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Rates increases – coming to a letterbox near you

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by Andy Foster
Most of us got our rates bills for the new financial year on Friday. This is the first rates bill after the recent revaluations, so if your property rose in value by more than the average, there is definitely some particular pain there.

People have started contacting me to ask why their increases are as large as they are. It even came up in a friendly way on the football pitch yesterday.

I’ll use ours as a ‘modest’ example – city rates up 4.6% and regional rates up a staggering 15.7%. Overall that’s 6.2%. Other people, undoubtedly with greater proportionate rises in Capital Value in the revaluation, have even higher numbers. Normally I don’t get this level of immediate feedback on rates. I suspect the cause is the combination of rates increases and new property valuations.

The bad news is that there is a lot more proposed. The Wellington City Council Chief Executive’s Pre-election Report shows that over the 10 years of our Long Term Plan (LTP) rates are expected to rise by 48.2%. If you add a targeted tourism rate (targeted to relevant businesses) planned for next year, the rise is 52.2%. That is after accounting for a growing ratepayer base – a perfectly reasonable deduction because rates are then spread across more ratepayers. Add that back in and the raw number is 66.0%.

CPI is currently running at 1.7% which if continued would equate to 18.4% over 10 years.

It gets worse. That does not include remotely enough money for Let’s Get Wellington Moving or for Civic Square.

Based on the information to date, LGWM will cost the city and region in the order of $1.2billion in today’s money, while the Council’s placeholder in the LTP is just $120million. The annual cost seems to be (the LGWM numbers are a bit inconsistent) around $90million of which 62% appears to be expected to be paid through rates. It’s not entirely clear whether this properly factors in the loss of significant carparking revenue. My calculations remain naturally a bit rough at this stage but that winds up at around another 18% on rates. Add 48% and 18%, factor in something for Civic Square – it’s not a pretty picture.

This is exactly what I said in last year’s Long Term Plan debate and why I put up a raft of possible savings, and ended up voting against the budget as a whole. I just do not think that such a rates trajectory is remotely affordable, nor is a debt line that has city debt rising from $550million to $1.2billion over 10 years, and that again without LGWM and Civic Square even close to being fully provided for.

We are in my view trying to do too much in too short a time. We aren’t being clever enough in some areas either. Freddie Mercury and Queen sang ‘I want it all, and I want it now’. We – you – cannot afford that luxury. We are often told to ‘live within our means.’ Actually that means living within your means and therefore affordability becomes utterly crucial.

We are making progress to save money in some areas, largely unseen as yet. I chair the Finance, Audit and Risk Management Committee. This is engine room stuff. We’ve been taking a hard look at insurance, at reducing the ongoing liabilities of leaky buildings, at our tender and contract management processes, at management of contingencies. We’ve made some savings but there are more substantial savings to be made over time. Not sexy stuff, but very important. The numbers are very large.

Yesterday there was a Stuff article written by somebody who was a victim of a leaky home in Auckland. This involved poor workmanship and materials including cladding designed to last only 15 years. Leaky buildings are an ongoing nationwide disaster for everyone: property owners, Councils, sometimes liable suppliers and builders and architects (if they are still around).

The City Council’s annual report last year shows the Council has paid out $15million on leaky building settlements in the two years 2016-18, and we had to add $17million over those two years in actuarial provision for current and future settlements. This problem has a long and very expensive tail, and it has become clear that we are still building problem buildings all over the country. I have been talking with some very skilled building practitioners about practical techniques to reduce or eliminate future problems. There are system and legal changes required too. We will also need Government as the rule setters to step up on this and are planning to bring the parties together to find real solutions.

I believe there is also potential for savings in some parts of the organisation. The Council is a very complex beast. Sometimes you have to pry out the information you need, never forget anything, and don’t give up. Simplistic propositions generally don’t work.

That’s inside the organisation. I also think we have to dial back some of the expenditure expectations, focus on finishing things, and doing things that have to be done. There is a lot of debate still to come about Let’s Get Wellington Moving and getting some realistic plans, costs and funding arrangements.

And we have to push back some of those big cost items like arenas and runways. We need a clearer framework around investing in the community and recreation area, unless we can offset the costs. We need to be looking much more at value for money across the board. This absolutely doesn’t mean not doing anything new or anything that makes change. It does mean not doing everything though! We will certainly need to invest in assets necessary for accommodating predicted population growth.

Alternative revenue sources are critically important. Our development contributions (DCs) need updating. DCs are the way in which new development pays for the costs of infrastructure, facilities and reserves that it causes to be needed. A single dwelling or commercial building will probably have little impact on the need for bigger pipes, enhanced roading, more sewage treatment, a new reservoir or park, but when you think that we have around 76,000 existing dwellings and we are expecting to need up to 30,000 new dwellings and associated non-residential development over the next 30 years, it is clear that growth will result in significant costs, and growth should pay for that.

Let’s Get Wellington Moving includes some thinking about capturing some of the value uplift from properties around any mass transit route. It also looks at levies on parking spaces. In my view we need to differentiate between levying long stay parking spaces and avoiding levying short stay parking spaces which are important for business and retail customers.

The Government appears to have ruled out congestion pricing, and has certainly ruled out fuel taxes. None of these things are popular but if the alternative is a massive – permanent – rise in rates then they need to be explored. Long stay parking levies and congestion pricing in particular also incentivize transport behaviour change and were built into the original LGWM transport models. Without them, and much of the roading originally proposed, of course the model needs changing.

As with so many things about the Council, there are a complex mass of moving parts to be put together. These are often matters of real substance, and often take time to work through, but work through them we must if Wellington is to stay affordable and livable for many of us.

I would always welcome informed feedback.

Andy Foster is Wellington city councillor for the Onslow-Western Ward.

32 comments:

  1. Roy Kutel, 5. August 2019, 8:21

    Unliveable rates rises delivered to us by Councils that simply don’t understand ‘affordability’. GWRC rates rises are truly awful as we’re paying more for worse services that the council took eight years to plan. Abolish GWRC now!

     
  2. Make it stop, 5. August 2019, 8:52

    Certainly a shock to open the latest rates invoice. I’m now paying just over a month’s wages per year for the privilege of living in Wellington and I suspect I’m on the lower end of the rates spectrum. What do we get for that? No library. Most services user pays – rubbish/parking etc. Public transport ruined under the premise of it costing less, and now costing more than before. Wellington is rapidly becoming unaffordable and risks losing its coolest little capital moniker if it hasn’t already.

     
  3. Traveller, 5. August 2019, 10:05

    My income has gone down (because of retirement) over the last ten years. But in the same decade, the annual rates bill for my house in Brooklyn has kept going up. Ten years ago it was $3260. Now it’s $5055. How does the council expect me to find an extra $1800 per year?

     
  4. Hayden, 5. August 2019, 11:33

    I live up in Karori and my Rateable Valuation (Capital Value) increased from $600,000 to $870,000 this year, a 45% uplift ($270,000 / $600,000 = 45%). Reading articles at the time it sounded like our 45% uplift was around the average Rateable Value increase in Wellington.
    What doesn’t appear to add up is: if my Rate Valuation has gone up by around the average, why have my annual rates gone up by 6.7% ($237.26 / $3,790.78 = 6.7%) against WCC advice that the ‘average’ increase will be 3.9%?
    Maybe there is a logical reason for this discrepancy, however being a little sceptical I’d be interested in seeing substantiation from WCC that the average rates increase accross Wellington is really their stated 3.9%?

     
  5. greenwelly, 5. August 2019, 12:14

    @Hayden. Are the rates you quote just the WCC portion? The headline number (the big one at the bottom they want paid) includes the regional council which went up 15%, that will drag the average increase up over 3.9%

     
  6. Andrew, 5. August 2019, 12:19

    The white elephant convention centre has to be stopped RIGHT NOW. We need that money for the library.

     
  7. Michael Gibson, 5. August 2019, 12:28

    Andy’s comments are so valuable. Our rates increase is 1.63% for WCC and an incredible 12.46% for the Regional Council. Our “Public Transport” rate which is part of the Regional Council rate has increased by an even more incredible 13.78% which completely belies the Regional Council’s claims that the new scheme was meant to save money.
    How on earth can our Transport rate go up by 13.87% when the number of peak-hour services from Karori was reduced from 18 to 10????
    I hope there is support when I present my Petition to Greater Wellington on Wednesday morning asking them to get a report from the Audit Office before the election on how they are operating the bus contracts.
    Are they levying the fines properly? And are the proceeds being allocated to Wellington City ratepayers or are they being shared with the people from Porirua (for instance)?

     
  8. Goofy, 5. August 2019, 13:01

    It’s an outrage that the rates have increased with the shockingly bad management and services from the Council. A Council that was designed to provide cost effective core services to the ratepayers. If managed properly (assets not sold off and contracted out) our rates would have decreased over time.

     
  9. Andrew, 5. August 2019, 13:25

    Here in Brooklyn I’m showing a 7.7% increase from the WCC and 19.6% from GWRC. CV has increased by 59%.

     
  10. Meredith, 5. August 2019, 20:39

    Andy, Thanks for this. There is something very wrong with what is happening here. Some in inner city apartments will be paying over $5000 per year in rates but the infrastructure they need is less than, say, that of a house in Tawa and, each apartment block brings in multiplier gold to the Council. I am a female pensioner…with no other income except the pension about $21,000 a year, taxed. I didn’t earn much during my life because I had children, so I had to take time off, and the jobs I had did not pay much (much less than the men). I am lucky my mortgage is only $350 a week. How do I keep on paying these rates increases and still eat?

    Two questions:

    1. The Council never seems to produce figures showing exactly where in the Council’s business from year to year there have been income and expenditure increases and by how much. All companies and Body Corporates have to produce these in their accounts. Can you produce these figures for each Council business and CCO for the last five years?
    2. Are you still on the Airport Board? As I recall, you support the runway extension. Have you changed your mind? How much has all the legal wrangling cost us? Does the new hotel impact negatively on the dividend that we receive? And are there comparative figures for the airport dividend over the last five years?

     
  11. Northland, 5. August 2019, 20:40

    Can someone do a comparative analysis of per-capita WCC rates and expenditure between 2019, 1999, 1979 to work out what has changed in each 20 year interval? Is it compliance cost, scope of the WCC portfolio, consultancy costs, staff costs? Are the WCC trying to do so much more … or does everything just cost lots more (e.g. consultancy services) – or is it actually comparable in real terms? Is it bureaucracy bloat, or are ratepayers just good at moaning?

    In theory our rates should be going down in real terms as human advancement makes the cost of ‘doing things’ cheaper year on year.

     
  12. Alf the Aspirational Apteryx, 5. August 2019, 21:24

    Andy, are you standing for Mayor this year? I find I agree with you on most things except your predator obsession. We have to say a tearful goodbye to Lester and Lavery before they destroy this city.

     
  13. Lim Leong, 5. August 2019, 21:51

    My WCC rates increase is 2.9% whereas the GWRC rates increase is a whopping 14% ! I have a strong suspicion that that GWRC’s increase is to pay for the bus debacle created by GWRC itself. The reality is I now have to take cars on many occasions, which is adding to traffic congestion and environmental pollution, because buses are unreliable and/or take too long with transfers.
    Could someone please explain the logic of paying a lot more for a worse service ?

     
  14. Peter S, 5. August 2019, 22:22

    Thanks Andy for this very informative, but depressing, article. Can you then please tell us why you voted for the new Convention Centre? What were you thinking?

     
  15. D.W., 6. August 2019, 7:55

    Lim – GWRC introduced their plan to reduce costs! If GWRC had left things as they were with our 100% electric trolley buses still operating, we would have not spent $11million taking down the overhead wires, which incidentally the WCC didn’t object very strongly about.

     
  16. Keith Flinders, 6. August 2019, 8:31

    Elections are in October so we all know what to do. Every one of the present WCC councillors voted for the vanity conference centre which will add millions to the rates each year in running costs, so none deserve re-election.

    I addressed the WCC about rates affordability in 2014 and the response from one of their number was: “Anyone who can claim hardship (financial poverty she meant) can apply to have their rates payments set aside until they die or sell their house.” Explains a lot about councillors’ understanding of economics, let alone social responsibility.

    The GWRC has four outside the Wellington City boundaries councillors expecting to be re-elected and who decided we should have smelly old polluting second buses instead of trolley buses. They also voted to substantially cripple the excellent bus service Wellington City enjoyed for nearly 30 years, and charge us more for less. Do these four feel any shame or take responsibility for their actions? No they don’t, instead they are standing again. Included is the councillor who overviewed the removal of seats from buses so they became like cattle trucks.

    Email Brash, Donaldson, Laban and Lamason asking them to stand aside and let others with more acumen get elected. We also need to petition for the abolition of the GWRC, but let’s be thankful that we didn’t end up with Fran’s Super City which would have been far worse and even more expensive.

     
  17. K, 6. August 2019, 9:03

    Didn’t Andy Foster vote in favour of the convention centre, longer runway and the Flyover? And now he is writing about a need for budget constraint??

     
  18. Benny, 6. August 2019, 10:28

    Even the Wellington Airport 2030 Masterplan acknowledges the runway extension won’t be needed for 20 years (page 22). Who still believes it’s something to even talk about?
    As for the convention centre, who will finally admit it’s way off the priority list?

     
  19. glenn, 6. August 2019, 10:35

    Hmmm, imagine what your rates will be, when most of you advocate for light rail, food for thought.

     
  20. Bob, 6. August 2019, 11:04

    So it looks like WCC have kept THEIR rates increases down as much as possible while dealing with munted Council buildings, the Town Hall bill, and the Library closure. BUT the GWRC have put in a huuuge increase after “saving” money with the new “better” bus service. I agree that there needs to be an audit of the GWRC. And the GWRC _still_ don’t admit to their responsibility for the debacle.

     
  21. Dave B, 6. August 2019, 12:53

    @ Glenn. I (alone?) advocate for extending existing rail to complete the currently-truncated regional public transport spine. This will cost more than “cheap” light rail running in the streets, but will deliver far more in terms of regional benefits. It ought to attract government-funding as a transport project of ‘national significance’.

    The crunch-question is, how much more will it cost in attempting to “build our way out of congestion” with more roading, if we do not do this? Far more and with far less effect, history would suggest.

     
  22. Robin Hood, 6. August 2019, 20:49

    If you’re a low income earner – or retired – there’s a chance that you’ll qualify for a rates rebate of max $640. Thought I’d put it out there, in case someone wasn’t aware of this.

     
  23. Lissa, 6. August 2019, 21:03

    35, renting, hope to one day be privileged enough to be able to complain about rates rising for the home I own.

    Please, please fix our beautiful library. The City isn’t whole without it.

     
  24. Helen, 6. August 2019, 23:05

    Lissa – Landlords will definitely be passing on the rate increase to you. And when the beautiful library is fixed, then add on some more rental dollars. But hopefully you will have a few dollars left to put in a ‘close to zero savings account’ for a deposit on a house in say 10 years and compete with the 80,000 extra people planners are expecting in Wellington.

     
  25. Alf the Aspirational Apterxy, 7. August 2019, 7:15

    @ Lissa: you should feel entitled to complain about the exorbitant rate rises as they will likely be passed on to you to pay as a renter.

     
  26. Bobby, 7. August 2019, 15:30

    Drain the swamp! Vote out Lester, Lavery & all the WCC / GWRC Councillors.
    When CPI runs at 1-2% & these people approve a 3-15% Rates rise, we know they are not running efficient organisations.
    Enough is Enough Wellington – Vote against EVERY SINGLE COUNCILLOR at the next election – send them all a clear message that we’ve had enough!

     
  27. Vee, 8. August 2019, 22:46

    Andy Foster for Mayor!
    Remember what Stephen said to William Wallace in the forest in the movie Braveheart?
    “We’re fooked” is what he said, and we are!
    Anyone but Lester! Kia Kaha!
    There will be dancing in the streets the day he is booted out! He told us a while back, 3.9% rates increase for the next ten years, yes every year, cumulatively. Back to the sandwich shop Mr Lester!

     
  28. steve doole, 9. August 2019, 3:55

    Hi Andy. Funding councils by rates appears limiting. You mention congestion pricing and fuel taxes. Is the government looking at other funding mechanisims for councils, such as,
    – workplace parking charges, as in Nottingham, England
    – equalising charges for parking overnight near homes.
    Currently residential properties that have parking spaces for cars on them, often with a garage, have higher values than the house next door that does not have parking on that property. The higher value property of course has higher rates bill from council than a similar property next door.
    Charging for parking overnight in all public space, including any part of road and road reserves, will address this imbalance in rates. People who park on the road are in effect avoiding accommodating their vehicles on the property, using public space instead. Yes, councils would likely keep track of how many vehicles could reasonably be parked at some properties, and scan the vehicles parked in streets regularly – perhaps once a week would be adequate.
    charging for idling a vehicle engine for more than a minute. The Times newspaper in England suggested that government is considering increasing the penalty to £80 ($160) to reduce pollution from exhausts.

    Are any similar ideas being examined?

     
  29. Basket fungus, 9. August 2019, 9:51

    Steve those ideas sound like real vote winners. You may not have noticed that it’s actually impossible to accomodate a vehicle on a lot of Wellington properties due to the topography.

     
  30. Ron Oliver, 9. August 2019, 15:08

    Wellington City Council is a Body Corporate so its definition tells me. Am I right? What then is its main purpose? The Commerce Act tells me that a corporate body is an organization for the purpose of fairly competing with others for the purpose of making a profit. It also states that it has to compete fairly with other private Corporations either by way of contract or direct competition and I guess that also includes the debt-servicing industry. I don’t think our Council should be competing as a private entity at our expense. What has happened to public representation and our democratic representation? Our councillors at present may as well not be there. Someone should tell them that profit comes from community wellbeing, not from electronic blips in someone’s private bank account.

     
  31. Paul, 9. August 2019, 17:01

    Well written Andy – Dont forget to review the number of contractors in government over $100k. Some are required for sub 1 year projects that makes sense. In the pub the other day and the whole table bar one was a contractor!

     
  32. George, 18. August 2019, 10:18

    The convention centre is likely to be subject to the same flawed financial analysis as Zealandia, with ratepayers again picking up the tab.