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 Rates per Rating General UAGC (inc UAGC rates Resident Rateable System - rates % of GST) 2013/14 % of total 13/14 Property general rates total Rates 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 $1,202 $2,399 CV 7% $693 25% review Hastings District $877 $2,125 LV 58% $180 8% Napier City $815 $1,876 LV 58% $324 to keep 15% under 30% cap 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 0% Facilities UTR of $765) Porirua City $1,088 $3,215 CV 55% $460 12%

Context of Benchmarking Councils Local Authority Rates Increase Opex per rateable Gross Debt $ Use of Other value based 13/14 property million 2013/14 rates using other valuation method 100 Nelson City 3.2% $4,578 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 58 135 New Plymouth District $3,626 CV Stormwater Gisborne District - Full 2.5% $3,598 36 LV pests and plants review Hastings District 2.4% $3,188 no 110 54 (net is nil) Napier City 1.5% $3,384 no Palmerston North City 3.9% $3,572 No 145 Rotorua District 1.0% $4,133 No 170 Lower Hutt City 1.7% $3,598 81 no 130 Selwyn District 8.3% $4,381 Yes - land drainage on LV or Hectares Timaru District 4.8% $3,032 no 85 Wanganui District 5.0% $3,404 105 Yes - CV for roading, debt retiring, CBD services 60 Porirua City 3.7% $4,171

Results of Requested Models Rating Differential Shifts in Proportion of Rates Group LV with LV with CV with LV with no CV with no Commerical Commerical differentials commercial differentials Differential Differential and UAGC the differentials 24% 24% UAGC + 1% same 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%

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 Commercial rates Rating System - 13/14 fixed proportion 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 Targeted multiple no CV review Hastings District 2.3 to 3.5 LV Napier City 2.9 Yes 34% of general + LV UAGC 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 No CV years) 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 offices. 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 Yes Sleep outs, family used flats. Motels. review 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?