Indicative rates cap 11.4pc for three years

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

The potential 11.4 percent rates rise reported yesterday for next year, based on a council media release, is actually an indicative 11.4 percent rates cap for the next three years.

In response to a query seeking clarity on this, council chief financial officer Pauline Foreman replied:

“At the moment, it is only indicative but it is to operate as a cap, as to be set out in a draft financial strategy. 11.4 percent is the threshold/cap for the first three years. It is based on 7.9 percent plus a recovery rate of between 2.5-3.5 percent.

“The majority of ratepayers will be within a less-than-8 percent  rates increase, as the recovery rate will be mostly charged as a fixed amount — around $43 to $63, total per annum. But specific industries — forestry and pastoral — will pay more towards a targeted woody debris rate. Essentially, on top of this uniform annual general charge,  forestry will be charged on average across the industry $1300; and pastoral $91.

“The second and third years will be consulted but only if there are significant changes to the Three Year Plan process. However, rates within those years are set to be within the overall cap — of 7.9 percent plus the recovery rate of 2.5-3.5 percent. Details of the actual rates and incidence of rates will be completed in the new year, once draft estimates are completed.”

These are obviously very large indicated maximum shifts in the rating impost and the council can expect considerable pushback during its consultation on this early next year.

Let’s say the average rates bill now of $2972 was to go up by 7.9 percent plus a recovery rate of 2.5 percent for each of the three years, so 10.4 percent annually: that would take the average rates bill to $3281 next year, $3622 in 2025/26, and $3999 in 2026/27.

The council describes the 7.9 percent increase as being needed to maintain business-as-usual services. BAU has clearly changed a lot since the council finalised its last 10-year plan in 2021, with a rates rise cap of 6.5 percent in the first three years then a 5 percent  maximum cap for the remaining seven years. Its projected rates rises for 2025-2027 were 4.8 percent, then 3.9 percent, then 4.9 percent.

As stated in the council media release reported yesterday, it will have several meetings in the new year “to discuss where the rates increase will fall”. “Following the decision, the draft financial strategy and draft budget estimates for the Three Year Plan can be completed and presented for council approval in 2024. Community consultation is planned for March and April, before the council adopts the plan on June 27.”

The council will need to look for savings across the board, as these projected maximum rates rises will be unaffordable for many residents.