But it far exceeds land value on almost every criterion and principle. This is why the Rating Inquiry recommended it be the common system for all councils and why the Government wrote it into the Auckland Council founding legislation.
Time to stop propping up land value system.
The land value system has been propped up by using about nine somewhat ad hoc differential categories to make it work. The whole effect has been to make it look more like a capital value result.
The recent revaluations showed up its flimsiness.
Ideally, a capital value system should be free of differentials but the council apparently plans to retain two differentials at reduced levels.
It is proposed businesses pay a differential of 2.2 (that is, 220 per cent the base general rate), and that rural residential properties pay at a differential of 0.85 (85 per cent of the base general rate).
This might be fair enough for the short term, but these differentials should be transitioned out as soon as possible starting now; say progressively over the next five to maximum seven years.
No rating policy can meet all expectations.
It seems councillors as a whole have agreed, taking all factors of equity and fairness into account, that the move to a capital value base is the preferred rating solution. But that doesn't mean someone won't try to drum up a case to oppose and discredit the change to a better system.
The most likely way of doing this will be by selectively singling out particular properties that have bigger increases but ignoring those that have reductions. This might produce some populist support but that doesn't make it right.
To appeal for public support on this basis would be unworthy of the search for a better rating system.
Rating policies cannot be worked out and administered on the basis of the impacts on individual properties.
Properties have to be grouped by category.
Whether we ratepayers like it or not, we have to accept that rating policy by its very nature requires some compromise.
It is not possible to write a policy that will give a level of fairness and equity that satisfies all property owners.
No policy can meet all expectations.
Historically, councils have found they must seek a best fit for categories of property, not for individual properties, even though this will in most cases leave some properties with solutions the owners will consider less than ideal.
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 are applied across the board to everyone.
Most "anomalies" aren't anomalies, but the real truth.
Big increases and decreases are often referred to as anomalies. Most aren't anomalies at all.
They are disclosures of the real truth.
With a more principled system, some ratepayers will get a pleasant surprise to find out they have been over-rated.
Others will get a shock to find they have been under-rated under an inadequate land value system.
Taken as a whole, the only real argument against the change to capital value is self-interest, and that isn't a worthy justification for opposing the change to a more principled, equitable, and fair system.
None of us likes rate increases.
At the same time, we at least pretend we want a fair and equitable system. It looks as if we might get it.
Need to rate all businesses on the same consistent basis.
So far, so good, but there is one other significant factor council needs to address if its business rate is to be consistently applied. Somewhere near 2000 properties are coded as business and pay the business rate.
There are seemingly anywhere from 2000 to 5000 or more properties, coded as residential, which are used wholly or partly for business purposes. Some of these have been identified and pay a de facto, inconsistent, partial business rate, but many haven't been included.
As long as the council has a business differential, it has a fundamental obligation to identify these properties and rate them consistently at the business differential to the extent they are used for business purposes.
It must do so in fairness to businesses that do pay the formal business rate.
This doesn't need to include home offices where the centre of gravity of the business is elsewhere, or minor incidental use, but it should include all genuine businesses.
Of course, if the business differential was abolished, the irregularity would cease to exist.
How do Rotorua rates compare anyway?
It is easy, cheap, and natural for us to say Rotorua rates are high, but is this true?
The truth is that the average residential rate is not high compared to peer provincial city/district councils with a similarly diverse mix of demographics. If anything, they are below the average.
But Rotorua's business rates are on the high side and this needs to be fixed on a planned basis over time by doing away with the differential multiplier. Too often people make the mistake of comparing rates against properties with similar land or capital values in other councils.
This is fallacious because property values are not a good comparator.
They vary from place to place for lots of reasons. It is more useful to compare based on the nature and characteristics of the property.
A better measure for retail would be to compare based on foot traffic.
