Mayors divided on regional fuel tax

Dave Cull, Dunedin mayor and also president of Local Government New Zealand, has suggested that a regional fuel tax ”might” be something that could be used outside Auckland, both other Otago mayors have different ideas on raising more money.

ODT: Regional fuel tax might work: Cull

Dunedin Mayor Dave Cull says a fuel tax such as that proposed for Auckland may be something that could raise money for infrastructure in Dunedin, but mayors in the rest of the region have not supported the idea.

Mr Cull pointed to the Port Chalmers cycle/walkway as one project a regional fuel tax could help pay for.

He said such a tax was appropriate for funding transportation infrastructure, but other mechanisms would be more appropriate for other needs.

”Across the country there are instances where there are transportation infrastructure needs, and there’s even money within the NZ Transport Agency available, but there’s not sufficient resource in the local body to match the funding, so nothing happens.”

The cycle/walkway to Port Chalmers was an example where a lack of resources was the problem.

”That would be a candidate for that sort of funding.”

”It’s about all road users contributing to make the whole system safer and more efficient.”

It seems to be more about trying to find ways of funding projects without having to keep raising rates so much.

The amount of money spent on cycleways and the disruption to traffic is already a contentious issue in Dunedin. Hundreds of car parks in or near the CBD have been removed or are planned to be removed to make way for cycle lanes on streets, including on both main streets running right through the city.

There is low usage of the cycle lanes. I was talking to someone yesterday who was parked for half an hour on state highway one during the busiest traffic time of day, and they saw three cyclists. I daily drive on streets where all car parks have been converted to cycle lanes that are only occasionally used by cyclists, most days I see none.

I think that fuel is already quite a bit more expensive down here. Slapping a tax on it to fund pet council projects would likely be very unpopular.

Other mayors in the area want more money other than from rate hikes but not from a fuel tax.

Queenstown Lakes Mayor Jim Boult…

…said the fuel tax might work for Auckland but not for Queenstown, which had 5million visitor nights and just 16,000 ratepayers.

”Large numbers of people fly in here on aeroplanes, arriving on tour coaches, so their ability to contribute to our economy is limited through a petrol tax.”

Instead, he wanted a visitor levy, something he had said before ”constantly”.

Central Otago Mayor Tim Cadogan…

…said the area’s fuel was already more expensive than Auckland’s, so he did not support a fuel tax.

Paying for expensive infrastructure was a problem.

The planned Cromwell wastewater treatment plant had a budget of $10 million and the Lake Dunstan water supply project would cost up to $17 million.

”We’ve got 20,000 people living here; that’s pretty tough.”

Using a fuel tax to pay fore waste water treatment and water supply would be ridiculous. Cromwell is increasingly popular for tourists, and also operates as a satellite town for Queenstown and Wanaka. It is also the centre of a thriving wine region.

Clutha Mayor Bryan Cadogan…

…said local government ”needs something”, but he did not support a fuel tax.

The issue Clutha had was paying for infrastructure related to its tourism industry, which was ”not as advanced as most”.

The area had a declining and ageing population and the council could not keep going back to them for more money.

”It just seems so simple to put a tax on for tourists when they come in. We need it, and we need it now.”

Clutha District includes the Catlins area that is increasingly popular for tourists (for good reason, it’s a great area to visit).

However all these areas have different situations and needs.

Fuel is already taxed heavily in New Zealand:

  • 59.524 cents – National Land Transport Fund
  • 6 cents – ACC Motor Vehicle Account
  • 0.66 cents – Local Authorities Fuel Tax
  • 0.3 cents – Petroleum or Engine Fuels Monitoring Levy
  • 9.9726 cents GST on the above taxes

We pay a total of 26 cents GST on $2 of petrol (diesel is taxed differently).

Just under a half of the cost of fuel is tax already.

From the AA:

It is now government policy for all of the petrol excise tax motorists pay to be directed to the National Land Transport Fund for investment back into New Zealand’s road and transport system. The AA lobbied hard on behalf of motorists for many years to have all the taxes devoted to road building and maintenance, road safety education and enforcement, and subsidies for public transport.

Previously, about 19 cents per litre of the tax motorists paid on petrol was diverted by the government to non-road and transport related projects.

For far too long there has been significant under-investment in the nation’s road and transport network, and tax diversion has been unfair and at the expense of motorists.

Motorists must not be selectively taxed or treated as an easy source of tax revenue to pay for projects that would be more fairly funded by other sources such as rates or general taxation.

We don’t support regional petrol levies that unfairly target motorists to subsidise the transport decisions of others. The future funding of public transport must not be another tax on motorists added to current taxes and charges, but has to be independently justified in terms of defined benefits to motorists.

Back to Cull:

On the Government’s commitment to reviewing local government costs and revenue, Mr Cull said LGNZ had been saying the revenue stream from rating property was not sustainable.

Perhaps it is extravagant spending wishes of councils that is unsustainable.

One could cynically suggest that mayors and councillors want to divert attention from them raising rates far more than inflation.

Our fuel is already taxed heavily. Perhaps mayors need to look more at user pays – but that’s never likely to happen for cyclists.

There’s a good case for some cycleways. A recently partly built harbour side cycleway here in Dunedin is popular and well used – mostly recreationally. One problem is the escalating cost of extending this all the way to Port Chalmers – estimates have over doubled.

Were initial estimates hopeless, or do rules and regulations and ideal requirements blow out the costs? There are suggestions that cycleway construction is lucrative because councils pay whatever it takes. The Dunedin Council wasted half a million dollars on a poorly designed cycleway that had to be redesigned and is still hardly used.

Getting sensible mayors, councillors and planners may be more important than finding ways to hide how much we are increasingly taxed and rated.

Talking of rates – they are about $2000 a year for an average house in Dunedin – how does that compare to elsewhere?

Central Otago mayor to Labour on water tax

Regions that rely on water for irrigation were always going to be concerned about any proposals to tax water.

Central Otago mayor Tim Cadogan has posted on Facebook about his opposition to any water taxes, and has included an open letter to Labour leader Jacinda Ardern.

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You will no doubt be aware that the Labour Party has raised the idea of a tax on irrigation and have put up a 2c/1000 litre tax rate.

I believe that this is grossly unfair to Central Otago; New Zealand’s driest district. Figures supplied to me have put the cost if introduced at that rate to our District’s economy at $6,000,000 per year. This could put marginal enterprises over the edge and make some of our top-end products (pinot noir springs to mind) uncompetitive.

I have written to Labour Leader Jacinda Ardern today to express these concerns. The text of the letter is below.

16 August 2017

Jacinda Ardern
Leader of the Opposition
Leader, Labour Party New Zealand
Parliament Buildings

Dear Ms Ardern


I write to you as the Mayor of the driest District in New Zealand, which is also one of the primary revenue earners for the country from the production of stonefruit, pipfruit, wine, meat and fine wool.

Central Otago is also one of the most pristine Districts in the country and it is my full intention as Mayor to support measures to keep it that way.

As we are the driest District; much of the export earnings created by our producers rely on irrigation and many in my rural community have met the announcement by the Labour Party of the proposed tax on water used for irrigation with fear and dismay. A calculation of the effect of the proffered 2c/1000 litres on Central Otago’s economy makes it easy to understand why.
Figures supplied to me by the Otago Water Rights User Group (OWRUG) show that there is approximately 40 000 hectares irrigated at present in the Central Otago District. Proposed expansion of irrigation could add 10,000 to 15,000 further hectares within the next 10 years. Irrigation is essential in this area not just for the obvious green growth that water provides but for frost fighting in the horticulture and viticulture sectors as well.

In an average season in Central Otago, OWRUG estimates that an average Central Otago irrigated property would use 750 mm of irrigation water a season per hectare. At $0.02/m3 (or 1000 Litres) your proposed tax cost would cost the producers in this District $6,000,000 per year over the 40,000 hectares currently in production. The fruit growing industries (including grapes for wine) will generally use well in excess of that amount as they rely on irrigation to protect the year’s crop from frost.
By way of example at a smaller level, I have been told by a local farmer that his family sheep and beef farm of 350 hectares would be facing an extra $52,500 in tax per year.

Irrigation water presently is far from cheap. Pumped piped pressure water currently costs about $800-1000/ha annually which comprises power, administration, maintenance and debt. The cheaper option of gravity water race where available currently costs about $100-300/ha annually.
New schemes such as the proposed lifting of the Falls Dam on the Manuherikia River is estimated to cost about $250/ha annually with pumping done on farm likely to be an extra $150/ha power cost, making for approximately $400/ha in costs. The expansion of irrigation in Central Otago that is currently in train, which will add significantly to my District and New Zealand’s earnings through stone and pip fruit exports amongst other industries, will become marginal to the point of unviable if your tax is introduced as proposed.

I accept that New Zealand’s waterways have been degraded through the impact of intensified land use and that, as a Nation, we must address that issue. I also accept that there is no such thing as a tax that will seem fair to all those being taxed.

However; your proposal is, in my view, grossly unfair on Central Otago for the following reasons:

• The proposal is a reverse tax on rainfall. Central Otago producers must store water in winter to cover the shortfall in summer. Wetter areas do not have to do this at all, or to the same extent. The amount of tax that will be paid by the producers in my District will therefore be determined not by usage of water through irrigation, but by the lack of rainfall here.

• Central Otago is not an area with significantly degraded waterways which can be taken as another sign that irrigation on its own does not have major negative environmental impacts. I have attached a map produced by the Otago Regional Council, which shows that only two of the 20 waterways described as having “poor” water quality are in Central Otago, and these are very small catchments. The effect of the tax as proposed by your party will be to tax this District disproportionately heavily and then apply those funds to the Otago Regional Council to repair waterways throughout the whole District. This is blatantly unfair.

• Your proposed tax also makes an incorrect assumption that the volume of water used matches the impact of water use. The environmental impact of taking large amounts of water for irrigation is arguably less than the environmental impact of taking lesser amounts of water for other purposes. By way of example; a very large amount of water applied to frost fighting in this District is essentially just delayed rain and has no detrimental impact on the environment whereas a comparatively small amount used in a dairy wash-down could (if not have a vastly greater impact.

At a Local Government New Zealand Rural and Provincial meeting last year, Finance Minister Stephen Joyce stated that he attributed New Zealand’s ability to ride the effect of the slump in dairy prices successfully as being due to growth in horticulture, viticulture and tourism. Central Otago excels on the world stage in horticulture and viticulture and will provide even more to the New Zealand economy if planned irrigation expansion goes ahead. Should your tax proposal become law; I am told much of this expansion will not get off the ground.

In addition; I am advised that the extra cost the tax would impose may lead current non-dairy operations to convert to dairy in this District to remain viable. If (as many claim) the dairy industry is a significant contributor to the issues facing our waterways, it would be a dreadful irony if the tax designed to improve waterways causes an increase in the industry many blame for much of the problem.

No matter what the result of September 23; I offer an invite to you to come to Central Otago and see for yourself the balance we are striving to achieve between the needs of the environment and the needs of the families who work the land to make a living.

Yours sincerely

Tim Cadogan
Central Otago District Council