Background to the GWRC Transport Rate
Providing public transport (PT) services is one of the most important services provided by the Greater Wellington Regional Council (GWRC). The council funds its PT services from Targeted Rate called the “Transport Rate“that provides about half the PT subsidies with the balance provided by matching funding from the New Zealand Transport Agency (NZTA). The 2018/19 Transport Rate will collect $67M which constitutes over half the total regional council’s rates income.
Since the early 2000’s the GWRC has used what I will call a “Subsidy Cost Model” to allocate Transport Rates to ratepayer groups. This model is based on the principle of a 50/50 Origin-Destination subsidy cost split between residential ratepayers (Origin) and business ratepayers (Destination). Because the Wellington CBD is such a major destination for commuters, the CBD business ratepayers fund over 25% of all the regional Transport Rates.
GWRC is changing the Transport Rate Allocation Model
One of the “Significant Decisions” of the Greater Wellington Regional Council (GWRC) 2018/19 Long Term Plan is to change the way the Transport Rate is allocated to the regions ratepayers to what I will call a “Ratepayer Benefits Model“. The “Consultation Document for the Greater Wellington Regional Council Long Term Plan 2018-2028” only spends a few short paragraphs on page 24 describing its proposal for this major change in how Transport Rates are allocated to the region’s ratepayers as following (bold added for empahsis):
What’s proposed for public transport?
Greater Wellington operates the Metlink network (buses, ferries and trains) and is making region-wide improvements to the public transport system. We’re proposing to spread public transport rates more evenly across the region. Everyone will pay the same basic public transport rate, then a weighting – called a rating differential – will be used to reflect the benefits each group of ratepayers gets from the public transport network.
1.0 Residential, excluding Wairarapa
0.5 Wairarapa residential
8.0 Wellington CBD businesses
1.5 Business, excluding Wairarapa
1.0 Wairarapa businesses
Under the proposed policy, most residential ratepayers would pay the same rate for public transport. So the owners of a residential property in Wellington city would contribute the same amount toward public transport that owners of a residential property of the same value in Upper Hutt or Porirua. As the public transport network is less comprehensive in the Wairarapa, residential ratepayers in this area will pay a lower rate.
The proposed changes to public transport will mean residents in the Hutt Valley, South Wairarapa and Porirua pay a bit less toward public transport than they do now, while residents in Wellington city, Kāpiti and Masterton pay a bit more toward public transport. There is very little change for residents of Carterton.
The GWRC “Whatmatters” public consultation Web site description is just a copy of the above but there is a little more detail in the “Revenue and Financing Policy Statement of Proposal” (i.e. buried in the boring detailed document) including that the proposal is to implement this change over three years:
Taking account of the overall impact of the proposed changes, Greater Wellington proposes to adjust the allocation of rates over the first three years, as a transition mechanism. This adjustment will operate from 1 July 2018, with the new system fully implemented from 1 July 2021.
There are a few weird things about this major change such as:
- There is only one Transport Rates allocation option being consulted on within the GWRC Long Term Plan. All the offered the rating options outlined in the Long Term Plan result in the same Transport Rates Ratepayer Benefits Model being adopted.
- There is no option to keep the current Subsidy Cost Model allocation approach.
- There is no baseline information on what the 2018/19 Transport Rates would be if the the current Transport Rates allocation approach was retained.
- There is only one comparison of the Transport Rate changes from 2017/18 to 2018/19 and this information is only in a chart for residential ratepayers.
- All the comparisons with actual figures, even the specific GWRC consultation document “Understanding the proposed rates – Supporting information” only showed detailed changes for Flood Protection and Transport Rates together so it is impossible for ratepayers to understand the funding changes in either the Flood Protection Rates or the Transport Rates.
- There is no baseline information on what the 2018/19 Transport Rates would be under the current Subsidy Cost Model.
- There is no information on how the GWRC determined the Ratepayer Benefits Model “Rate Differentials” for different ratepayer categories.
- Most of the detailed information is about the changes for 2018/19 when only one third of the new model rating changes have been applied and there is little about the full final impact of this change in Transport Rates.
In fact the GWRC is not really consulting on changing the Transport Rate to a Ratepayer Benefit Model. The council is just going through the mandated process of consulting about this “Significant Decision” to change the Transport Rates allocation approach as there are literally no choices in this “consultation” other than to choose the new Ratepayer Benefits Model … there is not even any option or information on keeping the current Subsidy Cost Model. So the decision to change the Transport Rates is effectively already made and the public consultation is a farce.
The Transport Rate Allocation Spreadsheet was obtained from the GWRC
The 2018/19 Transport Rates allocation spreadsheet used to estimate the new Transport Rates allocation approach was obtained from the GWRC by information request. It should be noted thatg this information was requested in January, promised to be provided in mid-March only received in April after a complaint to the Office of the Ombudsman. A copy of this spreadsheet that the GWRC used to allocate the 2018/19 Rates under the Long Term Plan, including the Transport Rates, can be downloaded HERE.
The information outlined in the rest of this document is based on the GWRC rates allocation spreadsheet and other Transport information requested from the GWRC.
Transport Rate Changes from 2017/18 Subsidy Cost Model to 2018/19 Ratepayer Benefits Model
The following table provide a detailed comparison between the 2017/18 Transport Rates with the 2018/19 Transport Rates (which is the 1st year of the transition to the new Ratepayer Benefits Model):
Note: ECV = Equalised Capital Value – The GWRC uses equalised capital value (ECV) to adjust for differences in the timing of when properties in different councils are revalued. The equalised figures, take account of market and other movements in property values within the region over the previous year.
Anyone can calculate their estimated Transport Rates by identifying which Ratepayer Category using the per $100k ECV. For example, if you are a Wellington Residential Ratepayer and your house costs $400,000, then you can calculate your Transport Rate by multiplying $35.86 by 4 = $143.44.
Transport Rate 2017/18 Subsidy Cost Model vs 2018/19 Subsidy Cost Model
However, there are two changes in transport Rates that are happening in the above estimations:
- the 2017/18 Transport Rate has increased by 4% in 2018/19 to $67M and
- the rates allocation model has changed from the Subsidy Cost Model to the Transitional Ratepayer Benefits Model.
To understand each of these changes, we need to look at the changes separately.
The following tables provide a detailed comparison between the 2017/18 Transport Rates with the 2018/19 Transport Rates both under the currently used Subsidy Cost Model. In other words the following compares the Transport Rate allocation is there was no change in the way these rates were allocated and this highlights the rates allocation due to the cost and revenue changes in the Transport Rates between these years:
As expected, most ratepayers received a moderate rates increase.
Transport Rate 2018/19 Subsidy Cost Model vs 2018/19 Ratepayer Benefits Model
The following tables provide a detailed comparison between the 2018/19 Transport Rates under the currently used Subsidy Cost Model with the 2018/19 Transport Rates under the 1st year of the transition to the new Ratepayer Benefits Model. In other words the following compares the Transport Rate allocation is there was no change in the way these rates were allocated with the GWRC 2018/19 transitional Ratepayer Benefits Model and highlights the changes due to the changes in the different rate allocation approach:
The above chart outlined the 2018/19 rate allocation changes due to the change from a Subsidy Cost Model to a Ratepayer Benefits Model. It confirms that the major decreases in rates for the Hutt Valley and Porirua, as well as the increases in Wellington City and Kapiti, are due to the change in the rating model rather than the 4% increase in the Transport Rates costs.
Transport Rate 2018/19 Subsidy Cost Model vs Final Ratepayer Benefits Model
The above does not really show the impact of the change in the Transport Rates allocation model because it only outlined the new first year of the three year transition to the model. To do this we need to show the rates between the 2018/19 Transport Rates under both old and new models as if the new model was undertaken immediately.
The following tables provide a detailed comparison between the 2018/19 Transport Rates under the currently used Subsidy Cost Model with the 2018/19 Transport Rates under Ratepayer Benefits Model if it was fully implemented in 2018/19. In other words the following table compares the Transport Rate allocation if there was no change in the way these rates were allocated with the fully implemented new Ratepayer Benefits Model. This table highlights the long-term rates impact from the change in the GWRC Transport Rates allocation approach (with groups that will get major decreases in rates highlighted in grey and groups getting major increases in rates highlighted in yellow):
The GWRC decision to change the model for rates allocation Transport Rates to the region’s ratepayers has a major impact on many groups. In particular, Wellington City Ratepayers will pay about $7Million more towards the regions PT services with the net effect of this to benefit ratepayers in Hutt City, Upper Hutt and Porirua.
The GWRC claimed in its Long Term Plan consultation document:
The proposed changes to public transport will mean residents in the Hutt Valley, South Wairarapa and Porirua pay a bit less toward public transport than they do now, while residents in Wellington city, Kāpiti and Masterton pay a bit more toward public transport.
As shown in the above comparison table, shows that the imposition of the new Ratepayer Benefits Model in fact means major rates reductions and increases in various ratepayer groups. Under this new Transport Rates allocation model, residential ratepayers from Hutt City, Upper Hutt and Porirua will get millions in Transport Rate reductions at the expense of Wellington City ratepayers.
Wellington residents are unlikely to agree “a bit more towards public transport” is a valid description for the decision that we must pay 35% more and contribute an extea $4.3 million in Transport Rates towards subsidising the region’s PT services.