Auckland hotel bed tax faces legal issues, says local government consultancy

Pillow fight: Hotel beds could become the setting for a legal wrangle between Auckland Council and the hotel industry.

A proposed $18 million levy on hotels to attract visitors and big events to Auckland is unlikely to survive a legal challenge, says a local government expert.

Former Auckland Regional Council chief executive Peter Winder says there is a high chance of a legal challenge if the proposed targeted rate on hotels is passed by Auckland Council next month.

"There have been discussions about the potential for legal action and there is a prominent QC involved with a number of clients," says Winder, whose consultancy firm McGredy Winder is acting for hotel and tourism operators on the issue.

I don't see how anybody could conclude charging a sector 100 per cent of the costs of an activity where they derive 10 per cent of the benefits is reasonable

Peter Winder, local government expert

Tourism Industry Aotearoa has argued numerous times that it receives 9 per cent of the tourism spend in Auckland but is being asked to pay 100 per cent of the levy.

Winder said a legal challenge would be based on the "reasonableness" of the targeted rate, which Mayor Phil Goff has proposed to fund spending by Auckland Tourism, Events and Economic Development(Ateed) to attract visitors and support big events.

"I don't see how anybody could conclude charging a sector 100 per cent of the costs of an activity where they derive 10 per cent of the benefits is reasonable," said Winder, who is also a former chief executive of Local Government New Zealand.

Last week, Goff unveiled a new version of the levy to appease industry and political concerns.

Under the latest version, hotels will pay more than motels and lodges; backpackers, camping grounds and areas on the fringes of the city will be excluded; and two zones have been created with different rates.

The rate is now expected to collect $15 million to $18 million, rather than the original $27.8 million. The targeted rate would free up to $18 million to fund transport and housing infrastructure.

Winder said the latest version strengthened the case for a legal challenge.

A mayoral spokesman said the revised proposal deals with concerns raised by the industry in a fair and equitable manner.

"The Mayor has received legal and technical advice throughout the development of the proposal and is confident the Council is legally entitled to levy the targeted rate," the spokesman said.

Auckland Chamber of Commerce chief executive Michael Barnett said watering down the proposed bed tax to just selected hotels doesn't change it from being unfair and inequitable and deserving of challenge.

Barnett said Goff was targeting a small group of ratepayers because he thinks they can afford it.

If the mayor needs $18 million, Barnett said, he should deduct it from the Ateed budget and take up the wish of Ateed chief executive Brett O'Riley to see a wider range of those in the tourism sector fund its work.