Auckland Council staff have produced a paper on uniform rates charge options so ratepayers can give their views on the vexed question before the council prepares its next annual plan.
The paper presents more information more clearly than before, but it can’t overcome one obstacle: the ideological divide between those who want everybody to pay for services equally and those who want the richer to pay more/poorer to pay less.
The paper doesn’t help by including the view that more homes are rented in poor areas so, there, “more of the rates burden is borne by landlords”. I’ve heard this argument over the years from politicians who ignore the very simple fact that landlords have money because tenants pay them. The burden is borne by landlords’ tenants.
In this paper, the point is not expressed as a political view but it’s bound to be garnished in debate. The term “landlords” can quickly become emotive – rapacious to one, unfairly overburdened to another.
A uniform charge increases the rates on a cheaper property and does the opposite on a more expensive property. One attached issue raised during the years of the residential property boom is that many homeowners have been caught by sharp value gains without having an income rise to match. To share the rates cost of valuation increases (that are higher in one area than another) by imposing higher uniform charges might be fine if the windfall gain is also shared. I haven’t heard that suggested.
The paper – written by council financial policy manager Andrew Duncan, policy advisor Eric Wen and principal modelling advisor Aaron Matich – goes to a meeting of the council’s finance & performance committee on Wednesday, along with a set of recommendations on the interim transport levy imposed in June.
After a large hike in the uniform annual general charge was again defeated in June, Cllr Cameron Brewer sought more frequent reviews than a 3-yearly revisit and it’s now scheduled for annual review as part of the annual plan. For that to happen it needs to go out for consultation, so staff have proposed options to be put to ratepayers.
Possible options proposed in the paper are: no uniform charge (all general rates applied according to property capital value), $200, $397 (this year’s $385 levy adjusted for general rates increase), $600, $800 & $980. Or the council could decide not to consult on changes and retain the current level ($397).
The staff report says the 4 relevant guiding principles in the council’s revenue & financing policy and sections 101 & 103 of the Local Government Act are:
- aligning rates to the level of benefit received (through an analysis of the distribution of benefits)
- minimising change, and
- administrative simplicity.
A complication is that rates increases have varied widely between ratepayers in the first 5 years of the super-city council as a result of transition & the recent revaluation. The paper’s authors said: “A material change to the uniform charge would result in another year with large numbers of ratepayers facing varying changes. Retaining the current uniform charge would mean the first year in which all ratepayers (residential & farm/lifestyle 3.5% and business 2.5%) would face the same general rates increase.”
The paper makes a few general points on rates, payment for service & uniform charges: “Rates are a tax on property wealth. They are used to fund those general council activities where we can’t charge individuals who benefit, no alternative funding source or where the council wishes to subsidise the activity due to its wider social benefits….
“The uniform charge sets a minimum contribution that each ratepayer makes towards the cost of running the city. It is not a payment for the minimum level of services, or benefit, that each property receives. The services the council provides are predominantly public goods and the benefit that each property, or resident, receives can’t be objectively measured.”
Fixed-charge rates may not exceed 30% of the total rates collected.
The authors modelled 6 uniform charge scenarios. This table shows the general rates (including gst) that would be paid at 4 residential value steps for 2016-17 year under each of the uniform charge options:
Link: Council committee agenda
30 August 2015: Council picks consultants to review finance sources
29 June 2015: 2% get big rates hike, 22% get cut
25 June 2015: Council approves rates, transport levy & long-term plan after 2 close shaves
23 June 2015: Flurry of targeted rates will distort rates bills
18 March 2015: Brewer sets out his 5 priorities for the next mayor
Attribution: Council agenda.