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Rates under review

AUTHOR Better! Whangarei DATE 07 May 2017

The WDC is currently reviewing the way it charges rates and is undertaking what it calls "pre-engagement" with the community. To date it has held a number of public meetings but, as is usually the case, the meetings have attracted little public interest

The WDC is currently reviewing the way it charges rates and is undertaking what it calls "pre-engagement" with the community.

To date it has held a number of public meetings but, as is usually the case, the meetings have attracted little public interest. No doubt people will tune into the issue after the Council releases its proposal and can see the impact on their personal rates bill.

The council says in its publicity material that they are seeking feedback on all rate-related matters, including:

  • General Rates (including the use of Land Value or Capital Value)
  • The use and definition of Separately Used or Inhabited Parts (SUIP)
  • Stepped Rates
  • Sector Splits (Residential, Rural and Commercial)
  • Targeted Rates
  • Remission and Postponement Policies.

I understand the feedback to date is essentially that ratepayers are anti anything that is going to result in them paying more. There should be no surprise in that.

Here are some quick facts:

  • The WDC collects about $88 million a year in rates.
  • Approximately 62% is collected from residential ratepayers, 28.5% from the commercial sector, and 9.5% from farmers. A point of contention will be whether these proportions are a fair reflection of the benefit each sector receives from Council.
  • The WDC charges rates on land value (LV). About a third of all councils in New Zealand use land value. The other two-thirds use capital value (CV), which includes the value of the land and improvements (buildings typically). There has been a general trend for councils to move to capital value rating over a number of years. They have done so because it better reflects the market value of a property and presumably the property owner’s ability to pay land taxes (rates) and the potential to generate income from the property.

 

  • Changing from LV to CV rate collection would not change the total amount of rates the Council would collect.

Here's an example to illustrate. Let's assume a family buys a lifestyle section for $500,000 and in doing so they exhaust most of their financial resources, so they build a glorified shed for $100,000 until they can afford extensions. Compare this to a property in town that has a land value of say $250,000 and a house worth $350,000. Both properties have a capital value of $600,000.

Under a land value rating system the first household would pay double the rates of the second. If capital value rating were to be introduced they would pay exactly the same amount. In this case the lifestyle block owner would pay less and the city person would pay more. Which approach is fair?

Last year the Advocate reported that when the WDC last looked into switching to capital value rating in 2012, it found 70% of ratepayers would have an increase of $100 or more, 15% would pay up to $100 less, and the remaining 15% would receive reductions of more than $100.  

The WDC website has a lot of information about the review. Go to wdc.govt.nz, click on the "rates and payments" tab, click on "rates", then on "Rates Structure Review" in the left-hand column. If you have a view about rates, make it known to the Council via email at mailroom@wdc.govt.nz and put "Rating Review" in the subject line.

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