average	464,400	326,800	42.1%	2,360	2,599	239	10.1%
Commercial	1,605,000	1,307,000	22.8%	16,652	17,385	733	4.4%
Farmland	1,265,000	1,157,000	9.3%	3,331	3,015	(316)	-9.5%
Lifestyle	746,000	561,000	33.0%	2,018	2,184	166	8.2%
Option 2 (a) – reduce CSTR to $150
Residential Mode	385,000	245,000	57.1%	2,087	2,341	254	12.2%
Residential Median	420,000	285,000	47.4%	2,220	2,442	222	10.0%
Residential Average	464,400	326,800	42.1%	2,360	2,570	210	8.9%
Commercial	1,605,000	1,307,000	22.8%	16,652	17,867	1,215	7.3%
Farmland	1,265,000	1,157,000	9.3%	3,331	3,067	(264)	-7.9%
Lifestyle	746,000	561,000	33.0%	2,018	2,191	173	8.6%
Option 2 (b) – reduce CSTR to $100
Residential Mode	385,000	245,000	57.1%	2,087	2,320	233	11.2%
Residential Median	420,000	285,000	47.4%	2,220	2,424	204	9.2%
Residential Average	464,400	326,800	42.1%	2,360	2,555	195	8.3%
Commercial	1,605,000	1,307,000	22.8%	16,652	18,114	1,462	8.8%
Farmland	1,265,000	1,157,000	9.3%	3,331	3,093	(238)	-7.1%
Lifestyle	746,000	561,000	33.0%	2,018	2,195	176	8.7%
Option 2 (c) – reduce CSTR to $50
Residential Mode	385,000	245,000	57.1%	2,087	2,299	212	10.2%
Residential Median	420,000	285,000	47.4%	2,220	2,405	185	8.3%
Residential Average	464,400	326,800	42.1%	2,360	2,540	180	7.6%
Commercial	1,605,000	1,307,000	22.8%	16,652	18,363	1,711	10.3%
Farmland	1,265,000	1,157,000	9.3%	3,331	3,120	(211)	-6.3%
Lifestyle	746,000	561,000	33.0%	2,018	2,198	180	8.9%
Option 3 – reduce CSTR to $0
Residential Mode	385,000	245,000	57.1%	2,087	2,279	192	9.2%
Residential Median	420,000	285,000	47.4%	2,220	2,387	167	7.5%
Residential Average	464,400	326,800	42.1%	2,360	2,525	166	7.0%
Commercial	1,605,000	1,307,000	22.8%	16,652	18,611	1,959	11.8%
Farmland	1,265,000	1,157,000	9.3%	3,331	3,146	(185)	-5.5%
Lifestyle	746,000	561,000	33.0%	2,018	2,201	183	9.1%

20 Overall impacts are provided for each option.

Option One – Status Quo

21 Under the status quo, allowing for both the June 2019 Local Government Cost Index of 2.8% and rounding to the nearest 50 cents would increase the CSTR from $240.50 to $247.00 for the 2020-21 year.

22 The impacts are:

· The total amount of rates collected from the CSTR increases from $13.557 million to $14.000 million for the 2020-21 year, an increase of 3.3%.

· General rates increase overall by 7.8%.

· The overall rate increase for residential, lifestyle and commercial categories is 9.4%, 7.4% and 1.9% respectively. The overall rate reduction for farmland properties is 9.6%.

· The CSTR increase is consistent with the 2018-28 10 year plan.

Option Two – Decrease the CSTR

23 Option two reduces the CSTR. Three different levels are provided:

2a) CSTR of $150.00,

2b) CSTR of $100.00 and

2c) CSTR of $50.00.

24 The impacts are:

· Option 2a (CSTR $150):

- The total amount of rates that would have been collected from the CSTR, $14 million under the status quo option, is reduced by $5.5 million. This is added to the general rate which increases overall by 13.5%.

- The rate increase is redistributed between categories. The residential category overall rate increase reduces to 7.9% (9.4% in the status quo option). The lifestyle and commercial categories overall increases become 7.8% and 4.8% respectively (from 7.4% and 1.9% respectively). The farmland category overall decrease is 7.7% (-9.6% in the status quo option).

· Option 2b (CSTR $100):

- The total amount of rates that would have been collected from the CSTR, $14 million under the status quo option, is reduced by $8.3 million. This is added to the general rate which increases overall by 16.5%.

- The rate increase is redistributed between categories. The residential category overall rate increase reduces to 7.2% (9.4% in the status quo option). The lifestyle and commercial categories overall increases become 8.0% and 6.2% respectively (from 7.4% and 1.9% respectively). The farmland category overall decrease is 6.8% (-9.6% in the status quo option).

· Option 2c (CSTR $50):

- The total amount of rates that would have been collected from the CSTR, $14 million under the status quo option, is reduced by $11.2 million. This is added to the general rate which increases overall by 19.5%.

- The rate increase is redistributed between categories. The residential category overall rate increase reduces to 6.5% (9.4% in the status quo option). The lifestyle and commercial categories overall increases become 8.1% and 7.7% respectively (from 7.4% and 1.9% respectively). The farmland category overall decrease is 5.9% (-9.6% in the status quo option).

· The CSTR would be at a lower level than predicted in the 2018-28 10 year plan.

· Maintaining the CSTR at any quantum provides a rating mechanism that can be utilised, depending on other decisions involving the rating method.

Option Three – Remove the CSTR

25 Option three removes the CSTR.

26 The impacts are:

· The total amount of rates that would have been collected from the CSTR, $14 million under the status quo option, is added to the general rate. General rates increase overall by 22.5%.

· The rate increase is redistributed between categories. The residential category overall rate increase reduces to 5.8% (9.4% in the status quo option). The lifestyle and commercial categories overall increase becomes 8.3% and 9.1% respectively (from 7.4% and 1.9% respectively). The farmland category overall decrease is 5.0% (-9.6% in the status quo option).

· The CSTR would be at a lower level than predicted in the 2018-28 10 year plan.

2018-28 10 year plan

27 A decision to reduce the CSTR by a material amount (option two) or remove it altogether (option three), would be a change from the 2018-28 10 year plan, requiring an amendment. The relevant sections that would need to be amended include the Revenue and Financing Policy, the Funding Impact Statements and other minor sections of supporting information.

28 The Revenue and Financing Policy (the Policy) states the Council’s policies on the funding of its operating and capital expenditure and the sources of those funds. One of the factors the Council can take into account when considering the Policy is the overall impact on the social, economic, environmental and cultural well-being of the community. For example, affordability issues (the impact on the elderly or low-income families) and the size and materiality of any shift in funding.

29 The funding impact statements (FIS) provide a schedule of funding sources, how those sources are applied and describe what rates and charges the Council will be setting. The FIS must be consistent with the revenue and financing policy.

NEXT STEPS

30 As discussed above, Council approval of option two or three would require a formal amendment to the 2018-28 10 year plan. This section details the consultation requirements necessary should the Council wish to implement a change from 1 July 2020.

31 The Council must use the special consultative procedure when making an amendment. This could occur concurrently while Council engages with the community on the 2020-21 Annual Plan.

32 The Council would need to prepare a consultation document which provides:

a) A description of the proposed amendment

b) The reasons for the proposed amendment

c) The implications of the proposed amendment

d) Any alternatives to the proposed amendment.

33 The consultation document would need to be audited and the final document must contain a report from the Auditor-General. This would be achievable within the current timeframe.

34 The consultation document, amended Revenue and Financing Policy, amended FIS and any other consequential amendments to the 2018-28 10 year plan would be provided to the Council for adoption on 24 February 2020.

35 The proposed rating method would be included in the supporting documentation that accompanies the draft 2020-21 budget.

36 While the Council is engaging with the community on the draft 2020-21 budget, rate account information will be available on the DCC website that shows the proposed rating impact by individual rate account.

Signatories

Author:

Carolyn Allan - Senior Management Accountant

Authoriser:

Gavin Logie - Financial Controller

Sandy Graham - General Manager City Services

Attachments

	Title	Page
⇩a	Sample property rate accounts	29

SUMMARY OF CONSIDERATIONS

Fit with purpose of Local Government

The development of the Annual Plan 2020-21 enables democratic local decision making and action by, and on behalf of, communities; and promotes the social, economic, environmental, and cultural well-being of Dunedin communities in the present and for the future.

Fit with strategic framework

	Contributes	Detracts	Not applicable
Social Wellbeing Strategy	☒	☐	☐
Economic Development Strategy	☒	☐	☐
Environment Strategy	☒	☐	☐
Arts and Culture Strategy	☒	☐	☐
3 Waters Strategy	☒	☐	☐
Spatial Plan	☒	☐	☐
Integrated Transport Strategy	☒	☐	☐
Parks and Recreation Strategy	☒	☐	☐
Other strategic projects/policies/plans	☒	☐	☐

The Annual Plan 2020-21 contributes to objectives across the strategic framework, as it describes the Council’s activities, which are aligned to community outcomes. It also provides a long term focus for decision making and coordination of the Council’s resources, as well as a basis for community accountability.

Māori Impact Statement

The DCC works in partnership with mana whenua across a range of projects and activities outlined in the Annual Plan 2020-21, and provides opportunities for all Māori to participate and contribute to decision-making processes.

Sustainability

Sustainability is an underlying principle of the DCC’s strategic framework. Activity in the Annual Plan 2020-21 supports the DCC to embed the principles of sustainability across DCC work outlined in the 10 Year Plan.

LTP/Annual Plan / Financial Strategy /Infrastructure Strategy

The proposed rating method will be set out with the draft 2020-21 budget material during the community engagement period. Depending on the option approved by Council, an amendment to the 2021-31 10 year plan may be required.

Financial considerations

The proposed rating method will be set out with the draft 2020-21 budget material during the community engagement period.

Significance

There will be full engagement on the 2020-21 draft budget as part of the Annual Plan process, which will cover any issues of significance.

Engagement – external

The proposed rating method for 2020-21 is of interest to the community and there will be a full community engagement process.

Engagement - internal

Staff and managers from across the Council have been involved in the development of the draft budgets.

Risks: Legal / Health and Safety etc.

There were no risks identified.

Conflict of Interest

There are no known conflicts of interest.

Community Boards

Community Boards had an opportunity to present any issues for their community as part of the 2020-21 Annual Plan development. Staff are working with community boards to develop new Community Board Plans to inform the Annual Plan and next 10 year plan.

Council

11 February 2020

Short Term Visitor Accommodation

Department: Finance

EXECUTIVE SUMMARY

1 The Council currently has two active resolutions related to rating differentials:

i. One related to the rating of residential properties used for Short Term Visitor Accommodation (STVA) and;

ii. The other requesting a full review of all current rating differentials as part of the next 10 year plan.

2 This report recommends that Council considers dealing with both matters as part of a single review to be carried out as part of the development of the 2021-31 10 year plan. This will avoid unnecessary, and costly, administrative duplication and avoid adopting a piecemeal approach to changes to the current rating method.

RECOMMENDATIONS

That the Council:

a) Considers a new differential rating category for residential properties being used for short term visitor accommodation as part of a wider review of all general rate differentials during preparation of the 2021-31 10 year plan.

b) Notes that there will be no change to rating differentials for the 2020/21 financial year.

BACKGROUND

3 During the last triennium, Council considered options for introducing higher rates for residential properties that provide short term visitor accommodation (STVA).

4 The Council approved the following resolutions on 29 January 2019:

Moved (Mayor Dave Cull/Cr Mike Lord):

That the Council:

a) Supports the implementation of a new rating method for non-owner-occupied residential properties (or a separately used or inhabited part) being used for short term visitor accommodation to apply from 1 July 2020, and

b) Requests a full proposal be developed for inclusion in the 2020/21 Annual Plan, and as part of the development of the proposal, that officers investigate targeted rate options as an alternative approach to a differentiated general rate, and

c) Requests staff commence engagement with the community, in advance of full consultation with the 2020/21 Annual Plan, and

d) Notes that further work be done on the definitions to refine relevant definitions as part of this process.

Motion carried (CNL/2019/006)

5 A report addressing these resolutions was scheduled to be presented to Council for consideration on 11 February 2020. However during the Annual Plan Council meeting on 29 January 2020, the following resolution was approved:

Moved (Cr David Benson-Pope/Cr Jim O'Malley):

That the Council:

Requests that staff provide a background report, for consideration at the time of the next Long Term Plan, on Property Category Differentials.

Motion carried (CAPCC/2020/007)”

6 This report looks at how the Council could progress both of these resolutions, in time for the 2021-31 10 year plan.

General rates

7 General rates are collected as a rate in the dollar on the capital value (CV) of each property. The Council sets the general rate differentially for six property categories, residential, lifestyle, commercial, farmland, residential Heritage Bed and Breakfast establishments and the Stadium.

8 A differential, described as a factor, is the degree to which the rate (the cents in the dollar) on each category of property is higher or lower than residential property. For example, the rate paid by commercial properties for the current year is 2.45 times more than the rate paid by residential properties.

9 The last time the general rate differentials were changed was in the 2017/18 year. This was the last year in a series of changes which started in the 2009/10 year. The general rate differential for commercial and farmland was reduced and increased for commercial properties in Strath Taieri.

10 Importantly from a financial perspective the introduction of a new rating category or any change in the current differentials will not result in additional rates revenue for the Council. The total amount of rates would remain the same but would be spread differently over the ratepayer base.

11 The table below provides a summary of how the different types of short term visitor accommodation providers are currently rated as compared to residential properties having a factor of 1.00.

Type of short term visitor accommodation	General rate differential category	Factor
Hotels, motels, backpackers and camping grounds - traditional commercial accommodation	Commercial	2.45
Commercial B & B* – B & B’s with greater than four bedrooms.	Commercial	2.45
Heritage B & B* – B & B’s with greater than four bedrooms, meets ‘heritage’ criteria and the owner lives at the facility. The differential is set at a lower level to ease the rates burden on these operators.	Residential Heritage B & B	1.75
Residential STVA – with four bedrooms or less.	Residential	1.00

* B & B properties in this category are those the Council has knowledge of, or has been advised of.

DISCUSSION

12 The current rating method generally allows residential properties to be used for STVA while paying normal residential rates. Traditional commercial accommodation providers (hotels, motels, commercial B&B, etc) on the other hand are required to pay commercial general rates (2.45 times the residential rate).

13 Both traditional accommodation providers and residential STVA providers benefit from Council expenditure on marketing and economic development, such as event attraction and major events funding.

14 In most cases, using residential property for STVA will not place any greater requirements on water supply and drainage services than other, similar sized residential properties.

15 Residential properties providing STVA can generally be divided into two types:

i. Residential (residential with incidental STVA use) – the main use of the property is a residential home (ie: generally owner-occupied), with the homeowner supplementing their income by providing short term visitor accommodation. These include home-owners letting out their houses to short-term paying visitors for less than 28 nights per calendar year or by letting out a single room or a number of rooms within the residence.

ii. Residential STVA (residential with more significant STVA use) – a more significant use of the property is to provide short term visitor accommodation. The entire property, or separately used or inhabited part (SUIP) of a property, is used more frequently for short term visitor accommodation. These properties are more aligned with commercial accommodation providers and are typically non-owner occupied.

Residential STVA category

16 Staff have identified an option which could provide a new general rate differential category for STVA properties falling into the Residential STVA category described in paragraph 15 (ii) above. Properties in the new category would pay higher general rates than other residential properties.

17 All properties meeting the following criteria would be included in the Residential STVA category:

All residential (lifestyle or farmland) properties with four bedrooms or less where the entire property or an entire separately used or inhabited part (SUIP) of a property;

a) is available for short term visitor accommodation for more than 28 nights per calendar year; and

b) has a ‘daily tariff’ or an implied ‘daily tariff’.

Explanation of key terms in definition of Residential STVA

Residential, lifestyle or farmland properties

18 The properties will often be non-owner-occupied residential properties but also includes SUIPs included in the lifestyle and farmland categories.

Four bedrooms or less

19 Residential properties with greater than four bedrooms available for STVA are currently included within the commercial or heritage bed and breakfast (B & B) categories.

Entire property or SUIP

20 The definition includes only those properties where the entire property or SUIP is used for STVA. This helps to ensure that cases where some rooms in the property are used for STVA while the owner remains in residence are not captured, as this is considered a homestay arrangement.

21 In situations where the owner of the property uses part of the house for storage, for example the garage and/or a bedroom, while the rest of the property is used for visitor accommodation, the Council would consider this as meeting the definition of a Residential STVA.

Daily tariff

22 A ‘daily tariff’ or an implied ‘daily tariff’ is included within the definition to ensure that properties used for standard rental accommodation purposes are not captured by the higher rates charge.

Available for more than 28 nights

23 If the property is only available for 28 nights or less per calendar year, there would be no change in rates.

24 A differential boundary of 28 nights per calendar year allows for property owners to let out their property for up to four weeks, for example the family home while on holiday, a rental property in between tenancies or offering the family home at peak times such as a major event in the city. It also recognises the limited revenue generated and the fairness compared to other businesses run from the family home.

25 The Council could vary the 28 night threshold and incorporate an alternative number of nights into the options provided below.

Identification of STVA properties

26 During the last 12 months, staff have been identifying properties that potentially meet this definition. The identification process has involved searching websites, particularly online booking sites such as Airbnb, Bookabach and Holiday Houses. Often the physical address of the property is not named in the listing and will only be provided when the accommodation is booked.

27 Staff have so far compiled a list of 261 residential STVA properties or SUIPs that have had their address confirmed. There are around 100 properties that are unconfirmed and require further investigation.

28 This is an imperfect process and is time consuming.

29 However, the Council has received legal advice (Attachment A) that states only official information sources should be used when assessing the appropriate rating valuation category for a property (or part of a property). A change to a property’s status from Residential to Residential STVA, resulting in the payment of additional rates, would therefore require some form of official notification. In the absence of any official information source, declaration by the property owner would be seen as the best mechanism to trigger this change. The legal advice suggests confirmation by owners of these properties by way of a statutory declaration.

30 If the Council proceeds with the differential rating of Residential STVA, affected property owners would be contacted in advance of the new rating year and advised that their property appears to meet the above criteria and, if confirmed, will be rated accordingly. Only those properties confirmed by the owner as being used for STVA would then be rated as such.

31 Note : Auckland Council charge STVA rates based on self-declaration by the STVA providers.

32 Council will need to ensure that Land Information Memorandum (LIM) information reflects the STVA category and that the property is subject to higher general rates.

33 Consideration was given to the possibility of incentivising as a way of attracting self- declaration. In Queenstown for example, free advertising on accommodation and tourism websites is offered for properties that register. This is something that could be further investigated following initial implementation of any change in rating.

Rating and regulatory considerations

34 In 29 January 2019 Council requested a targeted rate option be considered for STVAs. Targeted rates are generally used to pay for specific services or projects and are generally set across all ratepayers or applied to a specific group of ratepayers. The use of a targeted rate for STVA would need to be applied wider than the Residential STVA providers being discussed in this report and would therefore not address the current issue.

35 If the Residential STVA property is a separately used or inhabited part (SUIP) of a larger property, the Council will need to be able to rate the STVA part differently. The establishment of these ‘divisions’ may not be possible in order to meet a timeframe of 1 July 2020.

36 Rating changes on a property generally can’t be applied retrospectively. For example, where a property included in the Residential STVA category is sold part way through a rating year and the buyer wishes to change the property’s use back to residential, this cannot be updated in the rating method until the start of the next rating year (ie: the new home owner will continue paying higher rates for the remainder of the rating year).

37 There are potential regulatory issues relating to resource consents and building consents. These issues are largely around the need to have consent in certain situations eg a resource consent. The issues vary from case to case.

38 A potential issue has recently been identified related to the Development Contributions Policy application to residential properties converting to STVA. The Development Contributions Policy will be reviewed as part of the 2021-31 10 year plan preparation allowing this issue to be addressed.

OPTIONS

39 The options presented below consider how residential properties being used for STVA may be rated in terms of the general rate and how this fits with the preparation of a background report on all property category differentials.

Option One – Review all general rate differentials in time for 2021-31 10 year plan – recommended option

40 Council has two active resolutions relating to rating differentials.

41 This option maintains the status quo for the 2020-21 rating year while the Council undertakes a full review of all general rate differentials as part of the development of the 2021-31 10 year plan. This review would incorporate the options for introduction of a new residential STVA category.

Advantages

· Consideration all property categories at the same time avoids a potentially piecemeal approach.

· Allows the Council time to consider all differentials following the impact of the latest revaluation.

· Allows time for regulatory issues to be considered and an incentivisation to be investigated.

· The Development Contributions Policy will be reviewed as part of the 2021-31 10 year plan preparation. This will ensure coordination between the 10 year plan and the underlying documents.

· The outcome of the Local Authority Funding and Financing report may be known including any potential changes related to the general rate differential.

Disadvantages

· Addressing the current perceived fairness in rates paid by traditional commercial accommodation providers is delayed for a year.

Option Two – Establish a new Residential STVA rating category from 1 July 2020

42 This option creates a new general rate differential category for STVA properties. Properties in the new category would pay higher general rates than residential properties. This change would be effective from 1 July 2020.

General Rate differential factor options

43 Three potential scenarios are provided below for the general rate differential factor that could be applied to the new category. These scenarios give differing levels of tolerance to strike a balance between enabling residential property owners to cost-effectively provide STVA and maintaining a fair market for all accommodation providers:

Scenario	Description	Factor
a	STVA category set at the same level as heritage B & B differential	1.75
b	STVA category set at approximately 25% residential and 75% commercial	2.10
c	STVA category set at the same level as commercial differential	2.45

Advantages

This option, regardless of which scenario is preferred:

· Would make rates fairer between Residential STVA properties and traditional accommodation providers, such as hotels and motels.

· Would not impact on properties where only one or two bedrooms in the house are available for STVA and the owner lives in the residence.

· Would not deter home owners from making their homes available for STVA at peak times, such as major events in the city for less than the designated number of nights a year.

Disadvantages

· Given a full review of the differentials will take place in time for the 2021-31 10 year plan, a new STVA category may be in place for only one year.

· To a large extent, the specific general rate differential factor that is chosen to apply to Residential STVA would be selected in isolation from the other rating categories.

· Additional staff resource required to identify, monitor and administer STVA providers including changes made between rating years.

· Likely to result in complaints and, as a result, dissatisfied ratepayers and additional staff resources to deal with these.

· There may be a risk that by rating these STVA properties differently implies an acceptance of other potential regulatory issues relating to planning or consents.

Option Three – Establish a new Residential STVA rating category from 1 July 2021

44 This option is identical to Option Two but introduced as part of the 2021-31 10 year plan.

Option Four – Maintain the current rating method

45 This option involves maintaining the status quo. Residential properties with greater than four bedrooms available for STVA would continue to be included within the commercial or heritage bed and breakfast (B & B) categories. Properties with four bedrooms or less would continue to be rated within the residential category.

Advantages

· The issues highlighted in this report which arise from a flawed rating system are avoided under this option.

· No administrative costs required to identify and monitor STVA properties.

Disadvantages

· Does not address the current perceived inequity in rates paid by traditional commercial accommodation providers.

NEXT STEPS

46 Depending on which option Council chooses, there will be a range of next steps.

47 A review of the general rate differentials will be undertaken in time for the 2021-31 10 year plan. If the Council approves Option One, this review would include consideration of a new STVA differential category.

48 If the Council approves Option Two, the change in rating method for 2020/21 will require a formal amendment to the 2018-28 10 year plan. The Council must use the special consultative procedure when making an amendment and this could occur concurrently with consultation/engagement on the 2020-21 Annual Plan.

49 Staff will continue to work through regulatory issues as they arise. A review of the Development Contributions Policy will be progressed as part of the 2021-31 10 year plan preparation.

50 If the Council introduces a new Residential STVA category from the 2021/22 year, the change would be included in the 2021/31 10 year plan and would, accordingly, avoid a special consultation.

Signatories

Author:	Gavin Logie - Financial Controller
Authoriser:	Dave Tombs - General Manager Finance and Commercial

Attachments

	Title	Page
⇩a	Legal Opinion	41

SUMMARY OF CONSIDERATIONS

Fit with purpose of Local Government

This decision enables democratic local decision making and action by, and on behalf of communities. This decision promotes the social, economic, environmental and cultural well-being of communities in the present and for the future.

Fit with strategic framework

	Contributes	Detracts	Not applicable
Social Wellbeing Strategy	☒	☐	☐
Economic Development Strategy	☒	☐	☐
Environment Strategy	☒	☐	☐
Arts and Culture Strategy	☒	☐	☐
3 Waters Strategy	☒	☐	☐
Spatial Plan	☒	☐	☐
Integrated Transport Strategy	☒	☐	☐
Parks and Recreation Strategy	☒	☐	☐
Other strategic projects/policies/plans	☒	☐	☐

Aspects of rating policy changes may touch on the strategies selected including the Revenue and Financing Policy.

Māori Impact Statement

There are no known impacts for tangata whenua.

Sustainability

There are no known impacts for sustainability.

LTP/Annual Plan / Financial Strategy /Infrastructure Strategy

Any decision to establish a new rating category prior to the 2021/22 year will require an amendment to the 2018-28 10 year plan and be consulted concurrently with the 2020/21 Annual Plan consultation.

Financial considerations

There are no financial implications at this stage. Different options do have different cost implications.

Significance

This decision is considered low in terms of the Council’s significant and engagement policy but any proposal to introduce a new rating category will be fully consulted on with the community.

Engagement – external

Communication has been held with representatives of the Motel Industry, Queenstown Council and Auckland Council.

Engagement - internal

Internal engagement has occurred with staff in the relevant departments.

Risks: Legal / Health and Safety etc.

Legal advice has been obtained that supports the validity of the rating options provided but does highlight a number of issues to consider.

Conflict of Interest

There are no known conflicts of interest.

Community Boards

This is likely to be of interest to Community Boards as there will be STVA properties in the Community Board areas. Community Boards will be involved in any consultation that is undertaken on STVAs.

Council

11 February 2020

Funding Options: Subsidised Bus Fares in Dunedin

Department: Finance

EXECUTIVE SUMMARY

1 This report provides options for the funding of subsidised bus fares in Dunedin for the 2020/21 financial year.

RECOMMENDATIONS

That the Council:

a) Considers the options to provide subsidised Dunedin bus fares that may be required in 2020/21 as unbudgeted.

b) Notes that once the required level of expenditure is ascertained, the cost can be included in the development of the 2021-31 10 year plan.

BACKGROUND

2 As part of the consultation for the annual plan 2019/20, residents were asked to provide feedback on the following: “Would you support the idea of using money from rates or parking charges to make city bus fares cheaper?”.

3 The Council received 79 feedback forms where respondents indicated whether or not they support offsetting bus fares in Dunedin.

Support for offsetting bus fares in Dunedin	Number of responses	Percentage
Supports offsetting bus fares in Dunedin	62	78%
Does not support offsetting bus fares in Dunedin	17	22%

4 Following this feedback, the final annual plan for 2019/20 noted “A progress report on the ORC Regional Public Transport Plan review, particularly as it relates to using DCC revenue to offset bus fares on the wider public transport network will be provided before the Annual Plan 2020/21”.

5 At the annual plan meeting held on the 29 January 2020 the overview report on the draft budget for 2020/21 presented by Chief Executive Dr S Bidrose noted the following narrative in relation to bus fares in Dunedin:

Collaborative work is underway between the DCC and Otago Regional Council (ORC) to investigate improvements to Dunedin’s public transport system, encouraging behaviour shift away from single occupancy vehicle usage and investigating changes to the fare structure. It is anticipated a subsidised fare arrangement, similar to the Queenstown Lakes District Council’s (QLDC) subsidy to ORC ($600k in the QLDC 2017/18 Annual Plan), has the potential to increase bus patronage and achieve similar outcomes. At this stage, this item is unfunded in the draft 2020/21 budget, pending further discussion. Options are being progressed to implement cheaper fares in the coming year.

6 The meeting discussed options for achieving the aim of providing cheaper bus fares in Dunedin, with the resulting resolution being passed:

“That the Council:

a) Allocate up to $600k to provide for cheaper public bus fares from July 1 2020;

b) Request a report in time for February 11th outlining options to resource this; and

c) Request a report in time for Annual Plan deliberations providing options for delivering a new fare structure.”

DISCUSSION

7 As noted above, staff have already commenced engagement with the ORC on how the outcome of cheaper fares could be achieved. These discussions are ongoing.

8 A similar initiative, in the Queenstown area, resulted in an overall increase in passenger numbers such that the local authority was not required to make any subsidy payment to ORC.

9 Depending on the level of patronage and the fare structure agreed for Dunedin, the outcome for Dunedin could be similar to that of Queenstown - the actual level of subsidy could fall below the $600k allocation.

10 There are a number of options that Council could consider to deliver the required funding for the 2020/21 financial year. These options are detailed below. Note that all options must be considered in light of the need to maintain a balanced budget.

OPTIONS

11 The options assume the scheme can be established in the required timeframes.

Option One – Treat any required subsidy that may be required as unbudgeted expenditure in the 2020/21 financial year

12 Any subsidy that may be required from the DCC can be treated as an unbudgeted spend in 2020/21.

Advantages

· This would allow the scheme to commence, without reducing other budgets or rating for a level of expenditure or that may or may not be incurred.

· Maintains a balance budget.

Disadvantages

· The DCC could incur an unbudgeted level of expenditure up to $600k.

Option Two – Reduce other budgets or increase Rates Income to fund the subsidy amount of $600k

13 Include the $600k subsidy in the 2020/21 operating budget and increase rates by the same figure. This would mean that the draft budget would have a 6.9% increase.

Advantages

· Any expenditure up to the anticipated level of $600k is funded in the 2020/21 financial year.

Disadvantages

· The level of additional income generated could exceed the actual level of subsidy required to be paid.

NEXT STEPS

14 Staff to continue working with the ORC to establish the mechanism for achieving the goal of lower bus fares in Dunedin effective from 1 July 2020.

15 Monitor the level of any subsidy required from the DCC, with the view of including a more accurate level of expenditure in the 2021/31 ten year plan.

Signatories

Author:	Gavin Logie - Financial Controller
Authoriser:	Dave Tombs - General Manager Finance and Commercial

Attachments

There are no attachments for this report.

SUMMARY OF CONSIDERATIONS

Fit with purpose of Local Government

This report enables democratic local decision making and action by, and on behalf of communities; and promotes the social, cultural, environmental and economic well-being of communities in the present and for the future.

Fit with strategic framework

	Contributes	Detracts	Not applicable
Social Wellbeing Strategy	☒	☐	☐
Economic Development Strategy	☒	☐	☐
Environment Strategy	☒	☐	☐
Arts and Culture Strategy	☐	☐	☒
3 Waters Strategy	☐	☐	☒
Spatial Plan	☒	☐	☐
Integrated Transport Strategy	☒	☐	☐
Parks and Recreation Strategy	☐	☐	☒
Other strategic projects/policies/plans	☐	☐	☐

Key contributions to the Council’s strategic priorities and plans include: the provision of travel choice, resilient network and connectivity of centres (Integrated Transport Strategy), connected people (Social Wellbeing Strategy) and resilient and carbon zero depending on outcome (Environment Strategy).

Māori Impact Statement

There are no known impacts for tangata whenua.

Sustainability

A reduction in carbon emissions may result if the subsidised bus fares results in a mode shift from private vehicle use to public transport.

LTP/Annual Plan / Financial Strategy /Infrastructure Strategy

This project has no current funding source and represents an increase in the level of service offered to the community.

Financial considerations

The cost estimate for subsidised bus fares is circa. $600k per annum and is currently unbudgeted,

Significance

This decision is considered of low significance in terms of the Council’s Significance and Engagement Policy.

Engagement – external

Community feedback was sought during the 2019/20 annual plan engagement. Some preliminary discussions have occurred with the Otago Regional Council.

Engagement - internal

A number of departments have been involved in the preparation of this report including Civic, Finance and Corporate Management.

Risks: Legal / Health and Safety etc.

There are no identified risks, unless the actual cost of any subsidised bus fare scheme exceeds the current anticipated level of subsidy.

Conflict of Interest

There are no known conflicts of interest.

Community Boards

There are no known implications for Community Boards, although the topic may be of interest to Community Boards.

Mayor	Mayor Aaron Hawkins
Deputy Mayor	Cr Christine Garey
Members	Cr Sophie Barker	Cr David Benson-Pope
	Cr Rachel Elder	Cr Doug Hall
	Cr Carmen Houlahan	Cr Marie Laufiso
	Cr Mike Lord	Cr Jim O'Malley
	Cr Jules Radich	Cr Chris Staynes
	Cr Lee Vandervis	Cr Steve Walker
	Cr Andrew Whiley

	Title	Page
⇩a	Elected Members' Register of Interest	7
⇩b	Executive Leadership Team Register of Interest	16