Auckland Council financial strategy and planning general manager Matthew Walker said while certain types of Crown-owned land were exempt, commercial works on Crown-owned land were required to pay rates in the normal way.
"We can confirm that we are looking into a business located on Crown land in Auckland to determine whether it is liable to pay additional rates."
While the council takes court action against some homeowners with unpaid rates, Darby has identified operations on dozens of hectares of waterfront land which are charged only the rubbish collection fee of $88.68, "and of course that doesn't even cover the rubbish collection costs," he said.
He is now working with Auckland Council's finance team to fix the gap.
The fault is not the Crown's but the council's, he says.
Darby lives in Stanley Point and first discovered anomalies when he investigated rates charges in his own area using the council's GIS Viewer online tool. He found the waterfront operations of global business Babcock in Devonport are on a large 13.8ha site at 41 Queens Parade alongside the Royal New Zealand Navy's HMNZS Philomel.
The council lists that property as having a valuation of $45.3 million for rating purposes. Yet the land is classified "non-rateable" under legislation which allows the defence forces to escape rates.
Council information shows an $88.68 fee applies to the land for rubbish collection purposes, GST inclusive.
"Babcock (NZ) Ltd is based in the Devonport Dockyard in Auckland, producing outstanding results for a range of commercial and defence customers," that company says.
Darby said the land Babcock operated from was officially classified as "dock yard" or "wharf" which under the law did not draw full rates.
Mike Wardlaw, Babcock NZ managing director, said rates for the naval base, including that space used by Babcock, were invoiced to and paid by the defence force.
"After receipt of the invoice, the NZDF recovers a portion of the total annual rates from Babcock. The amount recovered by the NZDF is based on the percentage of the area that Babcock occupies," he said, but did not specify how much Babcock paid.
Darby said some of the navy's HMNZS Philomel base at the end of Queens Parade and off Calliope Rd was used for non-defence purposes such as accommodation yet also did not incur full rates.
A defence force representative said the Herald's requests for information would take some time to answer, so were being treated as an Official Information Act inquiry.
Darby said there were many commercial or money-making activities on school and university land also unable to be rated under the Local Government (Rating) Act 2002.
Commercial activities on this land, including educating full fee-paying foreign students and major research activities, generated millions of dollars, he said.
That had enabled tertiary institutes to spend tens of millions of dollars expanding their campus infrastructure and buildings while avoiding rates charges.
Darby also questioned whether GST should be charged on rates.
"The total GST on Auckland rates for the 2014/15 year was $224,106,000 which is $149/person or about $450/ratepayer. It's time we had a discussion about the fact that we have a tax on a tax," he said, asking whether this money could be 'ring-fenced' by the Government to be spent on Auckland.
"Having that extra $224 million would allow the council to borrow an extra $200 million."
David Seymour, Act party leader, said changing the system could mean a slightly lower rates burden on households.
"We have got this 430ha of Crown land [in Auckland] that allegedly could be turned into houses. Well, why have they waited so long? I suspect one of the reasons is that the Crown can keep land rates-free," he said.
In June, a draft report by the Productivity Commission, called Using Land for Housing, recommended the Government start paying rates on Crown land.
Local Government NZ has also pushed for the Crown to be charged rates on its land.
Auckland non-rateable properties:
Churches, council land, Crown land, Maori land, state and integrated schools, private/religious education including commercial childcare businesses, universities