Kiwi Property Group Limited ("Kiwi Property")

SUBMISSION ON HAMILTON CITY COUNCIL'S LONG TERM PLAN 2021-2031

To: Hamilton City Council ("Council")

Submission on: The Draft Long Term Plan 2021-2031 ("Draft LTP")

Name: Kiwi Property Group Limited ("Kiwi Property")

Address: C/- Russell McVeagh, at the address for service specified below.

1. SUMMARY

1.1 Kiwi Property opposes two aspects of the Draft LTP:

(a) the introduction of the Government Compliance targeted rate for 2021/22; and

(b) the general rates increase to existing ratepayers of 4.4% for 2021/22 and 4.9% for 2022 onwards.

1.2 Kiwi Property owns and operates The Base and Centre Place in Hamilton. Under the increases proposed in the Draft LTP, The Base's rates bill will increase by 9.4% ($308,000)

to $3.6 million.

1.3 Centre Place's rates bill will increase by 9% ($103,000) to $1.25 million.

1.4 Kiwi Property already makes a significant contribution to the Hamilton economy. Over the last 13 years, it has invested in excess of $400 million in the development of The Base, and in excess of $50 million in the development of Centre Place. Together, the Base and Centre Place are home to nearly 300 businesses.

1.5 These centres provide employment for Hamilton locals, including in a range of trainee and apprenticeship roles. Together, Centre Place and The Base generate approximately 2,700 retail / service full-time and part-time jobs, which is a significant proportion of the retail, service and management employment opportunities in Hamilton.

1.6 The proposed rates increases are of significant concern for Kiwi Property. In the event they are approved, these changes will place a direct burden on Kiwi Property and its many tenants, who have already been significantly impacted by COVID-19.

1.7 Kiwi Property is strongly opposed to the introduction of the "Government Compliance" targeted rate for the following reasons:

(a) The proposed rate is disproportionately targeted at Commercial and BID Commercial rate payers.

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(b) It is inappropriate to have a "targeted" rate which applies to all ratepayers across the board.

(c) The Government is still yet to fully announce the details of the Three Waters reform package, how any reforms will be funded, and when the changes will need to be implemented by. The Council cannot possibly be in a position to quantify these costs or indeed require ratepayers to fund them now.

(d) There are a range of alternative funding methods available to the Council for these initiatives.

(e) The costs of District Plan reviews and other similar local government processes are better suited to other funding mechanisms.

1.8 Local government must conduct its business in an open, transparent and democratically accountable manner that is efficient and effective.1 Simply put, a targeted rate for "Government Compliance" rate is unreasonable, lacks transparency, and is out of step and premature. The impact on ratepayers like Kiwi Property (and by extension all its tenants) has not been properly assessed. The proposed targeted rate should not proceed.

1.9 Kiwi Property is also opposed to the increase to the general rate and seeks that the increase remain at 3.8% as outlined in the 2018-2028 ten-year plan to reflect the reality for many businesses already struggling with the economic impacts of the pandemic.

2. BACKGROUND

2.1 Kiwi Property owns and manages some of New Zealand's best and largest shopping centres, large format retail and office buildings.

2.2 In Hamilton, Kiwi Property has major interests at Centre Place, located at 501 Victoria Street. Centre Place is jointly owned with Tainui Group Holdings Limited through Centre Place Limited. Kiwi Property manages Centre Place South on behalf of TEA Custodians (Silverfin) Limited. The Base is jointly owned by Kiwi Property and Tainui Group Holdings through The Base Te Awa Limited. This submission also covers the commercial office owned by Kiwi Property and Tainui Group Holdings Limited through Centre Place Limited at 67 Bryce St that is on the same rating valuation number as Centre Place.

2.3 Kiwi Property makes this submission on behalf of all of the owners of Centre Place and The Base.

1 Local Government Act 2002, section 14.

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2.4 Shopping centres form an important part of the commercial infrastructure of a modern society and are important to the success and vitality of wider city centres. Beyond commercial opportunities, shopping centres are also a community space for local residents, families and youth alike to meet.

2.5 Kiwi Property's shopping malls in Hamilton provide a number of services to the community and there has been considerable investment - in excess of $400m for The Base and $50m in recent development of Centre Place respectively to ensure that these shopping centres are attractive places to work and visit.

Centre Place

2.6 Centre Place has 102 speciality retail stores, with 30% of businesses owned and operated locally. The shopping centre aims to make shopping convenient and enjoyable for the whole of the Hamilton community, and as part of this provides:

(a) 554 spaces in the Bryce Street car park which also has free parking every weekend and after 5pm on Thursdays;

(b) undercover and accessible parking;

(d) accessible facilities;

(e) community bookings that allow registered charities to create awareness for their cause and fundraise; and

(f) city-wide information and direction service for customers and tourists.

2.7 Centre Place also supports a variety of community groups throughout the year by facilitating:

(a) Volunteer Waikato which provides gold coin donation gift wrapping;

(b) The Sensory Santa event for sensory-challenged children;

(d) a free space for H3 events promotions (Lions Tour, Rugby 7s); and

(e) a performance space for community theatre and musical groups.

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The Base

2.8 The Base has a considerable retail offering with 164 specialty retail stores including 36 food outlets. In addition, The Base provides:

(a) over 3,300 free car parks;

(b) a free shuttle service to assist customers around the site;

(d) community bookings to enable registered charities to create awareness of their cause and fund raise; and

(e) Justice of the Peace services.

2.9 Kiwi Property has provided significant investment into the refurbishment and redevelopment for both The Base and Centre Place to ensure these are vibrant, safe and secure shopping environments for the communities of Hamilton. The shopping centres contain a variety of tenancies and provide an opportunity for Hamilton owned and operated businesses to operate alongside major retail businesses such as the James Pascoe Group (including Farmers), Hoyts cinemas, The Warehouse, Rebel Briscoes and Mitre 10.

2.10 These shopping centres provide good employment options for Hamilton locals, including in a range of trainee and apprenticeship roles. Together, Centre Place and The Base generate approximately 2,700 retail / service full-time and part-time jobs, which is a significant proportion of the retail, service and management employment opportunities in Hamilton.

2.11 Kiwi Property invests into The Base and Centre Place every year by way of continual reconfiguration and refurbishment of the premises, vital to ensuring high quality, attractive shopping centres. Continual annual capital expenditure ensures the revitalisation of the assets and common areas including amenities such as children’s outdoor play area, toilet facilities, customer car parking and health and safety improvements that ensure amenity and safety for employees and visitors.

The impacts of COVID-19

2.12 The retail sector has been severely affected by the impacts of COVID-19 and the associated lockdowns and continues to struggle.2 COVID-19 has resulted in reductions in retail spending.

2 Retail sales plummet in lockdown, Statistics New Zealand, dated 24 August 2020, available at https://www.stats.govt.nz/news/retail-sales-plummet-in-lockdown.

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4.10 The Revenue and Financing Policy says that targeted rates could be used to fund the Council's proportion of new projects where costs and beneficiaries of these activities can be easily identified.10

4.11 The Policy also sets out that the Council may establish targeted rates to fund specific capital projects and explains that targeted rates are more likely to be considered where a benefit can be linked to an identifiable individual or group.11

4.12 The Government Compliance targeted rate will apply to all ratepayers in Hamilton. Funding for water services reform and changing the District Plan are both activities that benefit the whole community, and it is difficult to identify specific beneficiaries in the way the Council's own policy intends. It is unclear why these activities are being funded by a targeted rate.

4.13 The rate per dollar of capital value is also significantly higher for Commercial and BID commercial rate payers, compared to the rate per dollar of capital value for residential ratepayers. This means Commercial ratepayers will pay disproportionately more per dollar value of their property than residential ratepayers. It is unclear why Commercial ratepayers should pay proportionally more than residential ratepayers for this targeted rate, when the funding is going towards water services and changing the District Plan, something all rate payers will benefit from.

4.14 Under its own "affordability" principle, the Council has said that it will explore external funding options for new agreed discretionary projects wherever possible.12 There is nothing to demonstrate that the Council has properly considered any external funding options for this projects, particularly in light of the clear alternative funding methods available.

Alternative funding methods are available

4.15 There are a number of alternative methods available to the Council to fund the water and District Plan changes that the Government Compliance rate is supposedly addressing, including:

(a) the Infrastructure Funding and Financing Act 2020 ("IFFA");

(b) Three Waters stimulus and reform funding from central Government;

(d) general rates.

10 At paragraph 3. 11 At paragraph 52. 12 Hamilton City Council, Revenue and Financing Policy, at paragraph 3.

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IFFA

4.16 The IFFA introduced a new funding and financing model to enable private capital to support local councils, iwi and developers to partner and deliver infrastructure, free of the Council's public debt limits. A key feature of this model is the establishment of the Special Purpose Vehicle, which is a financing tool that enables debt finance to be raised from the private sector, and kept separate from the Council's balance sheet, not affecting their debt levels or credit rating.13

4.17 Under this model, the levy can be paid annually, for up to 50 years, by future homeowners who benefit from the infrastructure, to fund the finance raised for its construction. This prevents the burden of the cost of long-term infrastructure falling solely on current rate payers.

4.18 In the Revenue and Financing Policy, the Council acknowledges the IFFA as a mechanism to support the delivery of infrastructure projects.14 However, the Council has only considered using this to fund the Peacocke growth area and in negotiating a private developer agreement in the Rotokauri growth cell.

4.19 The Council is clearly comfortable with using the IFFA as a mechanism and plans to utilise it for the Peacocke growth area. We see no reason why the Council cannot be utilising this in the same way for the proposed water services.

Central Government funding

4.20 The Government is providing significant assistance to councils to fund critical water infrastructure upgrades. The Government has announced that it will provide $761 million in Three Waters stimulus and reform funding for councils.15 The Waikato has been allocated $66.61 million under the regional allocations of the Three Waters Investment Package.16

4.21 In the Long-Term Plan consultation document, the Council has said that the Government Compliance targeted rate will be used to make sure the drinking water network has more capacity and resilience, by building new water storage reservoirs and upgrading the treatment plant. It will also be used to ensure that processed wastewater and stormwater that goes into the Waikato River is of a very high standard.17

4.22 The Three Waters stimulus funding has been provided to support precisely that. It is unclear why the Council requires additional funding for upgrading Hamilton's water services where there is central Government funding available.

13 Law to help infrastructure financing passes, Beehive press release, Hon Phil Twyford, 24 July 2020. Link can be found at https://www.beehive.govt.nz/release/law-help-infrastructure-financing-passes. 14 Hamilton City Council, Revenue and Financing Policy, at paragraph 54. 15 Government announces allocation of three waters funds for councils, Beehive press release, Hon Phil Twyford, 4 August 2020. 16 As above. 17 Hamilton City Council, 2021 – 2031 Long Term Plan Consultation Document, at page 62.

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4.23 The Council cannot "double-dip" for funding from both central government and ratepayers. It needs to be able to clearly demonstrate how it has quantified these costs, and why the money needs to come from ratepayers.

Local Government Funding Agency

4.24 The Local Government Funding Agency provides alternative methods of funding to the Council. It specialises in financing the local government sector and was established to raise debt on behalf of local authorities on terms that are more favourable to them than if they raised the debt directly.18

4.25 The Revenue and Financing Policy acknowledges that the Council must borrow to fund its asset programme. The Policy explains that this spreads the cost of a project over a longer period of time, smoothing changes in rates and ensuring that future ratepayers who will enjoy the benefit of long-lived assets contribute to their costs.19

General rates

4.26 Three Waters services and District Plan reviews are basic Council functions that should be covered by general rates. It is entirely inappropriate to be introducing a targeted rate to fund these services. While the Council has said the targeted rate provides transparency for ratepayers, it does the opposite. It conceals what is in reality a significant general rates increase.

Inconsistency with statutory obligations

4.27 The Council is required to conduct its business in an open, transparent, and democratically accountable manner that is efficient and effective.20

4.28 When setting rates, local authorities must determine the appropriate sources to meeting their funding needs after consideration of the matters in the Local Government Act 2002 ("LGA").21

4.29 Section 101 of the LGA provides that the funding needs of the Council must be met from appropriate sources following consideration of, among other things:

(a) the community outcomes to which the activity primarily contributes;

(b) the distribution of benefits between the community as a whole, any identifiable part of the community, and individuals; and

18 New Zealand Local Government Funding Agency website, see https://www.lgfa.co.nz/about-lgfa. 19 Hamilton City Council, Revenue and Financing Policy, at paragraphs 43 to 45. 20 Local Government Act 2002, section 14. 21 Tacon v Hastings District Council [2013] NZHC 1078 at [42].

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(d) the extent to which the actions or inaction of particular individuals or a group contribute to the need to undertake the activity; and

(e) the costs and benefits, including consequences for transparency and accountability, of funding the activity distinctly from other activities; and

(f) the overall impact of any allocation of liability for revenue needs on the community.

4.30 The consideration of these factors is cumulative, and mandatory.22

4.31 When considering its funding needs, the Council is required under the LGA to stand back after the proposed allocation of liability for revenue and consider its impact on a range of community factors.23

4.32 The Government Compliance targeted rate proposed by the Council does not take the above considerations into account. In particular:

(a) Water services reform and the District Plan benefit the community as whole, and should be something already captured by general rates, rather than a targeted rate.

(b) Redeveloping water services and the District Plan benefits all rate payers. The Government Compliance targeted rate unfairly targets Commercial and BID Commercial properties, when comparing the rate per dollar of capital value compared to Residential zoned properties.

(c) Changes to Hamilton's water services and District Plan will benefit future generations, so the burden of covering the cost of these changes should be shared with future ratepayers.

(d) There are a range of alternative methods of funding available to the Council provide a more equitable allocation of the rates burden.

(e) The proposed rate lacks transparency. It is not clear what work is required, by when, given that the matters to which "government compliance" is relevant are not yet fully known.

4.33 The Government has not announced the details of the Three Waters reform package. As outlined above, the Council has said that the water services component of the targeted rate will be used to make sure the drinking water network has more capacity and resilience, by building new water storage reservoirs and upgrading the treatment plant. However, there is little detail on specific projects or upgrades that will be undertaken as part of the Three Waters Reform.

22 Tacon v Hastings District Council [2013] NZHC 1078 at [42]. 23 Paekakariki Informed Community Inc v Kapiti Coast District Council (High Court, Wellington, CIV-2003-485-2760, 29 September 2004, Ronald Young J at [52]).

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4.34 The Council can also have little sense, at this stage, of the cost or commitment of any district plan review. The Government's extensive RMA reform program is still in its infancy. New legislation is expected, but a draft bill is yet to be released. It is too soon to tell what implications these RMA reforms will have on the Three Waters reform package, or district plan reviews.

4.35 This raises questions as to how the $22.9 million budgeted for water services and district plan review has been calculated, with $7.5 million per year of this budgeted for water services upgrades. It is deeply concerning that the Council is proposing such significant rates increases in the absence of robust information to quantify these costs. The Council has also acknowledged that Three Waters Reform is one of four key assumptions applied to its budgeting that has a "high degree of uncertainty",24 the impacts of COVID-19 being another key assumption. We simply do not know what the impacts of these Three Waters announcements will be for Councils, or even the extent to which Councils will be responsible for implementing these changes (as opposed to other entities, including Councils working together on combined plans, the role of the new water regulator Taumata Aromai, MfE, and other entities such as Kāinga Ora).

4.36 There is simply no justification for the Government Compliance Rate, and it should not be approved.

5. GENERAL RATE

5.1 Under the 2018-2028 10-Year Plan, the annual average increase in general rates is 3.8%. In setting this figure, the Council said that it could complete its investment programme, maintain services, and build surpluses necessary to repay debt.25

5.2 The Council is now proposing to increase the general rate to 4.4% for 2021/2022, and then to 4.9% from 2022 onwards. As outlined in section 3 above, the general rates increase of 4.9% per year from 2022/2023 onwards is significant and will amount to $236,971 for the first year being $53,197 over and above the previously advised 3.8% increase, compounding every year thereafter.

5.3 Kiwi Property considers that an increase of 3.8% is a modest and acceptable increase and opposes the proposed increases to 4.4% and then to 4.9% next year. There is no reason that the Council should be seeking to increase general rates beyond 3.8%, particularly with residents and businesses struggling with the economic impacts of the COVID-19 pandemic.

5.4 Kiwi Property wishes to be heard in support of this submission.

24 See Hamilton City Council website, at https://www.futurehamilton.co.nz/finances. 25 Hamilton 10-Year Plan, page 69.

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Signature: KIWI PROPERTY HOLDINGS LIMITED by its solicitors and authorised agents Russell McVeagh:

______Allison Arthur-Young / Jacob Burton

Date: 7 April 2021

Address for Service: C/- Jacob Burton Russell McVeagh Vero Centre 48 Shortland Street PO Box 8 DX CX10085 AUCKLAND

Telephone:

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