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OPINION
There have been several recent opinion pieces and articles about Hawke’s Bay Regional Council’s review of how it sets rates.
Rates are the main form of revenue for local government across the country. Rates are an imperfect tool, but it is the revenue-gathering mechanism we are stuck with.
Councilsnationwide have lobbied successive governments in Wellington about the need to have more than just rates as a way of paying for the services they provide.
The total amount of rates collected is set through a council’s long-term plan or annual plan. How the total amount of rates is split across rate types — general rate, targeted rates, as well as fees and charges — is set through a council’s revenue and financing policy. It is this policy that HBRC is now consulting the community about. This policy will not change the total amount of revenue collected.
Hawke's Bay Regional Council chairwoman Hinewai Ormsby says rates, by their nature, require compromise. Photo / Warren Buckland
Responsible councils review how they set rates. It is important to do this to make sure rates are being set in the right way. Part of doing that is to look at all the rates levied for all the activities of a council and work out who benefits, who contributes to the need for the activity, the type of rate (general or targeted), percentage splits, rating footprint, and rating differentials. Council’s ideas are then tested with our communities through formal consultation, submissions and hearings.
So far, this complex process has taken 18 months for HBRC with the interruption of the cyclone meaning this work was put on hold for several months. Formal consultation has been running since December 1 and continues until January 28 — giving ratepayers eight weeks to make their views known. The council will then consider all the submissions, hold hearings and make final decisions.
It is preferable that council makes decisions on how the rates are set before we make decisions — again through consultation — on how much the total rate bill will be for the coming year. To do it any other way would confuse policy changes with cost and service changes. This council’s guiding principles for the rates review have been to be clear and fair, simple and flexible.
As part of the revenue and financing policy consultation, we are asking for feedback on:
How we fund the general rate — moving from land value to capital value for the general rate.
How the regional economic development rate is allocated.
How we rate our flood protection and drainage schemes.
How we rate our passenger transport
Freshwater science changes, including a new targeted rate.
Simplifying sustainable land management, biodiversity and biosecurity rates.
Improvements and additions to our rates remission and postponement policies
None of these changes affect the total revenue collected.
The area gaining significant attention is council’s proposal to change the basis of how we charge for the general rate. Nine out of 10 of the other regional councils in New Zealand base the general rate on capital value. This change to capital value has occurred progressively over time as councils review their policies.
Capital value is seen to be more equitable, fairer and stable because those with more capital have more productive earning capacity, consume more resources and capital values fluctuate less than land value. This is why the rating inquiry recommended it be the common system for all councils when it completed its work in 2007, and why the Government wrote it into the Auckland Council founding legislation in 2009.
Any rating policy is complex and by its very nature requires some compromise.
Councils work hard to get to a best fit for categories of property, even though this will in most cases leave some properties with solutions that owners will see as unfair.
The impacts on groups of property certainly need to be taken into account, but policies have to be derived from a common set of principles that is applied across the board to everyone.
You may support or oppose what HBRC is proposing. Councillors would really value your views and ideas before final decisions are made.
