The Regions Hit With The Sharpest Rates Hike

Thursday, 13 June 2024, 8:31 pm
Article: Marika Hill - Local Democracy Reporting

Homeowners are being hit with some of the biggest rate rises of their lifetime. For many, that means finding hundreds of dollars more to cover their annual council bill.

The higher cost comes on the back of rising interest rates, higher food prices and soaring insurance premiums. The new annual rates bill is expected to land for some just as tax cuts take effect on July 1.

It follows months of discussion and debate over long-term plans, which set out a region’s budget for the next 10 years. Councils decide what to can, shelve, or splash cash on, and how much it will ultimately cost residents via their rates.

Where are rates rising the most?

West Coast Regional Council ratepayers will swallow one of the biggest increases with a proposed rise of 27%. The region spans 600km, similar to the distance between Auckland and Wellington, but also has one of the smallest pools of ratepayers, so fewer households to draw funds from.

Other big jumps include Hastings District Council, which is considering a rates increases of around 25%.

Hastings mayor Sandra Hazlehurst has spoken about the huge clean up bill after Cyclone Gabrielle. The estimated cost to finish reinstating the roading network alone is more than $795m.

Close behind, Napier, Gore, Clutha, Buller and Central Hawke’s Bay district councils are mulling an increase in the 19-24% range.

Some of the figures are still being finalised as councils consider feedback from locals. Canterbury’s regional council pulled back its proposed average rates rise from 24.2 per cent to 17.9 per cent after listening to residents.

Of the biggest cities, Wellingtonians are looking at about 17%, while 16.5% is proposed for Hamilton.

Where are the smallest jumps?

Auckland households face an average 6.8% rise, which will cost an extra $6.38 per week in rates and water charges.

Approximately 11 councils have so far kept their proposed rates rise below 10%.

At the lower end of the scale: Manawatū District Council (7%), Chatham Islands Council (6.65%) and Waikato Regional Council (6%).

Nelson City Council is proposing a 8.2% rise, but a $300 storm recovery fee could increases this to 15%.

Again, these numbers may change as work continues to finalise long-term plans.

The hidden cost of a 'budget’ plan

Some councils have stripped back spending to keep the rates increases lower for struggling households.

This might mean less investment goes into keeping towns and cities running, such as doing the bare minimum to maintain water infrastructure and roads. Library services could be cutback or transport projects put on hold.

So, although it might hurt less in the pocket now, you may notice a pothole remains unfixed for longer or an exciting new city project is shelved indefinitely.

During the past few months, councils have been fiercely debating this balancing act.

Why are rates rising so fast?

Rates are rising for the same reason your bills are increasing. Councils are being hit by rising inflation, higher interest rates and larger insurance premiums. This means councils need to find more money to deliver the same level of service.

Building costs are also increasing. Bridges are 38% more expensive to build over the last three years, and sewerage systems are 30% more expensive, according to a recent analysis for Local Government NZ.

Ashburton mayor Neil Brown summed it up when speaking to Local Democracy Reporting on his region’s 11.8% rates rise.

“Inflation is certainly not our friend, interest rates are kicking in and it’s all biting.”

Community feedback asked the council to make savings where possible and focus on core services like roads and water, Brown said.

“We dropped the frilly stuff and focused on what was needed.”

Can councils do more to keep rates lower?

It all comes down to money and services. Councils either need to find more revenue or cut back on spending.

Local Government New Zealand president Sam Broughton said the average rates rise is currently about 16% across the motu.

Rates rises do tend to be higher in the first years of a 10-year plan – something most councils are currently working on.

However, in the past, a few councils might have had a large increase, but now most councils are looking at significant rises.

Rates are the primary revenue source for councils, but LGNZ is campaigning on finding new revenue sources.

Broughton said the overreliance on rates was unsustainable for councils and the Government needs to help.

“The system has passed its used by date. We need new tools.”

Local Government NZ has suggested returning GST charged on rates to local councils. This would cost the Government at least $1.1b, according to analysis from Infometrics.

What does the Government think?

Local Government Minister Simeon Brown says councils need to keep an eye on their spending.

“Like most New Zealanders, central government is having to prioritise the must-haves over the nice-to-haves.

“For the Government, this means funding essential services and critical infrastructure. I expect local councils to adopt a similar approach.”

The Government isn’t considering sharing GST on rates with councils.

However, the Government is looking at sharing a portion of GST collected on new residential builds with councils as an option for incentivising growth.

The Government is also developing a policy around City and Regional Deals, where councils team up with other councils and central Government to deliver infrastructure projects in a bid to keep the costs down.

When will the new rates bill arrive?

Many councils are discussing or finalising their long-term plans now. The overall plan includes a figure for the rates rises for the years ahead.

Once approved, homeowners will receive a new rates bill.

Some councils have also chosen to delay their long-term plan or complete an annual plan instead while they wait for more details on a raft of Government reforms.

Any relief for councils via new Government policies will take time and there is unlikely to be a huge handout to solve the problem overnight.

While most people have missed the cut-off to submit on long-term plans, you can keep an eye on your council's website for future discussions around rates and projects.

If you do struggle to pay for rates, there is a relief option for some.

Homeowners on low incomes can apply for a rates rebate, which is a partial discount on a rates bill. 

LDR is local body journalism co-funded by RNZ and NZ On Air.

© Scoop Media

Local Democracy Reporting

Content from the Local Democracy Reporting (LDR) service is published by Scoop as a registered New Zealand Media Outlet LDR Partner.