Rating Principles Rates are never popular or easy to change No - - PowerPoint PPT Presentation

Rating Principles

 Rates are never popular or easy to change  No ‘right system’ – driven by historical decisions  General taxation principles apply

 Equity – people in similar situations pay similar amounts.  Fairness - all pay a fair share.  Affordable and related to services provided.  Simplicity – people can understand the system  Stability – funding is secure to aid long term planning  Ease of administration – administration costs are low  Flexibility - to be able to meet changing funding needs

Rating Systems

 Rates are a mix of property tax and service charges  In place for 150 years but tools have changed  Processes set by LGA 2002, and Tools by the LG

Rating Act 2002

 Huge flexibility

 UAGC and general rate differentials – or none  Targeted rates – uniform, differentiated and value

based

 Overall % of uniform rates limited to 30% (ex water

and waste) – so some rates must be based on value

 Councillors decide on what is best mix for the City –

have to follow the LGA 2002 process.

Rating Policy – Process to Change

Significant changes an LTP issue

• Now 10 years of current system
• Work through 2014 to apply 2015 LTP
• Can be very disruptive and resource hungry
• Identify the problem and explore tools to

improve

• Best to focus on tools that limit the scope of

change, and phase in over time.

• Minor tweaks can be implemented though Annual

Plan

• Should look at the whole funding mix

Rating Policy – Process to Change

 Council needs to consider the following :

 Community/Council outcomes – overall impact and

affordability

 The distribution of benefits between the community,

groups and individuals (private / public split that drives fees and charges targets)

 The period over which benefits occur (should these

benefits be funded by loans?)

 The extent that activities are caused by individuals or

groups (exacerbator pays)

 The costs and benefits of funding activities distinctly

(efficiency issues)

 Unintended consequences and externalities – (B&Bs Vs

motels, fly-tipping,

CV or LV

 Nelson general rate on LV.  Majority of Councils on CV, but LV used by many rural and

provincial

 Used to fund activities that benefit the whole district  Property values are a poor proxy of short term incomes  CV is better than LV – but not great either!  Is CV that much better that it is worth the major

disruptions to shift?

 Nelson has 51% of Rates from LV based General Rate  Has the option of increasing the level of uniform charges

(UAGC and / or targeted uniform)

 Uniform charges (includes Stormwater) currently at 19% -

room to move

 Uniform rates are regressive

CV or LV and UAGC %

Rates per Resident 13/14 Rates per Rateable Property Rating System - general rates General rates % of total Rates UAGC (inc GST) 2013/14 UAGC rates % of total Rates Local Authority Nelson City $1,299 $2,878 LV 51% $372 12% Tasman District $1,309 $2,819 CV 43% $290 9% Marlborough District $1,283 $2,154 LV - Area 60% Nil 0% Invercargill City $893 $1,803 CV 16% nil 0% New Plymouth District $996 $2,129 LV 45% $371 15% Gisborne District - Full review $1,202 $2,399 CV 7% $693 25% Hastings District $877 $2,125 LV 58% $180 8% Napier City $815 $1,876 LV 58% $324 to keep under 30% cap 15% Palmerston North City $973 $2,468 LV 55% $585 21% Rotorua District $1,126 $2,570 CV 44% $604 20% Lower Hutt City $1,100 $2,804 CV 58% nil 0% Selwyn District $699 $1,754 CV 29% $164 8% Timaru District $967 $1,944 LV 9% $460 19% Wanganui District $1,134 $2,398 LV 20% nil (Community Facilities UTR

• f $765)

0% Porirua City $1,088 $3,215 CV 55% $460 12%

Context of Benchmarking Councils

Local Authority Rates Increase 13/14 Opex per rateable property Gross Debt $ million 2013/14 Use of Other value based rates using other valuation method Nelson City 3.2% $4,578

100

No Tasman District 2.3% $4,349

173

No Marlborough District 2.2% $3,312

51

A few CV targeted rates for river works Invercargill City 1.4% $3,137

58

New Plymouth District $3,626

135

CV Stormwater Gisborne District - Full review 2.5% $3,598

36

LV pests and plants Hastings District 2.4% $3,188

110

no Napier City 1.5% $3,384

54 (net is nil)

no Palmerston North City 3.9% $3,572

145

No Rotorua District 1.0% $4,133

170

No Lower Hutt City 1.7% $3,598

81

no Selwyn District 8.3% $4,381

130

Yes - land drainage on LV or Hectares Timaru District 4.8% $3,032

85

no Wanganui District 5.0% $3,404

105

Yes - CV for roading, debt retiring, CBD services Porirua City 3.7% $4,171

60

Results of Requested Models

LV with Commerical Differential 24% LV with Commerical Differential 24% UAGC + 1% CV with differentials and UAGC the same LV with no commercial differentials CV with no differentials Residential 1.3% 1.2% 1.6% 14.3% 15.2% Multi unit residential 1.1% 1.8% 6.7% 11.4% 13.4% Commercial Inner

• 4.2%
• 3.9%

0.0%

• 53.2%
• 53.0%

Commercial General

• 4.1%
• 3.9%
• 0.7%
• 41.0%
• 37.5%

Rural 2.3% 0.9%

• 25.6%

24.5% 33.5% Small Holdings 2.0% 1.1%

• 11.8%

21.4% 14.1% Shifts in Proportion of Rates Rating Differential Group

The Commercial Differential

 Council has the tools to set differentials

• General or targeted
• Introduced in 1970’s to increase LG funding

 Process to justify – Revenue and Financing Policy

 LTP issue  Costs and benefits, who pays, private / public split  Modified for principles (affordability etc)  Council decision  Results vary significantly across NZ

 Allocation of benefits has been re-looked at

 Comfortably justified  Level of differential not high compared to others

The Commercial Differential

Local Authority Commercial Differential 13/14 Commercial rates fixed proportion Rating System - general rates Nelson City 1.4 to 2.2 25% LV Tasman District nil no CV Marlborough District 2.9 (Blenheim) no LV - Area based Invercargill City nil no CV New Plymouth District 4 Yes 27.2% of General LV Gisborne District - Full review Targeted multiple no CV Hastings District 2.3 to 3.5 LV Napier City 2.9 Yes 34% of general + UAGC LV Palmerston North City 3.4 no LV Rotorua District 2.1 (reducing) No CV Lower Hutt City 2.9-3.4 (to 2.3 over 10 years) No CV Selwyn District nil No CV Timaru District 4.2 No LV Wanganui District 2.3 No LV Porirua City 2.8-3.5 No CV

The Commercial Differential Area –

Nelson Inner City and General

The Commercial Differential Area

Tahunanui & Stoke

Use of SUIP for Rates

 SUIP = Separately used or inhabited parts of a rating unit  Method to apply rates to leased properties and

multi –unit residential and businesses (malls, retirement villages etc).

 Can be applied to all rates or specific targeted rates –

Council decides. Should be justified by benefits.

 Use varies around NZ but most Councils use SUIP for at

least some rates, especially for utilities.

 Some UAGC issues can be dealt with in remissions policy.  Changing wastewater rate to non SUIP basis will shift some

costs into Commercial general rate

 If not used rates will increase for single residential

in particular.

Use of SUIP for Rates

Local Authority SUIP* Basis for Rates SUIP Exclusions Nelson City Yes Granny flats (no kitchen). Partnership

• ffices. Hotel / motel rooms

Tasman District Only for some targeted Household members (granny flat) Marlborough District Yes Hotel / motel rooms, Home businesses Invercargill City No New Plymouth District Yes Family members exempt the UAGC and roading charge Gisborne District - Full review Yes Sleep outs, family used flats. Motels. Hobby businesses. Hastings District Yes commercial accommodation Napier City Yes single family residence Palmerston North City Yes - Only on targeted rates Not on UAGC. No other exemptions Rotorua District Yes - Only on targeted rates Single household use Lower Hutt City Yes - Water and recycling

• None. Wastewater on ' each

household' Selwyn District Yes - targeted rates Not UAGC . Family or ratepayer use (granny flats, business etc). Timaru District Yes - Water and pools Through remissions for family use. Wastewater on # of toilets Wanganui District Yes - most targeted Not roading - no exemptions Porirua City Yes

• None. Wastewater on # of toilets.

Trends and other Options

 Shift in recent years across New Zealand to more

capital value rating,

 more targeted uniform rates for activities such as

community facilities and part of roading (network access charge)

 Councils on land value general rating introducing

targeted rates based on capital value.

 Stormwater  Emergency management  Economic development

Other Factors to Consider

 Rural (-35%) and Small Holdings (-10%)  Consultation process for any significant changes

 Is this a major issue for 2015 LTP?

 Possible future amalgamation

 Currently LGC proposing CV in Northland and Hawkes

• Bay. Changes phased in. Any new Council would

consider rating mix at first LTP process.

 Minor changes until future structures more certain?

 Available staff time  Elected Members time and willingness to tackle the issues

 Is there a major problem?