Greater use of Council uniform charges would be fairer

Greater use of Council uniform charges would be fairer, Feds says

City, regional and district councils urgently need alternative funding frameworks if local government is to restore its credibility with communities, Federated Farmers says.

"Property value-based rates fail on the basic principles of fair taxation; they do not naturally reflect income, wealth, or use of services and can be easily manipulated to political ends," Feds President and local government spokesperson Katie Milne says.

The NZ Productivity Commission is investigating local government funding and financing, and submissions closed 15 February. Federated Farmers has suggested:

- greater use of uniform annual general charges (UAGCs) and targeted rates,

- better cost sharing with central government when communities are significantly impacted by national economic trends (such as tourism growth), and

- recognition that setting demanding national standards and imposing new and more complex regulatory responsibilities on local authorities means ratepayers ultimately pick up the tab.

"It’s too easy for central government to make these demands when they are not directly facing the cost and there is no agreed framework for funding new responsibilities," Katie says. "The represents a shift in cost from taxpayer to ratepayer and needs to be quantified and sorted out."

Results from a Federated Farmers survey of more than 1000 of its members underpinned its submission. The average annual rates paid (combined district and regional council) by the farmers who responded was $26,208 (median $19,746). Nearly 10% pay more than $50,000. Just on 97% did not believe they get value for money from their rates.

It can be convincingly argued that uniform annual general charges, a flat fee paid by all property owners, far better reflects actual consumption of council services and fairer cost sharing than a system based on property values.

"While some rural and regional councils utilise the charge up to the current maximum of 30% of total rate revenue, many are nowhere near this limit and some councils don’t use the UAGC at all," Katie says. "If anything, the 30% should be a minimum, not a maximum."

Older people generally tend to exercise their vote at council elections more often than do younger people, a trend spurred by the fact that a greater proportion of them own their homes (rather than rent) and thus directly get rates bills in their letterbox. With the ageing population, there has been a wind-back of UAGC levels in some districts, with councils citing "affordability" issues for urban residents. This is despite the availability of the Rates Rebate Scheme for lower income ratepayers.

When UAGCs are lower, a great burden of costs falls on property value rates - and thus farmers.

"The rateable value of a farm says very little about its income, costs or debt yet this is a fundamental basis of a farmer’s contribution to rates. It can be a difficult experience for a farmer in a low income or loss-making year to read in a Long-Term Plan document that council is concerned about ability to pay among its residents, when their rates bill is over $10,000.

"And it’s doubly galling given that farmers are often long distances, or don’t even access, many council services, including parks, stormwater, streetlights, rubbish collection and so on."

ENDS

© Scoop Media