• The GWRC is changing how the Transport Rates that fund the regions PT service is allocated to ratepayers. They claim that this change means “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”.
• The detailed Rates Allocation spreadsheet was requested and eventually provided with the aid of the Ombudsman.
• Analysis shows the Consultation documents do not clearly explain how the new “ratepayer benefit” allocation approach works and the two charts with actual amounts are incorrect hiding a major increase in Wellington City Residential Rates.
• Analysis also shows that most ratepayers will get large increases and decreases with this change … the Transport Rates for some will double while others will nearly halve.  Wellington Residential ratepayers are the biggest losers and will eventually pay 35% more (an additional $4.3M).
• The GWRC change in Transport Rates allocation will significantly increases the hidden subsidy of rail services by Wellington City Residential Ratepayers.  Wellington City residents will eventually pay $3,500 per Wellington City rail commuter compared to Hutt Valley ratepayers who will pay just $1,000 per Hutt Valley rail commuter.

Background to the GWRC Transport Rate

For the past twenty years the Greater Wellington Regional Council (GWRC) has used a Targeted Rate called the “Transport Rate” to allocate who pays the regional councils share of the subsidies for providing the region’s PT services.  This rates allocation is based on what I will call a “Subsidy Cost Model” where residential areas (the “origin”) and business areas (the “destination”) are allocated to fund half the subsidy cost of the PT service between them.

Now, let’s face it, few people know about the GWRC Transport Rate even though it is over half the councils rates income.  Just a handful of people have the time and experience to get to understand how the Subsidy Cost Model is calculated and all but a couple work for the regional council.

The GWRC is changing how the Transport Rate is allocated

Most residents will not have noticed but the GWRC has fundamentally changed how it allocates the $67 million that subsidises Wellington’s public transport (PT) services.  The GWRC explains the new Ratepayer Benefit Model on page 24 of its 2018-28 Long Term Plan consultation document:

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
0.25 Rural

The council also explained:

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.

These changes will be rubber-stamped by Regional Councilors at the upcoming GWRC Council Meeting at 9:30am on Thursday 14th of June 2018.  But consultation documents do not put any detailed figures on the actual Transport Rate amounts to clarify what “pay a bit less” and “pay a bit more” actually means to the region’s ratepayers.  

Getting answers to how the 2018/19 Transport Rate Changes

To work out how the Transport Rates were calculated under the new Ratepayer Benefits Model, an information request to the GWRC was sent in January 2018.  To cut a long story short, after the intervention of the Office of the Ombudsman, the GWRC eventually provided the new rates allocation spreadsheet in early April (but still withheld most other requested Transport Rates information).

Before outlining the detailed results of the analysis 2018/19 Transport Rates calculation spreadsheet, we must first discuss the efforts of the GWRC to inform the public. The GWRC 2018/19 described the Transport Rate changes in eight different documents (449 pages). The nearest the regional council get to explain the specific details of the rating allocation change is on page 15 of the “Revenue and Financing Policy Statement of Proposal”.  This page provides a couple of city by city comparison charts of residential Transport Rates between the 2017/8 and the new 2018/19 model.  The following chart compares the 2017/18 and the proposed 2018/19 Transport Rates:

However, the figures outlined in the above chart do not match the figures in the Rates Allocation spreadsheet ! The GWRC rates calculation spreadsheet information has the following figures (key figure circled):

The circled amount shows that the GWRC 2018/19 Rate is 0.03586 cents per dollars which equals $35.86 dollars per $100,000 ECV.

The GWRC published chart indicates Wellington Residential Ratepayers will pay, in 2018/19, less than $30 per $100,000 ECV which is not what is stated in the Rates Allocation spreadsheet.  The following chart is uses the correct figures as it compares the Residential Rates for 2017/18 (Orange) and Transitional Ratepayer Benefits Model for 2018/19 (Red):

The error in the “Revenue and Financing Policy Statement of Proposal” consultation document hides that Wellington Residential Ratepayers will have a major increase in their 2018/19 Transport Rates and will go on to paying the highest Residential Transport Rates in the region !

Key Questions

So let us now get on with the job the GWRC so obviously failed to do and that is to answer the most obvious questions people would ask about the change in Transport Rates:

1. What would I have paid in 2018/19 if the current Subsidy Cost Model did not change ?
2. What will I pay in 2018/19 with the planned transitional Ratepayer Benefits Model ?
3. What would I pay if the new Ratepayer Benefits Model was fully implemented immediately ?
4. On what PT Services are my 2018/19 Transport Rates going to be spent ?
5. How is the new Transport Rate “rating differential” determined ?

This post outlines the good and bad news to the regions residential ratepayers to the public.  A more detailed analysis of the GWRC Transport Rate changes across all ratepayer groups is documents HERE.

What would I have paid in 2018/19 if the current Subsidy Cost Model did not change ?

The above estimations contain two different changes in transport Rates: that the 2017/18 Transport Rate has increased by 4% in 2018/19 to $67M and the that 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 these two changes separately.

The starting place to understanding the change from the current Subsidy Cost Model to the new Ratepayer Benefits Model is to calculate the Transport Rate allocation for both 2017/18 and 2018/19 using the current model.  The 2018/19 Transport Rate calculation spreadsheet has this calculation in the “Control” worksheet. The following chart compares the Residential Rates for 2017/18 (Orange) and 2018/19 both using the current Subsidy Cost Model (Yellow):

The above outlines the changes due to the 4% increase in Transport Rates from $64M to $67M.  As expected, most ratepayers received a rates increase.

What will I pay in 2018/19 with the planned transitional Ratepayer Benefits Model ?

We can now compare how the $67M of 2018/19 Transport Rates are allocated using the current Subsidy Cost Model against the Ratepayer Benefits Model proposed for 2018/19. The following chart compares what the 2018/19 Residential Transport Rate would be using the current Subsidy Cost Model (Yellow) with the Transitional Ratepayer Benefits Model for 2018/19 (Red):

The above chart shows 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 residential rates levels for the Hutt Valley & Porirua and the increases for Wellington City and Kapiti residents, are actually due to the change in the rating model rather than the 4% increase in the Transport Rates costs.

What would I pay if the new Ratepayer Benefits Model was fully implemented immediately ?

The above does not really show the full impact of the change in the Transport Rates allocation model because it only outlines the new first year of the three year transition to the model.  To show the full change we need to compare the residential rates between the 2018/19 Transport Rates under both current Subsidy Cost Model and the new Ratepayer Benefits Model as if change to the new model was undertaken immediately.

The following chart compares the 2018/19 Transport Rates under the currently used Subsidy Cost Model (Yellow) with the 2018/19 Transport Rates under Ratepayer Benefits Model if it was fully implemented (Blue):

In fact Kapiti realised that the GWRC claim they would “pay a bit more” means they will actually “pay a lot more” with the Kapiti District council publicly complaining about a major increase in GWRC rates.  But the biggest loser from the change to this new Transport Rates Model will be Wellington City Ratepayers.

The following chart compares the Total 2018/19 Transport Rates under the current Subsidy Cost Model (Yellow) with the Total 2018/19 Transport Rates under Ratepayer Benefits Model if it was fully implemented (Blue):

The above chart shows that Wellington City ratepayers already pay the GWRC for nearly 60% of all Transport Rates that fund the regions PT services but, under the new model , this will rise to nearly 70% !  

The chart below highlights the change in the amount paid by different cities if the new Ratepayer Benefits Model was implemented immediately in full.  In particular, Wellington City Ratepayers will pay about $7 Million more towards the regions PT services due to this change (also with a significant increase Kapiti residential ratepayers) to the benefit ratepayers in Hutt City, Upper Hutt and Porirua:

Also note that a more detailed analysis of the GWRC Transport Rate changes across all ratepayer groups is documents HERE.

On what PT Services are my 2018/19 Transport Rates going to be spent ?

So what PT services are these transport rates paying to fund ?  This question really needs it’s own post but it is important to get some insight on whether the GWRC change in the Transport Rates allocation model supports its claim that this will reflect “the benefits each group of ratepayers gets from the public transport network.“

Firstly the GWRC consultation documents are notably silent on where the Transport Rates are to be spent.  In fact it is impossible to find any clear statement from any GWRC document that connects the amount of Transport Rates paid with the amount of PT services provided.  The regional council, for all the millions it has spent on transport analysis, is silent on the relationship between PT funding and PT costs.

Some insight can be derived from the current Subsidy Cost Model because the 2017/18 Transport Rates calculation using the Subsidy Cost Model includes the amount of Transport Rates allocated to the bus services for each city.  From this data, the percentage of 2017/18 bus related transport rates can be determined for each city and this can then be used to estimate the Bus Service Transport Rates for 2018/19.  Each city’s contribution toward funding passenger rail services can then be calculated by subtracting the city’s Bus Transport Rate from the city’s Total Transport Rate.

Finally, to get a better idea of the residential ratepayer benefit for each city, we can divide the total Residential Bus and Rail Transport Rate totals by the number of bus and rail commuters from each area as outlined in the Wellington 2013 Census Journey to Work document.  This calculation will give the per bus commuter and per rail commuter estimates of the Residential Transport Rate for each of the city’s in the region.

The following table shows the estimated 2018/19 Residential Ratepayer per commuter payment for bus (green) and rail (blue) commuters:

For bus commuters, the low subsidy amount for Wellington City probably reflects just how cost effective the Wellington City bus service really is compared to the bus services in other cities and to the region’s rail services as well as the absence of planned investment in bus services planned by the GWRC.

The average per rail commuter subsidy from ratepayers is perhaps three times that to support each bus commuter which is no surprise.  But, more importantly, the above chart shows Wellington Residential Ratepayers are paying a lot more per Wellington City rail commuter than the other cities. For every dollar Wellington City residents pay towards their bus service, they pay two dollars towards subsidising the regions passenger rail services.

The higher Wellington Residential rate amount per Wellington rail commuter is not because Wellington City rail services to Johnsonville and Tawa are more expensive that those to Kapiti and the Wairarapa (the reality is rail costs are quite the opposite).  Rather it reflects the hidden subsidy, through the GWRC rates allocation models, of Wellington Residential Ratepayers towards funding rail services to the other cities in the region.

Even worse, this overcharging of Wellington Residential Ratepayers to fund expanding rail services from other cities is to significantly increase with the change from the current Subsidy Cost Model to the new Ratepayer Benefits Model.  The following chart compares the per rail commuter Residential Ratepayer Transport Rates for the current Subsidy Cost Model (yellow), the 2018/19 Ratepayer Benefits Model (red) and the full Ratepayer benefits Model (blue):

This change in the Transport Rates allocation from a Subsidy Cost Model to a Ratepayer Benefits Model in no way benefits Wellington City ratepayers.  Wellington City Ratepayers will be paying many millions more towards a rail service that mainly provides services to other ratepayer groups who, in turn, will receive much reduced rates !

How is the new Transport Rate “rating differential” determined ?

To try and answer this final question, one should be able to look at the the 2018/19 Transport Rate allocation spreadsheet and see how the “Rating Differentials” are derived.  However, examination of this spreadsheet shows the key “Rating Differentials” numbers are simply entered into the calculation spreadsheet.  There is nothing in the Rates Distribution spreadsheet provided by the GWRC that explains or justifies why the differential is 8 for Wellington CBD businesses, 1 for both Wellington and Upper Hutt Residents and only 0.5 for Wairarapa Residents.

How the GWRC determines Ratepayer Benefit and so who pays what amount of the $67 Million in Transport Rates rate remains a mystery.  For all the public knows, the GWRC transport managers will simply meet and decide the amount of Transport Rates that the ratepayers of different types and areas will pay for the next year.  This is much worse that the current Subsidy Cost Model which is at least based on real costs and independent statistics. Score Zero for transparency.

Conclusion

At the start of the GWRC 2018-19 Consultation on the change to the Transport Rates, the regional council announced:

“The changes to this policy are intended to spread the costs of these core services more equitably so those ratepayers who get the most benefit pay the largest share of the costs.  However, we are open to the views of our community on this and will be guided by feedback on the proposed plans.” says Mr Laidlaw.
GWRC Press Release 26th March 2018.

However, the consultation process by the GWRC on this change has been far from open and informative.  Very little information is provided in consultation documentation about this major change in the councils rates funding.  Most of the amount information is mixed with the proposed change in Flood Control Rates and so it is impossible for any ratepayer to understand the impact of this decision.  That the one published chart on the Transport Rate Change appears to use incorrect amount hiding the major increase in Wellington City Transport Rates.

Equally important, the GWRC also delayed and withheld the actual calculation information until the intervention of the Office of the Ombudsman intervened.

This Post shows that the planned change in the Transport Rates allocation model means major rates increases on unsuspecting Wellington City ratepayers, especially Residential and non-CBD Business Ratepayers.

Worst of all, it seems that all of this multi-million dollar increase in rates revenue from Wellington City will be going to fund expanding and improving the rail service from other cities.  How does this outcome align with the claim by GWRC Chair and Wellington City representative Cr Chris Laidlaw that “intended to spread the costs of these core services more equitably so those ratepayers who get the most benefit pay the largest share of the costs” ?