Cap Attack: Mayors reject controversial rates freeze idea

Tuesday, 8 July 2025

Waikato mayors have hit back at suggestions of “rates capping” to control council spending, saying capping their main source of income could be a recipe for disaster.

Hamilton City mayor Paula Southgate and Ōtorohanga District mayor Max Baxter will end their careers in local government this year, and while Southgate said capping would lead to lower levels of service for ratepayers, Baxter said it was simply a distraction, and a “blunt tool” being used to put even more pressure on councils.

In April, Minister for Local Government Simon Watts began work on a rates capping system for New Zealand.

In his Cabinet paper, Watts said the new system would be “determined by an independent authority, transparent, simple for councils and their communities to understand, accurately reflect cost changes for councils, and localised to consider differences between councils”.

However, that work is in its infancy and no details would be released until December.

Calls to somehow cap rates rises have also come from the Tax Payers Union.

The union’s local government campaigns manager Sam Warren said more than 27,500 people have signed the union’s ‘Cap Rates Now’ petition and he was encouraged by the coalition government’s plans to look seriously at the issue.

He said the union didn’t have its own policy, but one idea was to cap rates rises at annual CPI (consumer price index) increases, or have them tied to inflation.

“It would need to be simple and understandable.”

He said population and growth rates could also be taken into account, and councils could hold public referenda if they want to exceed those limits for a specific project.

“Councils would plead their case … and if the cost is justified the public could say that seems reasonable, or not.

“Rates are cited as one of the biggest drivers of the cost of living, particularly right now,” Warren said.

Baxter said there was a lot of “negative press” about rates pressure but capping was “an incredibly blunt tool, and without other income sources - nonsensical, there’s no other options”.

He said unless central government offered other funding options, rates were the only way they could fund services to the community.

“We keep on forgetting that only 20% of the taxes or rates we pay … are from local government, and we don't criticize increased costs on the taxes from central government.

“I think for central government to be so hard on local they’ve got to take a serious look at themselves first.

“If you point the finger and say it loud enough, everyone will believe that local government is broken.”

He said if councils stopped spending on anything but infrastructure, “you're going to have ghost towns all around the country. They're going to be uninviting, unappealing”.

“Your crime rates, your graffiti, everything is going to increase as a consequence of living in an undesirable environment.”

Southgate said capping was “a hugely complex issue” and “the devil is in the detail for this one”.

“And we still don’t know what the proposal is.

“We have to stay engaged with central government, and have an honest conversation with our citizens … will people be okay with a lower level of service?

She said the subject would spoken about at next week’s Local Government NZ conference.

“What parts of our work do the Government want to cap? There needs to be more discussion between government and local government on what the definition of core and non-core services is.”

Southgate said the funding model for local government “is broken”.

“It's not sustainable the way we are currently operating.

“When you think about construction costs, material costs, staff costs, they're all greater than everyday inflation.

“That's not making excuses, that's pointing out a significant funding gap.

“Those are the kinds of conversations that we need to have with the public because less spending means less doing.”