Ian Bradley: Business differential won't solve Auckland rates woes

COMMENT

A year on from the introduction of the Auckland Regional Council's new rates policy, and the almost apocalyptic response, no one has come up with a better idea.

Meanwhile, the regional council has collected 95 per cent of its rates revenue for the present year, ahead of its own forecast.

Even the leader of the so-called rates rebellion has realised that simply attacking the messenger is not going to solve the problem. Earlier this month, he made a "fresh start". He knows that Auckland's problems will not be solved by keeping the rates down unless, and until, another way of paying for our services is authorised.

The regional council's rates policy is as fair as a property tax can be under the law. A number of residents, particularly from the North Shore, can be forgiven for not agreeing, given that the bills they received were in some cases multiples of the amounts previously levied by their own council.

North Shore City had businesses subsidising residential ratepayers at the rate of 10 to one on the general rate. Not only could we do nothing to help these people but, courageously and responsibly, we had decided (most of us, not just those who voted for the annual plan) to increase the overall rate by 34 per cent to kick-start an attempt to alleviate Auckland's transport chaos. (We had to borrow from the Government to pay for the new trains introduced last week.)

In response to the arguments being put forward that we had got it wrong, I produced figures which showed that changing the system or resetting the rates would not make much difference to the size of the bills. The average regional council rate last year was $250, as against a levy of about $200 the year before. Thus any rate increase above about $50 was entirely because of the new law, not the regional council.

Ironically, this increase was required to combat the effects of the last rates revolution in the 1980s when a "no rates increase" team was elected to run the regional council. It kept its promise and now we are paying for it. Our transport infrastructure reflects years of neglect.

The Government appears to have realised the Auckland rates issue was not one that the regional council could solve on its own. In December, the Prime Minister started an initiative that will return the assets stripped from the council a decade ago, and signalled it would contribute more to solving Auckland's transport problems.

Thanks to this and good housekeeping, this year's projected rate increase is down from 18 per cent to 3.2 per cent. The debate now centres on whether we should introduce a business differential. All the indications are that this debate will be as counterproductive as last year's argument over capital value versus land value.

Last year, the regional council considered there was no clear justification for a differential on the basis of benefits received. It was recognised that the costs associated with environmental monitoring and complaints could be attributed to the business sector (especially industrial), and that businesses should bear a higher share of passenger transport costs.

This was not considered sufficient to require a business differential, however, particularly as the use of capital value as the valuation base for rates leads to a higher contribution from the business sector because of the higher average capitalisation of their properties.

If the council were to choose to implement a business differential, it would be mainly on the basis of equity or ability to pay. Public consultation has indicated that respondents mainly consider that businesses should pay rates based on a somewhat higher percentage of property value on the basis that "businesses can claim it on their tax or pass the cost to their customers".

As equity would be the reason for implementing the business differential, this would only justify setting it at a relatively low level and preferably as part of an overall reform of the transport rating method which needs more work.

This is why the council has put forward the option of a differential set at 1.5. But I think we should stick with the status quo while we sort out the transport rate.

What has been missed in the furore is that the regional council collected only 34 per cent more money last year. The rises some ratepayers experienced were balanced by a similar number of falls, as the subsidies were removed and the burden spread more equally.

I accept, however, that some people were angered by the rate rises and the apparent arrogance of those of us who tried to defend the regional council against a hostile media and unfair criticism.

For this reason I urge Aucklanders to log on to www.getinvolved.co.nz and tell us which rating policy we should go for. If you don't get involved, please don't complain when you get your rates bill.

* Ian Bradley chairs the Auckland Regional Council's strategic policy committee.