Smack bang in the middle of local elections, rates are more scrutinised than ever, writes Duncan Greive in today’s extract from The Bulletin.
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The campaign for a rates cap
Financial advisor Nick Stewart joined Peter Williams on a podcast from the Taxpayers’ Union last week and crystalised the anger around rates rises. “While inflation was 2.7%, Council rates increased by 12.2%,” said Stewart. “It’s a monopoly, there is no alternative provider – you’re stuck with what you’ve got.”
The TPU is campaigning hard on the issue. It runs a rates dashboard, with a table showing the rate of increase around the country over the last three years. These range from 17% in the Bay of Plenty, to more than 65% on the West Coast, with a national average of around 35%. This has prompted the organisation to run a campaign to “Cap rates now” and issue a “Ratepayer protection pledge”, which seeks to bond signatories to keep rises hooked to inflation.
National meets local
The current coalition has been hammering local councils on spending. Local government minister Simon Watts confirmed on RNZ in August he would bring a proposed model for capping rates to cabinet by Christmas. That does not mean it will move further, as both David Seymour and Winston Peters have expressed skepticism about a cap, and BusinessDesk reports that Treasury is also unimpressed.
The big unanswered question
Stuff asked candidates advocating for lower rates how they would achieve it. One said better infrastructure spending, while an Act-aligned candidate cited eliminating kerbside compost bins. Embattled Wellington mayoral candidate Ray Chung said he’d get the council’s social housing off its books. Most said they wouldn’t know where the waste was until they were elected.
Even in booming rural areas, rates remain an obsession. Yesterday I drove to Morrinsville via Hamilton, thus getting a whistlestop guide to what is driving the candidates throughout Waikato. Ash Tanner’s signs were everywhere in Morrinsville – one of his pledges is to “keep rates rises to the bare minimum”. One of his opponents, army veteran Roman Jackson, has a much more aggressive line. He wants to “see us move toward a rate free district” through the council acquiring rental properties.
Why are rates rising so fast?
Stuff quoted regional economist Benje Patterson from Arrowtown, who says the government critique of council largesse was wrong. “Very little was on peripheral activities,” he said. What has driven it? “It’s been because they’ve needed to catch up on underinvestment.”
This sentiment was echoed in a powerful Windbag column from the Spinoff’s Wellington Editor Joel MacManus in July. “Putting a hard cap on rates will inevitably mean that important maintenance is deferred, delayed or ignored… We are already seeing the consequences of this in the water network, where councils of the 80s, 90s and 2000s cheaped out on pipe renewals to keep rates artificially low. The bill has come due for the ratepayers of today.”
Central government prefers debt increases to rates increases. But ratings agency S&P downgraded more than 20 Councils or CCOs earlier this year, thanks in part to council debt more than doubling in less than 10 years, per Newsroom’s Jono Milne. The report accompanying S&P’s downgrade noted a “policy environment more volatile than in the past. This reflects factors including the quick passage and repeal of several key laws governing local councils, the cancellation of various Crown grant programs [and] an increase in unfunded mandates.”
Still, despite economist and ratings agency arguments, rates rises have a hip pocket impact which flows straight up into local and national politics. A spokesperson for the Taxpayers’ Union told The Bulletin that 16.8% of council candidates and 19.8% of mayoral candidates have signed its pledge.
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