Runaway rates: Discount sweetener for prompt payment

As hefty rates bills land in letterboxes throughout Greater Auckland, five out of the eight councils are offering sweeteners in the form of discounts for prompt payment.

Papakura District Council has upped its discount to 5 per cent - the same as Rodney District's - for those who pay their rates in full in one instalment by the due date.

Other councils offer from 2 per cent to 2.5 per cent.

Papakura Mayor John Robertson said the rise from last year's 3 per cent was done to offer a reasonable match for market interest rates. "I think if you are going to offer a discount it has to be the right incentive - and for the council, if we can collect it early, we are saving in finance costs as well."

That incentive is greater than it sounds, said Rodney finance director Kevin Ramsay. "This actually equates to more than an annual interest rate of 5 per cent," he said.

"This is not the same as putting the rates amount into the bank and gaining interest on the whole amount for the year.

"You would have to draw out a quarter of the amount on August 25, November 25, February 25 and finally May 25 to pay off the four instalments.

"Therefore, getting 5 per cent on the whole amount up front is the equivalent of getting around 10 per cent on the reducing balance."

Mr Ramsay said Rodney councillors thought 5 per cent would encourage prompt payment without creating too much of a cost to the council and therefore other ratepayers. He said the discount offer was popular, with about 40 per cent of the the council's $70 million rates take coming in by the first instalment's due date of August 25.

North Shore finance director Dale Lott said the council did not need to offer a discount as an incentive because such a high number of residents paid on due dates.

A further consideration was the cost. A 5 per cent discount could swallow as much as 2 per cent of the council's $140 million rates take.

"Also, a lot of people on normal incomes cannot afford to pay straight away, so you would end up giving a discount to the more wealthy."


FINANCIAL CARROTS

* Rodney 5 per cent.
* Papakura 5 per cent.
* Auckland Regional Council 2.5 per cent.
* Auckland 2.15 per cent.
* Manukau 2 per cent.
* Waitakere nil.
* North Shore nil.
* Franklin nil.