Possible property ‘value capture’ tax to fund infrastructure

Finance Minister Grant Robertson is thinking about a tax targeting people who will get an advantage from improved infrastructure to help fund projects like rail links.

Rather than ‘user pays’ this is ‘benefactor pays’ – but it could become contentious deciding who benefits and by how much and how much extra tax they should pay.

Would property owners who are adversely affected by new rail lines and roads get tax reductions? Property values may go up close to new railway stations, but values may go down if a property suddenly has trains whistling past them.

The very fact that property values are changed by infrastructure projects will already affect the level of rates they pay, which is already a local body tax on property.

Stuff: Finance Minister Grant Robertson considering property ‘value capture’ tax to fund rail

Speaking at the Auckland Chamber of Commerce/Massey University annual finance lunch at the Pullman Hotel in Auckland, Robertson said the Government was investigating “innovative” ways to bridge the funding gap to pay for the rail and roading infrastructure the country needs, especially in Auckland.

“Between the balance sheets of the Auckland Council and the Government, we still don’t have enough,” Robertson said.

“Minister Phil Twyford and I are actively looking at opportunities for how to do that.”

“If we are going to make big investments in things like [Auckland’s City] Rail Link, and a series of different rail links, people will benefit from that. How do we capture the value of that, and use that to fund the development?” Robertson said.

In March last year, the Productivity Commission gave an example of how that might work.

If the land value of a property benefiting from a new rail link increased in value from $100,000 to $250,000 over five years – a 150 per cent increase compared with a rise of 120 per cent in land values in the wider area – a tax could be levied on the $30,000 gain attributable to the infrastructure improvements.

The tax could be levied alongside of rates, the commission suggested.

This would amount to double taxing – increased property values mean higher rates, but this proposes slapping another tax on top of that.

Sounds very complicated, and it would be very contentious.

People who don’t use rail and don’t sell their properties will end up paying more for nothing. This is likely to particularly affect retired property owners who don’t commute and who are unlikely to move except to the cemetery – perhaps old people living close to cemeteries should be taxed higher.

More Winston bottom lines

Yesterday Winston Peters implied that a Northland rail link to Marsden Point was a bottom line, or at least was an election promise.

Newshub:  Northland rail ‘going to happen’, Winston Peters promises

Winston Peters says the Northport rail project at Marsden Point is his bottom line for any coalition deal.

NZ First has been strongly advocating the connection, which may cost up to $1 billion.

Mr Peters says it’s the first thing both National and Labour will have to concede if he’s the kingmaker.

“I can say for the people of Northland and Whangerei this is going to happen,” he told The Nation on Saturday morning.

“We’ve got the corridor, it’s been designated – the only thing it lacks is the commitment from central Government, and that’s one of the first things we’re going to be doing straight after the election.”

Today he had another promise/bottom line: Winston Peters delivers bottom-line binding referendum on abolishing Maori seats

Winston Peters promised “explosive policy” at his party’s convention on Sunday but it was a tried and true pledge of referenda on abolishing the Maori seats and reducing the number of MPs that he delivered.

Speaking to media following his speech, Peters said the size of Parliament needs to reduce because there was a referendum in 1999 where 80 per cent of the country wanted to reduce the overall number of MPs but it wasn’t binding.

“The public should be asked again now whether they want the 120 or 100.”

A binding referendum on the two matters would be held on the same day in the middle of the next election term.

Peters said both issues were “explosive” but in particular the Maori seats because “Maori progress economically and socially has been massively sidetracked, detoured and road blocked by the Waitangi industry”.

“How could that possibly happen when we’ve got all these new members of Parliament coming from the Maori world?”

Peters said he wouldn’t use “silly phrases” like “bottom lines” but he made it clear the referendum wasn’t negotiable.

“My strategy is to tell everybody out there that you won’t be talking to NZ First unless you want a referendum on both those issues at the mid-term mark of this election.”

So it’s not a ‘bottom line’, it’s non-negotiable.

Peters is clocking up a few non negotiable policies. Unless he doesn’t have to negotiate:

Peters’ interview with media was interrupted several times by members of his youth wing yelling “Make New Zealand great again” but when asked if he thought his supporters using a Donald Trump slogan was helpful, Peters said he had never heard Trump say that.

He talked about a “great political upset coming” and signed off with a promise – “we will be, most definitely, the Government.”

That’s fairly ambitious to say the least, unless it’s just hot air.

I wonder if he would agree to a referendum of MPs in the next coalition on whether a referendum on Maori seats should happen?

 

Labour’s promise to reopen Gisborne-Napier rail line

Labour’s Phil Twyford has issued a statement on the Gisborne-Napier rail line that has been cut off by a major slip.

Labour pledges to re-open rail line

Labour in government will re-open the Gisborne-Napier rail line due to be closed under National, the party’s Transport spokesperson Phil Twyford says.

A clear promise to reopen the line.

“KiwiRail’s business case for the closure is utterly inadequate and falls way short of a comprehensive cost-benefit analysis, something a Labour government would carry out and which I am confident would justify the line’s re-opening,” Phil Twyford said.

A promise based on inadequate information and prior to a comprehensive cost-benefit analysis.  Labour have pledged to reopen the line regardless of what costs and benefits are determined.

“The line should be reinstated now for $4 million. It will never be cheaper. The longer you leave it, the more expensive it will be to re-open it.

It won’t be reinstated now. It will take time for Labour to do a comprehensive cost-benefit analysis, so even if they get back into government after the 2014 election by the time they reopen it the cost will be an unknown amount higher.

And if Labour do lead the next Government they will be in a coalition witgh Greens, plus possibly NZ First and the Maori Party. So they would need to get possibly several parties agree to reopen the line.

So this isn’t a pledge that can be taken as a genuine promise.

Mr Twyford said the BERL report noted annual freight volumes only needed to reach 180-200,000 tonnes per year for the line to be profitable. Current volumes of 44,000 tonnes showed that growth from local horticulture and forestry would bring the target within reach and this would justify future re-opening.

Current volumes are about a quarter what the BERL report says would be required to make the line profitable. That means volumes would have to increase FOUR TIMES for it to be profitable.

Tywford either thinks volumes can be quadrupled (he doesn’t say how) or he doesn’t think it is necessary for the line to be profitable – that means it would be a substantially taxpayer subsidised rail link, on top of the cost of reopening the line.

I’ll ask Phil Twyford to clarify.