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Thursday, 19th March, 2015
An initiative to reduce the proportion of Auckland Council’s revenue generated from rate payers has been proposed by Auckland Chamber head Michael Barnett.
Auckland Council’s 10-year budget shows that 45% of council’s revenue comes from rates.
As well as services, costs covered by rate payers include a sizeable chunk of debt interest costs to help meet the City’s growing debt.
The 10-year budget indicates that the level of net debt increases from $5.4 billion to $6.5 billion. The interest cost for this debt covered by each rate payer rises from $576 in 2015/16 to $695 in 2024/25.
For example, an urban residential property with a capital value of $750,000 has an estimated total rates bill of $2,274 (including GST) for 2015/16. The net interest cost is equivalent to approximately 19.4% of this rates bill (or $441) in 2015/16.
“That’s unfair. The rate payer burden is getting out of hand,” said Mr Barnett. But the plan shows no intent for new thinking. Over the 10 years, the proposed average 3.5% rate increase per year represents a cumulative rate increase of 41%.
“Few businesses would survive if they planned in advance to add an average 3.5% level of cost every year to their enterprise, especially with inflation currently below 1%.”
With firm leadership, the Council should be able to plan to deliver significantly lower or ‘nil’ rate increases in some years, especially given the low inflation – low interest rate economy we are currently enjoying.
Annual rate increases should be limited to cover inflation, and this should be enshrined as a principle, said Mr Barnett. Any increase above the inflation rate should be clearly tagged to indicate what service improvement it will provide for, and a statement provided as to why the ‘increase’ could not be provided through user charges or offset by grants and/or subsidies or other sources.
To start a step change to get a more balanced portfolio of revenue sources, he has suggested the Business Leaders Group that he chairs lead a search for new revenue sources from all possible areas – partnering with other organisations especially the private sector, central government, and charitable and community groups. “It won’t be easy, but it’s necessary, if Auckland is to progress.”
