Auckland motorists look set to pay an extra 11.5 cents a litre for petrol from next year to help ease congestion, improve the housing crisis and reduce sewage pouring into the city's harbours.

A regional petrol tax, agreed to by the new Government, is the key feature of Mayor Phil Goff's proposed 10-year budget.

Council officials said the petrol tax would likely be set at 10c a litre plus GST, taking the cost for motorists to 11.5c. It will raise $130 million to $150m.

The petrol tax allows Goff to remove an interim transport levy of $114 set three years ago, set a general rates increase of 2.5 per cent and introduce targeted rates on improving water quality and the environment to make big inroads in these areas.

The overall effect of these changes is to hold overall rates increases to 1.4 per cent next year - below Goff's election promise to hold rates to 2.5 per cent.

But while a household with an average property value of $1.08m faces a modest 1.4 per cent rates rise, the Automobile Association has estimated the petrol tax will cost motorists an extra $125 a year. This equates to a rates rise of about 9 per cent.

Goff said the proposed budget, to be tabled at a governing meeting today, will increase transport spending from $7.9 billion to $11b over the next decade. Much of this money will got towards the $3.4b City Rail Link and transport renewals.

The council will not know until March what its share will be towards the new Government's $5b plan for modern trams from the city to the airport and West Auckland, although Goff said $1.4b of the cost was budgeted in a joint council-Government transport funding plan.

"The (transport) investment is critical to ensure our city, with increasing population and cars on the road, doesn't grind to a halt," he said.

"For that we can clean up our streams and beaches, protect our kauri, our forest and native bird life," Goff said.

Much of the water quality targeted rate will go toward speeding up a $1b-plus giant pipeline from the central suburbs to the Mangere wastewater treatment plant to reduce wastewater overflows into the Waitemata Harbour within 10 years - 20 years earlier than planned.

It will also fund a number of other projects across the city, such as sediment reduction in the Kaipara Harbour and wastewater management on Waiheke and Great Barrier Islands.

Areas like the North Shore will not receive much benefit from the targeted rate, which are designed to fund a specific purpose.

Goff did not believe a proposed citywide targeted rate for water would face opposition or was outside the rules for a targeted rate.

"It is targeted at improving the quality of the environment right across the region and it makes sense for everyone to contribute to it," he told a media briefing.

When it comes to the America's Cup, Goff said the council's ability to fund the event "is not open-ended". It was contributing, along with the Government, towards $137m for infrastructure on the waterfront but he ruled out paying anything towards an event fee.

Goff is also proposing to update his bed tax to include Airbnb properties and other online accommodation providers.

The proposed 10-year budget will be tabled today, voted on by councillors next month and go out for public consultation next March. It comes into effect in July next year.

-NZ Herald