The 2.5% rates rise is forgotten, not mentioned in the rates setting spiel for Thursday’s meeting of Auckland Council’s governing body.
Instead, new targeted rates will increase the bill on a $1 million property by 4%, and on a $100,000 apartment (a cbd shoebox) by 27%.
The council posted the addendum containing the rates-setting agenda item on its website yesterday (link below).
The focus of complaint has been the addition, without consultation, of a targeted rate as a transport levy over the next 3 years, at $99 residential, $159 business property, both plus gst (which the business can pass on). There was consultation on 2 versions of a levy, a fuel tax or motorway tolls, so the council can argue there was consultation on some kind of increase.
Fixed sums, though, affect ratepayers differently, and for some ratepayers there are 3 fixed sums – the uniform annual general charge, a business district levy and the new transport levy. For cbd residential owners, a new targeted rate will be levied. For many other owners there are additional fixed local wastewater charges.
Some councillors wanted the uniform charge increased, lowering the rates for more expensive properties and raising them for cheaper properties. Politicians regard business district levies as a fair hit, and this year that hit will be on a wider district in several parts of the region.
The transport levy, dropped on the table by mayor Len Brown at a council budget committee meeting on 7 May, was voted on without prior consideration. One councillor, Ross Clow, spent the preceding night writing a variation on it which he said would be less adverse for those at the lower end, but he hadn’t mustered any pre-meeting support and his alternative was defeated.
There are 2 aspects to the imposition of rates which need to be resolved.
One is the cost-plus mentality, the other is equity.
Under the cost-plus mentality, costs rise so rates rise. All councillors look at the effect of that, look at their future if they impose the full amount, and try to pare back. The super-city created in 2010 was an opportunity to decide what the new council should do – starting from zero and working up, instead of starting at 100%-plus and trying to scrounge.
The super-city council has hired large numbers of highly qualified staff for new functions, many of whose work will presumably make for a better-functioning city. The council also claims to have reduced, by millions of dollars, the costs that would have been imposed by its predecessors had the legacy system carried on.
On that side of the equation there is apparent hiring extravagance from which ratepayers can’t easily see a tangible benefit, and apparent reduction in local services not matched by a rates reduction (a decision to increase by less may be valuable to ratepayers but is less apparent).
In a country that created a world-leading welfare net, stepped taxes & rates have been a given, though the systems have been partly dismantled. In short, stepping reduces the impact on poorer citizens.
Those on the right of politics argue strenuously for user-pays, but that theory doesn’t apply to any of these fixed-rate levies. Introducing fixed charges incrementally is a progression towards a fully regressive system where the wealthy pay a steadily falling proportion of their income or property value in rates or taxes.
No More Rates campaigner David Thornton argued yesterday that councillors considering abstaining – but not in numbers that would see the rates resolution defeated – could instead vote against the transport levy, and to put the money to be spent in the next 2 years on the city rail link to other transport priorities. He reckoned this could cut a potentially 9.5% average rates increase to one of about 5-6%.
That average rise would be unreasonably high, but it doesn’t take account of factors such as the numerous other levies.
On my calculations, the fixed uniform & transport levies will add $498.85 to a residential rates bill (excluding charges such as water rates). CBD apartments will have another $57.50 added.
For a small cbd apartment worth $100,000, the addition of 3 fixed charges to the basic rate would increase it by 325% = $246.77 + $385 + $113.85 + $57.50 = $803.12. Assuming the rate set on capital value + uniform charge are the base rate, adding the transport levy would increase the package by 18%, and adding the cbd levy would take the increase to 27%.
At the other end of the scale, the transport levy would amount to a 3.99% increase on a $1 million suburban house’s $2467.77 levy on capital value plus the uniform charge.
Adding the transport levy to the basic rate plus uniform charge would increase the rates by 8.3% on a $400,000 house, 7% on a $500,000 house, 6.1% on a $600,000 house.
Attribution: Council agenda, Thornton release.