Government advice says rates cap will hurt tourism

Saturday, 13 December 2025

The Government’s looming rates cap and its push for “back to basics” spending will restrict council spending on tourism, potentially affecting several Government portfolios, official advice reveals.

Rotorua Lakes mayor Tania Tapsell warns the policy could hurt tourism and economic development across the country if not well-considered.

An email obtained by The Post from a Department of Internal Affairs official to Local Government Minister Simon Watts calls for a meeting to discuss the rates cap policy to work out what portfolios were likely to be affected as a result of the policy, and how other ministers may need to respond.

“A targeted cap on nice-to-have will influence areas such as tourism and hospitality support, and economic development agencies, with impacts on ministerial portfolios,” the email reads.

Watts disagreed the policy - the Government wants a 4% cap on rates from 2029 - would have a significant impact on tourism flow, but said the policy was still in consultation.

Tapsell said for most, it would be “near impossible” to continue providing for the community with the same level of infrastructure and services.

Tourism could take a hit, she said, though Rotorua would “always find a way to support tourism” given it was the city’s leading employer for jobs.

“I am concerned for many of the districts that aren't as strong with their tourism industry.”

Tapsell said local councils were the best entities to enable tourism, with important roles such as providing destination marketing that supported local businesses.

But it was not just marketing at risk, but the essential services visitors relied on - such as parks and public toilets, she said.

Ensuring infrastructure was adequate was “vital”, not just for locals, but the visitors coming through, with concerns over what would become of New Zealand’s “pure brand”.

“Swimming pools and these facilities are going to be incredibly difficult to continue to subsidise and keep open.”

Though it was early days, Tapsell had “no doubt” there would be pressure for Government to take over responsibilities at a national level.

“If they’re going to reduce our ability to spend on what our communities believe are core services, then [the Government] also needs to consider how they can support with additional revenue.”

She believed the country would see a shift from rates spread evenly and intergenerationally across the community to charging those who used the service, with an increase in user fees and charges once the rates band was imposed.

“The funding has to come from somewhere.”

Tourism Minister Louise Upston said councils would continue to invest in things that made a difference to their communities.

“What we do know is that visitors are a significant part of local and regional economies.”

Local Government New Zealand vice president and Gisborne mayor Rehette Stoltz said that, while it was difficult to predict the impact of the rates band on councils, each council would need to discuss the cost of every service and how much return it delivers per dollar spent.

“We will have to decide that quantum of money that usually goes into tourism, is that worth what we get out of it?”