Why are councils considering rates hikes of 25.5% and higher?

Sunday, 10 December 2023

There were two competing ideas for a proposed rates rise for Hamilton - one put forward by Mayor Paula Southgate, the other by Councillor Ewan Wilson.

Councils up and down the country are considering rates rises as high as 25.5%, even 31.8%.

High interest rates and inflation, and growing infrastructure costs are blowing council budgets – no one is immune from the cost of living crisis.

As civic leaders consider their long-term plans for 2024-2034, they say they don’t want to pass costs onto ratepayers, so why are such hefty rises being proposed?

Hamilton

Hamilton ratepayers could face a 25.5% hike in rates next year, after city councillors voted last week for the proposed average rates rise to go out for public consultation.

For the median ratepayer, a 25.5% increase in rates would add $13.90 a week to their bill, or $722 a year.

Councillor Ewan Wilson proposed the higher rates rise in the first year of the Long Term Plan to minimise borrowing and thereby save on interest costs.

Councillors had earlier decided against selling the city’s shares in Hamilton Airport which leaves rates and debt as the only options to fund services.

But Mayor Paula Southgate was not keen on holding back on infrastructure work or racking up further debt. “We can’t keep kicking the can down the road to future generations” through borrowing, she said.

Hamilton ratepayers will be consulted on a 25.5% rates rise in 2024.

Southgate had proposed a lower initial rates rise, and said she expected a “vociferous reaction” from the public on the matter.

The city is also considering targeted rates to develop facilities like sports grounds and to respond to extreme weather events.

Auckland

Auckland councillors agreed this week to send a draft long term plan (LTP) out to public consultation with a proposed average rates rise of 7.5% in the 2024/2025 financial year. This includes regional targeted rates aimed at environmental programmes, water quality, waste and transport emissions reductions. But it won’t include localised targeted rates.

Maintaining rates at this level assumes the council sets up the Auckland Future Fund, shifting the airport shares into that fund and selling a 35-year lease on the city’s port operations.

The great unknown for Auckland, and everywhere else for that matter, is the future of water charges, which are not included in the region’s rates bills.

The council-owned Watercare bills residents separately for their water consumption and wastewater.

Watercare has been fixing a collapsed wastewater pipe in Parnell that sent millions of litres of sewage into the city’s harbour.

Watercare chief executive, Dave Chambers, said the water company is in “an extraordinary situation” where the three waters legislation passed by the previous government means the company will not legally be part of the council after July 1, 2024 and so can’t formally participate in the LTP process.

And because Watercare’s balance sheet is tied in with the Auckland Council group, it is limited in the amount it can borrow, he said.

The new government has committed to repealing the three waters legislation, but has not yet said what will replace it.

And if Watercare can’t increase its borrowing capacity, it’s likely it will have to increase prices beyond the planned 9.5% rise in July 2024 and adjust its infrastructure delivery programme, Chambers said.

Earthquake strengthening on Wellington Town Hall is impacting Wellington City Council’s budget.

Hutt City

Hutt City residents face a possible 15.9% rates increase as inadequate water infrastructure poses a threat to the city’s future housing plans.

Wellington Water needs to spend $30 billion a year to rectify the region’s water network and without increased spending on water infrastructure, Hutt City won’t be able to support the new housing required for a projected 10% increase in population over the next decade.

A 15.9% rate increase would be an extra $9.89 per week, or $514 a year, for an average residential property valued at $815,000. Investment in water infrastructure makes up 40% of the proposed average rise.

Wellington

For Wellington city residents, next year’s rates rise could be in the range of 15% to 20%, The Post reported in November after city councillors were warned that proposed cuts to the 2024/2025 budget were insufficient to prevent an “unprecendented” rates rise.

The $329m Town Hall rebuild and earthquake strengthening has helped blow out the budget.

Councillors have debated selling the city’s stake in its airport, valued at $278m, which the public will be consulted on next year.

Similar to Auckland, Wellington councillors are considering setting up an investment fund that the city could draw on in the event of a natural disaster, such as an earthquake.

Christchurch

Christchurch City Council is looking at a 13.3% rates rise for the 2024-2025 financial year, with the new $683m stadium Te Kaha adding to financial pressure on the council from high interest and insurance costs.

For the average value property, a 13.3% rates increase would cost an extra $448 a year.

To reduce the increase to a 12% rise would require the council to find $9m in operational savings, the council’s head of finance, Russell Holden, said. To get to a 9% hike would mean finding $30m in savings, which he said would be “extremely difficult”.

Councillor Aaron Keown has suggested a regional rate is established so that neighbouring districts contribute towards the stadium cost.

Honourable Mention – Buller District

Perhaps the most extreme example of the financial pressure that water infrastructure is putting on urban and regional councils came this week from Westport, where Buller District Councillors discussed a potential rates hike of 31.8% due to uncertainty around the government’s plans for three waters’ infrastructure.