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Open letter from Queenstown Lakes District Mayor Jim Boult regarding the proposed Visitor Levy
- Apr 18, 2019
Tēnā koutou katoa,
Over the last few weeks I have grown increasingly concerned about the commentary emerging from parts of the local accommodation sector regarding the proposed visitor levy on which we will all be asked to vote in June. I am concerned because much of this commentary is based on assumption, and perhaps even in some cases, deliberate misinformation. I accept that Council has not been able to provide detailed information to date. That has been influenced by the referendum process we need to follow, in particular the tight timeframe in which to finalise and present the referendum to our community and the complexity of working through the detail. Council officers continue to prioritise work with central government officials and independent advisors to finalise the model. Regardless I felt it was important and timely to provide as many facts as possible. Facts that may assist in addressing the concerns of some in the accommodation sector and help inform the wider community.
The need for an alternative revenue stream to fund visitor-related infrastructure and services is widely accepted. How to generate that revenue stream has been a much harder question to answer and we have been on a long journey to get us to the point where we are today. The government is finally offering our community the chance to express its support for a local visitor levy which will help fund the crucial infrastructure we need, and will take the full burden off our ratepayers. This will be a first for Aotearoa New Zealand. Let’s not forget that getting to this point is a monumental achievement for our district and this Council. A visitor levy is something I personally have advocated for since becoming Mayor in October 2016. I have spent many hours with two governments and a myriad of ministers and officials to give us this unique opportunity.
And make no mistake. This opportunity is a one-off. Now is the chance for our local community to send a clear message to Central Government. Our residents cannot keep underwriting the financial burden of tourism-related growth and if this district is to continue to make its significant contribution to the national economy, the experience of domestic and international visitors cannot be allowed to diminish, let alone the experience of locals living with this. Without additional and sustainable funding, the tourism industry in Aotearoa New Zealand truly is at risk, which affects each and every one of us from Makarora to Kingston.
We have been clear in the 2018-2028 Ten Year Plan that the scale of investment needed is three times bigger than the previous plan at nearly $1 billion over the decade. We estimate that the visitor share of the capital and operating cost for the ten years is $350M-$400M which the proposed levy can recover. The revenue from the proposed levy would enable the Council to either invest in projects that were deferred from the Ten Year Plan, accelerate projects already in the plan, and/or divert loan funding into alternative projects, all of which enable existing funding to be redirected into projects that directly benefit the local community. However it is approached this will be a major boost to the capacity to deliver high quality services to both our local and visiting communities alike
If we don’t get this levy, what are the alternatives? Firstly let me tell you that any form of revenue sharing from GST is not an alternative. The government has consistently rejected any proposal to share or increase GST. I’d be the first to support such an option but it’s simply not available and we must accept that. The two other real options are to increase rates even faster than we have been, and to earn an equivalent amount of income would require increases of up to 35% for some property types. I am not prepared to burden our ratepayers with those costs to support the visitor industry, no matter how important it is to New Zealand. The other option is for Council to peg back its investment which will very quickly turn us from being the country’s most attractive destination to the most unattractive, with enormous inconvenience to locals as well. Recovering from that reputational loss would be a very long road indeed. So here are some facts about what we’re proposing:
The Proposed Visitor Levy
> The proposed levy will be a 5-10% charge applied to the costs of accommodation payable by visitors throughout the district. On a $250 per night hotel, that’s between $12.50-$25.00, which is less than the cost of a couple of drinks in many hotel restaurants and bars. At a $40 per night backpackers it’s only $2-$4 per night. I doubt anyone could call that a “sizeable” levy that prefaces a wider tourism sector downturn as some have suggested.
> It is proposed that the levy will apply to all short-term (less than four weeks) accommodation based on occupancy, not number of beds. The levy won’t apply for stays over four weeks in length and therefore it is not expected to have any effect on tourism workers paying for accommodation.
> Other models were explored including airport charges, user charges, tourism-related activity charges and a percentage of GST. The levy on short-term accommodation was chosen as it is well accepted and understood internationally, but best of all is collected through an activity that predominantly only visitors use. We actively looked at activity based charges, charges on food and beverages, but these are more complex, and target locals as much as they target visitors and our residents already contribute through their rates. Taken wider, where do you start and where do you stop. Attraction providers are in the tourism business, but so are retailers. And that will include gas stations and supermarkets, with the result that locals will again be paying.
> This levy targets visitors, not accommodation providers, and is not as some have suggested an assault on the accommodation sector’s profits. We also don’t anticipate that a levy of 5-10% on top of the accommodation cost would have a significant effect on the majority of people choosing to visit and stay in the district – it’s not an unusual model and doesn’t put people off visiting Whistler or Aspen!
> The current proposal won’t apply to freedom campers in the district, however we are keenly aware of the community’s concerns that these visitors make a contribution. We are investigating models to capture freedom campers as our intention is to ensure they make a fair contribution like everyone else.
> Accommodation providers currently pay a differential rate which is inadequate to collect the scale of revenue needed to fund the district’s infrastructure and services. If the levy is implemented the current differential rate will be reviewed to ensure that accommodation providers are not paying for costs to be funded by the new levy. This will ensure that the additional funding needed is collected from visitors, and it is likely this may lead to a reduction in the rates accommodation providers pay.
Collecting the Visitor Levy
> We are in discussion around collecting this in the same way that GST is charged, as a clear below the line charge. It will not be hidden in any room rate, and will clearly exist as a local charge. Yes there is a small risk some people may be put off visiting but given the district’s premier reputation we are confident that like GST it will be quickly absorbed by visitors. It’s also important to note that the average stay in, for example Queenstown, is now less than three nights per person so the impact on their overall visitor experience in NZ will be very limited.
> Peer-to-peer online platforms, such as Airbnb, would collect the payment directly from the visitor at the time of booking and many have already signalled their support and willingness to implement a similar model they already have in place for other global destinations with a local levy. This ensures every visitor booking through these platforms for accommodation in our district is contributing.
> If implemented, we anticipate the levy would be in place for the 2021-2031 Ten Year Plan giving plenty of time to put systems in place to collect the levy that are effective and require no more administering than the GST regime that many providers manage successfully today.
This is by no means all the detail, and further information will continue to be released over the coming weeks. Everyone will receive more facts with their voting papers between 14-19 May.
It’s important that a discussion within the community sticks with the facts and that above all our community makes its voice heard. The government has acknowledged that we are a unique case and they have opened the pathway to a unique solution, and it’s within our power to now say whether we want it or not.
This is our one and only chance to change the way we finance our district. Let’s not waste the opportunity.
Jim Boult ONZM