Pushback against council plan to decrease commercial rates

Monday, 4 December 2023

Residents are being asked to take a hit to their rates bill to reduce the proportion of rates paid by businesses, but the plan will face opposition from councillors.

Currently, commercial properties pay 3.7 times the amount of rates that a residential property of the same value would pay to the Wellington City Council. The council is proposing to drop that to 3.25 times –leading to a rates rise of 4% on average for residents and a decrease of 5.5% for commercial properties.

Councillor Nureddin Abdurahman said it would be wrong for the council to decrease the business differential at a time when households were struggling.

“It doesn’t add up, it makes me angry,” he said.

The change was recommended by council staff in the Rating Policy Review, but was opposed by residents in hearings. Originally the review would have looked at changing the entire basis of Wellington’s rating system to land value instead of capital value, but the workload became too much and the review was scaled back.

Abdurahman acknowledged it had been a hard time for businesses and residents, but said it was a question of priorities. For the average residential ratepayer would mean a rates increase of about $120, while commercial property owners would get a discount of about $1600 on average.

“Our council faces real financial challenges. There are so many other things we could be spending rates revenue on than giving subsidies to big commercial landlords,” he said.

“At a tough time who should we be looking after the most?” For him, residential ratepayers were the priority.

Abdurahman will try to convince other councillors to vote against the change.

Ben McNulty framed the policy as a question of wealth distribution, from residents to businesses and commercial property owners.

It would mean residents faced the “unprecedented rates rise” (with no number yet confirmed) as well as an additional 4% from this policy choice.

While big box stores like supermarkets and hardware shops were generally charged outgoings like rates on top of their rent, and would therefore see a direct benefit to the policy, that was not the case for smaller businesses.

On a door-knocking trip to Johnsonville businesses he could find only four who believed they would be passed on the discount directly, out of 16. Some shop managers had laughed in his face at the suggestion their landlord would pass on the discount.

The benefit of the policy would not be passed on to “ye olde knitting store in town” said Nīkau Wi Neera.

He did not support the change and ultimately wanted to see the council move to land value rating rather than tinkering with the existing system.

Tony Randle said that “in the end, rates are to pay for services” and he doubted that businesses were getting 3.7 times the service from the council compared with residents.

John Apanowicz believed the change would help businesses on the ground, particularly in the inner city. “I hope [it will be passed on to businesses], that is the point,” he said.

“I do note the impact on residents,” but ultimately he believed the council could use tools to keep the rates increase affordable. Apanowicz was hoping for a less than 10% rates increase for the next year - in the face of other councils around the country announcing potential increases of 20% or more.

Sarah Free said that given the council had increased the differential in the past, it made sense to readjust it. There was no thriving city without thriving businesses, she said.

She was not set on the number and thought the change could be “less extreme” to soften the effects on residents.

“I think there will be a healthy debate about this one,” she said.

Councillors will vote on the commercial differential and other proposed changes to the rating system at a meeting on Thursday.