Escalating rate bills: who’s best, and worst

by Neil Douglas
The election campaign has shown escalating rate bills to be foremost in the minds of voters. To help you assess how your authority has been doing relative to the rest of the Wellington region, we have compiled a league table. The top performing authority is Porirua followed by Wellington City.

Both have kept rates rises below the national average over the last five years, though both have still managed increases above inflation. Bottom are the three rural authorities, where rates have soared over the last five years.

table

We used rates and population figures on the New Zealand Statistics database for 2007/8 and the most recent year 2011/12 to compile the league table. This gave data five years apart. The years clearly don’t coincide with the three-year terms of our local councillors, but we think it gives a pretty good picture of what has been happening.

Your rates bill has two components: your city/district bill and your wider Regional bill. We have added the two bills using the GWRC rates formula to apportion the regional rates to your area. Typically, the regional bill adds ten to fifteen percent on your total bill.

To standardise the figures, we have divided by population. This is the population on census night. Of course, some people may not have been resident in their ‘rating authority’ but still pay rates there. James Cameron, the film producer who has bought up large tracts of South Wairarapa, is a famous example. Indeed, South Wairarapa has more than 30% of its rate demands posted to addresses outside its boundaries. This said, most of us do live where we pay our rates and so long as the proportions haven’t changed much, the percentage increase will still be valid. There are also businesses, and these are also an important source of rates. So our league table is far from perfect but we still think it gives a picture of what the total rate demand is per resident and how it has gone up over the last five years.

We have created two graphs. The first graph gives your total rate for both 2007/8 and 2011/12.

rates per person

The highest rates are paid in Wellington at $1,308 per person. Perhaps no surprise there, given the range in services offered. What is surprising is that the next highest are the three rural authorities of South Wairarapa (SWA), Carterton and Masterton where rates have shot up over the last five years.

Of the three, SWA charges $1,301 per person which is only $7 shy of Wellington City. When asked, the Chief Executive Officer of South Wairarapa Paul Crimp replied that “South Wairarapa has three pools, three town halls, three wastewater systems, three of everything (one each for Martinborough, Greytown and Featherston). Way back, SWA had a very similar infrastructural asset base to Upper Hutt (about $200M) and you can appreciate the very different economies of scale of densely populated urban vs rural areas”.

SWA also has a very large geographical area and roading network to maintain and Adrienne Staples the Mayor also mentioned the rise in bitumen prices. “In 2009, our roading costs were going through the roof because the cost of bitumen was skyrocketing. The council either takes the money off ratepayers or doesn’t do the work”. This can’t be sustainable however. Surely, the Central Government needs to look at the road funding formula. How many kilometres of rural roads and bridges could you maintain instead of $100million flyover for a State Highway in Wellington?

Now, if cheap rates are the most important factor in your choice of where to live, then Wairarapa folk should consider moving over the Rimutakas. Upper Hutt would be the cheapest place to live at $836 per person in rates. Next is Porirua at $980 and Lower Hutt at $992. All three are lower than the national average of $1,020 per person.

graph2

The second graph looks at the rate of increase over the five years. Porirua, Wellington City and Hutt (Lower and Upper) residents should feel happiest in the knowledge that their rates have increased less than for NZ as a whole. In fact, the folk of Porirua and Wellington should thank their incumbent councillors for imposing lower rate increases of 2.7% and 2.8% a year than the national average of 4.1% a year. Nevertheless, the increase is still higher than retail prices (CPI) which averaged 2.5% p.a.

When asked by Caleb Harris of the Dominion Post, Wellington Mayor Celia Wade-Brown managed to spin the rates argument around. Despite the “low” average annual increase, the Wellington City Council was still maintaining and improving its assets: “the amount of money we’ve invested into earthquake strengthening negates the thought that we’re not investing in our infrastructure” she countered. Maybe she just should have complimented ex CEO Garry Poole (now CEO of Tauranga on three quarters of his Wellington salary) for keeping a tight ship.

Certainly, it is the rural ratepayers who should be most concerned about their rate increases as they have averaged an eye-watering 6% to 7% a year. Clearly, this can’t be sustained. Mayor Ron Mark of Carterton somewhat flippantly put it down to “a few rogue years” but the rise should be concerning him.

The CEO of SWA emphasised that we need to be aware of where each local authority was in relation to infrastructure replacement: some have high debt and servicing costs but have new infrastructure, whereas others have no debt but a lot of infrastructure that needs work.

Surely, the three rural authorities must be in the midst of a major infrastructure renewal and improvement program – like the Masterton sewerage scheme which was grossly under-costed by consultants. Hopefully, they are not borrowing too much from the bank to pay for it because this debt will eventually need to be repaid by future ratepayers. On this, Masterton Mayor Garry Daniell has commented that his council had spread the cost of major infrastructure projects over time as much as possible, by borrowing so “we expect the rate bill will flatten out”.

To end, we admit that comparing rates is tricky. Nevertheless whether you think you have been getting a good bang for your ratepayer buck is in your hands, given it is election time. In exercising your democratic right, do remember the positive things that your rates have bought…

carterton

… such as the highly regarded new Carterton events centre. Originally budgeted at $6million, it came in nearly 50% higher when completed in Autumn 2011 much to the angst of the local Ratepayer’s Association. Now it is well used and earning revenue for the Council.

Also remember that the ‘new’ guys who promise a lot may be no better at delivery than the old guys who know what’s actually possible.

The second question you should ponder since supersized cities are on the horizon is whether you would like to amalgamate with any of your fellow eight councils given their relative profligacy over recent years.

Neil Douglas is a Wellington economist who also owns a small nut farm / arboretum in the Carterton District. Scoop Dogs Henry and Harriet are wearing $59 dog tags as rural nut farm dogs – a bargain compared to $110 each for city dogs.

Since this article was first published, we have replaced the second graph with a more correct version.

 

14 comments:

  1. andy foster, 9. October 2013, 15:31

    Nice assessment Neil
    Three other things to add:
    The biggie especially for Wellington City is that the numbers you have used are rates per resident. When you compare the different authorities it would be good to note that they may have widely differing proportions paid by businesses. That is obviously true of Wellington City – because so many non Wellington residents work in the city and that is reflected in the rate distribution – ie the relative actual residential rates are much lower than your analysis shows.

    The second point is the rates are not the council’s only source of revenue, or more importantly there are other costs imposed by councils – eg you could raise or lower rates depending on the approach to user charges. Some also obtain revenue from investments such as Wellington Airport and ground leases. According to the Palmer report (done from GWRC and PCC as part of the ‘Super City’ discussion) the region’s territorial Councils raise between 60 and 80% of their income through rates.

    Final point is to look at predictions. The 10 year long term plan numbers (2012-22) I have show all the territorial Councils between 33% and 43% cumulative over ten years, except for Upper Hutt 48% and Kapiti 75%. Greater Wellington is predicting 64%.

    Warmest regards
    Andy Foster
    City Councillor

     
  2. Neil Douglas, 9. October 2013, 19:28

    Good points Andy – I did have a look at point 2 the proportion of income that each authority gets from rates versus other sources and I’ll see if we can include the graph in the article. I took a longer time frame than the five years by looking at 1992/3 to 2011/12.

    In 2011/12, Wellington City has the lowest rate share of all eight districts at 59%. All the other city/districts have shares of two-thirds or more with the highest being Kapiti at 76%. This compares with a national share of 58%.

    Bringing the average down for the Wellington region is a 45% share for the Greater Wellington Regional Council share which is lower due to government transport grants and subsidies.

    Over the years since 1992, the share of rates has increased. For Wellington City it has increased from 54% in 1992/3 to 59% in 2011/12 and for Kapiti, it has grown from 68% to 76%. Nationally, the increase in rate share has been noticeably lower with a rise of 1% point from 57% in 1992/93 to 58% in 2011/12.

    The conclusion:- ratepayers, residential and business are paying a greater share in and around Wellington for local services than elsewhere.

    Re business:- this is difficult largely due to confidentiality. The only details I could find were the result of information published on the Web by WCC in response to a request by Hayley Robinson under the Official Information Act. 2012/13 WCC formulae.

    I have also looked at the BERL projections for local authority spending and they are somewhat scary with forecasts above inflation especially for earthworks.

     
  3. Hayley Robinson, 10. October 2013, 2:18

    Neil is talking about this document: https://fyi.org.nz/request/904/response/4131/attach/3/IRO%203474%20FYI%20Robinson%2001%20attachment.pdf

    Here is a link to the billing categories for anyone interested in definitions: http://wellington.govt.nz/services/rates-and-property/rates/rates-explained/how-rates-are-calculated/billing-categories

    Hayley Robinson
    Onslow-Western ward candidate for Council

     
  4. andy foster, 10. October 2013, 6:11

    Hi Neil – the split between residential and commercial rates (WCC) is in the Annual Report. – Strategy and Policy Committee meeting. Nice pie chart on page 169 of the report – commercial 47% ($110.9 million), residential 53% ($126.5 million)

    Warmest regards

    Andy

     
  5. Neil Douglas, 10. October 2013, 8:40

    Thanks for this Andy – Has the share stayed the same over the five years?

    I’ll get Henry and Harriet to sniff around to find the same figures for the other seven authorities.

    I would also need the number of businesses too for all eight authorities in order to do a business comparison. Perhaps a joint authored article by Andy & Neil?

    There again – I think keeping it simple and dividing the total rates by the number of people does have virtue in keeping it simple.

     
  6. Fred, 10. October 2013, 11:54

    My first thought I had when reading your article is that the rates in Porirua and Lower Hutt are higher for the same house value than Wellington. Anecdotally talking to friends who live in Porirua and Lower Hutt it seems their rates are up to a 1/3 higher.

     
  7. Hayley Robinson, 10. October 2013, 20:02

    Neil,
    http://www.growwellington.co.nz/document/6-21/Wellington_Regional_Economy__Feb_2011_(SP_edits).pdf page six has Wellington business numbers for 2010. Statistics NZ will have other cities data, possibly more recent data too.

     
  8. Harriet, 10. October 2013, 21:33

    Let’s talk dogs. $110 for a dog in Carterton is just a tax. Better in Masterton where at least you have Henley Lake to walk around. It is a bit ironic though that having paid the city rate for your dog you can’t take it into the city centre. Is really think the dog tag is a way of raising money.

     
  9. Neil Douglas, 10. October 2013, 22:28

    Hayley: The business numbers need to include sheep, dairy and also nut farms as well as vineyards, forests etc which pay rates on land value and improved land value. This is important for the rural areas where the real message of this article lies. It is the Wairarapa where rates have soared, not in the urban areas.

     
  10. SJA, 11. October 2013, 14:33

    All the graphs under the sun look fine, so how does this permit WCC to go into a $343 million debt? To top this off how can WCC vote to grant $1 million to Wellington Airport for a Resource Consent without any consultation? Do the graphs illustate that WCC has a multi million dollar payout on earthquake proofing and leaky home syndrome? Some in WCC are favouring a $200 million grant to fund an 300metre runway extension. Forgive me but I have a problem reading glossy graphs when the impact on my rates has not been considered.

     
  11. Neil Douglas, 11. October 2013, 21:17

    Good points SJA. A article for the near future will be on debt levels the incoming councils will face. I agree with your point about the $1 million study too.

    I’m supposing you live in Wellington City. The point of my article is that you would probably have more to complain about if you lived in the Wairarapa. That said, the silence from over the hill is noticeable. I guess they are content with their lot, or feel there is nothing they can do.

     
  12. SJA, 12. October 2013, 11:39

    Neil, I love Wellington and have lived here for many years. We have owned our home for many years as well. I have to budget my income like most others, and on many an occasion the grass is greener on the other side but I resist the temptation to live beyond my means. Not sure about the Wairarapa as I don’t live there, and cannot influence their expenditure. As a ratepayer, I do my utmost to influence lower Wellington City Council expenditure by lodging submissions to various processes. I do not want to leave Wellington as a result of an unsustainable rate bill.

     
  13. Chris Laidlaw, 14. October 2013, 16:14

    This is an interesting debate but one element is missing. Some councils are able to boast lower rates rises on the back of deferred maintenance. There are examples of this in wastewater and stormwater infrastructure that urgently need upgrading but the council concerned does nothing, largely because they simply can’t afford it. Expect this issue to escalate until we adopt a regional approach to infrastructure.

     
  14. Elaine Hampton, 15. October 2013, 9:18

    Surely all the glossy graphs will not cover up bad housekeeping.
    The aim should be to get value for money for ratepayers.
    So many examples of poor housekeeping, such as CCOs, a supine approach to the airport runway extension, and the airport gouging the car / taxi drivers. To an extent, business rates is the point for resident ratepayers, when a debt as large as Wellington’s is run up.

     

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