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.

 

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