Tuesday, May 23, 2006

ARC's 10 year plan a disgrace

The Auckland Regional Council's spending plans for the next 10 years are
excessive, unexplained and unjustified, the Employers & Manufacturers Association (Northern) told the ARC hearings today.

EMA's chief executive Alasdair Thompson said the ARC business differential arbitrarily loads 60 per cent higher charges onto business rates to subsidise other ratepayers.

"The ARC has failed to discharge its statutory responsibilities in respect of its business differential rate," Mr Thompson said.

"The business differential imposes a 60 per cent loading on business which means businesses pay about six times more than other ratepayers instead of about 3.5 times more under the Capital Value rating system.

"Council provides no evidence of this loading being based, or related in any way to the distribution of benefits provided to ratepayers which it is required to do by law.

"Associate Professor Basil Sharpe's report to the Council last year did not support the business differential, neither did the Dwyer report commissioned by an Auckland business consortium to review the Sharpe report. Dwyer reviewed all Council staff advice on the matter and found nothing that supported a differential. He concluded no assessment of the type required had been undertaken by Council.

"The Council's 60 per cent loading on business rates therefore remains unsubstantiated, and in our view cannot be substantiated.

"Instead of responding to the Sharpe and Dwyer reports, the Council took steps to close off discussion on the subject by suggesting it would be inappropriate to discuss rating matters outside the annual plan process.

"In its Long Term Council Community Plan (LTCCP) the ARC has failed in its obligations to:
* adequately present the benefits received by business from Council, and
* to consult in good faith with business over its concerns for the last three years.

"Auckland business calls on the council to revoke the business differential and meet its legal obligations.

"However to avoid significant rate changes in any single year, business would accept a steady reduction in the business differential to zero over five to six years.

"Other matters of concern to business about the ARC 10 year Plan include:

* The average proposed annual rates rise of 6.5% (77% over the next 10 years).

* Nominal spending is forecast to rise 13% next financial year and by a further 9% in 2008/09, with increases thereafter almost certain to meet spending proposed by ARTA (Auckland Regional Transport Authority).

* Public transport already accounting for 60% of spending is forecast to rise by 34% between 2006/07 and 2015/16. Passenger transport is presently subsidized by an average $6.50 for every trip made.

* The $700m spend forecast in ARTA's draft passenger transport plan has not been included in the ARC's LTCCP. Yet to fund it, an average rates rise of 17% p.a. would be required. This extra unfunded transport public expenditure would increase public transport spending by 42% p.a. and total spending by 25% p.a.!

* The spending and funding in the LTCCP are not integrated with the plans of ARTA or ARH (Auckland Regional Holdings). Therefore it is not possible to form a view of the sustainability of council forecasts.

* ARTA's "blue skies" draft passenger transport plan adopts the highest patronage scenario in the strategy but we understand central government and Treasury have legitimate, serious concerns about the economic wisdom of its proposals.

* Mass passenger transport projects are, like the poorly conceived 'Think Big' projects, based on optimistic assumptions that will absorb resources in uneconomic ways and are environmentally unsustainable.

* There is no information in the LTCCP to indicate its unfunded spending will enhance the overall welfare of the community.

"In conclusion, the ARC's spending programme is excessive. It requires a rigorous approach to operations and capital spending of the sort the present ARC Chairman Mike Lee used to advocate when he was a councillor.

"The grounds for substantially raising the subsidies for most passenger transport owing to the early and uneconomic investment in rail electrification are weak and represent poor value.

"The grounds for the business differential have not been established and should be phased out over five to six years."

ENDS

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