Auckland Mayor Wayne Brown rules out rates rise to fund transport projects' shortfall

Auckland's mayor says he will not put the city's rates up just because the government has removed a tax that funds transport projects.

Prime Minister Christopher Luxon and Minister of Transport Simeon Brown confirmed on Thursday that the government would end the city's tax of 11.5 cents per litre of fuel on 30 June.

Mayor Wayne Brown told Morning Report Auckland city's council would look at cutting projects or finding other ways of paying for the projects.

"I'm not about to put rates up just because they've removed the tax," Brown said.

"They'll have to accept the consequences of it themselves so that when the Lake Road doesn't go ahead they'll know it was cancelled by them; I'm not going to replace it just by shoving rates up."

Brown earlier said scrapping the tax would leave a shortfall in the city's transport funding of $1.2 billion over the next four years.

Roughly 30 projects are at risk of being cancelled.

He said local governments in New Zealand received less funding than in "most countries" and said some projects would have to be cut as a result of the fuel tax being scrapped.

"We will look at what alternative methods of finance ... that do come out of this."

Brown accepted National had campaigned on scrapping the tax, but said there were consequences to doing so which had to be dealt with.

But he said the public still expected some of the promised projects to happen.

"We can't have the government coming and saying there's a need for more infrastructure and then just turning off the money flow."

But he said he could work with the government.

"I get on pretty well with the prime minister and I'll just have to work with individual ministers as we come around."

Auckland councillor Richard Hills earlier told Morning Report he believed rates would have to rise by about 7 percent to continue transport projects funded by the tax.

The money generated by the tax had gone towards "significant and important projects across the whole city", that were planned to help fight congestion, Hills said.

"Locked-in" projects such as bus lanes, roading upgrades, cycleways, safety projects and bus stations would still need to be funded somehow, he said.

"This money does need to come from somewhere ... There is an issue that we have limited ways as a council to raise money and this kind of removes that pretty quickly without anything to replace it."

Other projects, however, would be on the chopping block with the scrapping of the tax.

"Glenvar Road, Lake Road, Lincoln Road - big corridor projects that have been promised for a long time, upgrades down in Drury and growth projects, so in areas where there's new housing - roading and intersections there. There's a significant list of projects that this tax helps cover ... so we are stuck and so that's why you see the mayor is quite exercised about this," Hills said.

The removal of the tax had left the council with an "almost $2 billion hole" just two months before it had to pass its 10-year plan, he said.

"Under the Super City legislation that was set up, we're sort of given the powers and the responsibilities of state governments in Australia, but we still have the funding tools of small district councils, so we're expected to fund 50 percent of all mayor and all small renewals, transport projects from about a 3 percent revenue base, compared to the government. So it already quite a difficult situation."

Hills said if the government had worked with the council on other funding tools ahead of scrapping the tax, the transition may have been easier.

"The fuel tax was one option we had ... If the government had worked with us on other funding tools that could replace this, and it was a smooth situation ... but now we've got the situation where we're either going to lose those projects or have to increase rates quite considerably."

Transport funding hole will need to be filled - AA

The Automobile Association also said that while most Auckland motorists would be pleased the government was scrapping the regional fuel tax, the issue was how it would be replaced.

Its policy director, Martin Glynn, told Morning Report funding of transport projects was a challenge for all of Aotearoa's big cities, but particularly Auckland.

"It's certainly a challenge for everybody to meet the cost of living at this time of year but, as the mayor said, it has led to a big funding hole so the question really, going forward, is how that's going to be filled."

He said rates had already risen a lot in recent years and there was limited scope to increase them further.

"It does call into question what local government can use to meet these very big transport funding needs."

Auckland was a big part of the economy and it was underperforming, he said.

"It is the only region that's has a regional fuel tax and so there is a bit of a case there but there's demands across the country, particularly with maintenance, we've all seen the problems over the past few years; it's a tricky one for the government and Auckland to navigate."

The tax had been a "mixed bag" in terms of what it had been spent on, he said and the government had indicated that it had a different set of priorities for Auckland.

"I see it already reached agreement with the mayor that the funding for the extra trains needed when the City Rail Link comes online is going to be needed, and they've agreed to keep going with the Eastern Busway but they really do need to get together now and set down and thrash out their priorities and agree to some way to fund it."

Decision to scrap fuel tax 'hurts all Aucklanders' - Transport commentator

Transport commentator Matt Lowrie, the editor of Greater Auckland, also told Morning Report he believed Auckland's rates would need to rise to continue funding transport projects once the tax was scrapped.

"I think the best option is the council need to look at how they can raise council rates to help cover that lost revenue because, without it it's not just the fuel tax that we lose as a result of the decision, it's also all the co-funding that the council would normally get like they do get for any other project."

He said the plan to scrap the regional fuel tax was ideologically motivated and Aucklanders would suffer.

"It actually hurts all Aucklanders to do this ... many of these projects are ones that Aucklanders have asked for and have voted for many times and they're projects that will help Aucklanders get out of congestion, and reduce emissions and make it easier to get around."

Congestion charging could help reduce traffic flows, he said, but implementing them would likely be some time away.

"More Aucklanders are hurt by the fact that there's no other option but to drive and because everyone is having to do it, everyone gets caught and the cost is their time."

New transport policy set to be released

Transport Minister Simeon Brown said a new Government Policy Statement on transport would be released "shortly", and would tackle the matter of other revenue sources such as congestion charging and other local roading improvements.

The minister said the government would consider law changes to bring in other tools such as time-of-use charging, value capture, tolling, and public-private partnerships.

The tax was introduced by the Labour government in 2018, to be paid by fuel distributors for fuel stations and commercial users in the Auckland region, with the aim of funding transport projects that otherwise would take longer or not take place.

The funding is collected by Waka Kotahi, the Transport Agency, then is sent on to Auckland Council minus a service cost.

National had argued the funds from the tax were largely not being used, with more than $327 million of the $700m taken remaining unused by May last year.

A statement from the government on Wednesday clarified about $780m had been collected through the regional fuel tax as of September last year, with about $341m - the equivalent of two years of revenue - remaining unspent.

Luxon said they had discussed the matter with the mayor and signalled the $341m remaining from the tax would be ringfenced for spending on the Eastern Busway, the CRL electric trains, and road corridor improvements.

The tax applies to petrol, diesel, a biofuel variants and had been due to expire on 30 June 2028.

Some uses of fuel - for commercial, charity and government organisations using machinery and search and rescue vehicles, or international vessels including superyachts, for example - were eligible for rebates.

The government's statement also confirmed its legislation would fully remove the framework for such fuel taxes, meaning they could not be brought in for other regions.