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Feds notches some gains on Council Long-Term Plans

November 22, 2021 by Nick Clark

Federated Farmers has just published its 2021 Rates Report, with the disappointing  headline news that rates rises continue to outstrip inflation.  In the last decade average rates have jumped a whopping 63% versus CPI increases totalling 18%.

Fighting local authority excesses and poor decisions continues to be a major focus for the Federated Farmers policy team.  The following two articles – as with other material in the Rates Report now posted on the Feds’ website – were put together by Nigel Billings and Nick Clark, with input from regional policy advisors.

Consultation on council budgets and rates generally happens between March and May each year. 2021 was significant for it being a year for Long-term Plans (LTPs) – where financial strategies and to some extent rating policies are set for the next three years.

Nigel Billings

Much work was anticipated with this year’s LTP submissions in the North Island, with councils talking of recovery budgets and an increasing emphasis on “affordability” in the setting of rating policy. The term affordability is generally code for reducing uniform charges to fund general services and an increasing reliance on land or capital value rates.  Reducing uniform charges by even small margins can mean hundreds of dollars on farm rates bills and Federated Farmers is very vigilant on this.

Three Waters

Another known but uncertain issue was the future of three waters networks, with a surprising number of councils at that time budgeting on business as usual. The cost of upgrades to urban wastewater networks was a key issue in several consultations, with much of that now undetermined with government’s move recently to commandeer those assets. Indeed, given what’s since happened with three waters, there were still instances of councils deciding to use general rates to cover a portion of those costs – meaning farmland stumps up on property value for networks they’re not connected to.

Gisborne district council took this measure, introducing a 10% general rate contribution despite vigorous opposition from the farming community.

No Frills

A strong focus for Feds’ LTP submissions in the North Island was once again on lowering forecast rates increases or at least focusing council expenditure on the necessaries. It was refreshing to see a “no frills” approach put forward by Thames Coromandel’s council – which in the end wasn’t fully adopted – but this approach to supporting local economies was rare.

The most substantial rate rises were with the regional councils, contending as they are with the cost of implementing freshwater reforms. Northland topped the list with a whopping 19.8%, with Hawke’s Bay not far behind at 19.5% and significant increases across the life of their Long-term Plan. Elsewhere increases were a little more manageable at around 5%, but with Taranaki regional arriving at 9.0% and a plan to sell assets to meet some of the new costs.

UAGCs

The uniform annual general charge is a perennial issue for Federated Farmers, given its importance as a counterweight to land and capital value rates. While limited by law to 30% of total rates, full use of the UAGC makes a huge and positive difference to farm rates levels.

We are finding that the increasing cost of utilities in the towns and cities is resulting in more general rates on land and capital value as councillors try to soften the impacts on lower valued properties. We sought increases to uniform charges in most jurisdictions, but exceptions – such as Bay of Plenty Regional Council which stays close to the maximum 30%  proportion of total rates – are rare and treasured.

The Feds’ submission helped prevent a proposed dissolution of the UAGC altogether in the Far North, with the council citing affordability of rates as the key pressure. We rightly asked, affordable for who? And pointed to central government’s rates rebate scheme for low-income households or a means tested rates remission policy as a more credible approach to dealing with affordability concerns.

With the help of district revaluations, the UAGC holding up, and some prudent budgets some farms in the North Island saw rare rate decreases this year. Among them an overall decrease of 5.18% for farmland in Rotorua came as a surprise, with dairy farms down more than 10%.

Revaluations contributed to drops in Stratford, and a change to depreciation policy and tight budgeting resulted in small reductions on farms in Waitomo.

Local government will look quite a bit different next time Long-term Plans roll around, with drinking, waste and storm water off the books, and district planning likely gone to regional councils. How this will impact farmland rates is unknown; Federated Farmers will for sure be there looking.

Dodging bullets in Long-term Plans down South

Some tough news in the South, with some Long-term Plans forecasting bumper rates increases. In these circumstances Federated Farmers had quite a job looking after farmers’ interests and got a few good results.

Much like the North Island, the South saw a trend in instances where the Uniform Annual General Charge (UAGC) is reduced and councils rely more on land and capital value rates. There were exceptions, but around New Zealand this is a worrying response from too many councils to financial pressures – given that it comes at such a cost to farmland.

Regional rises

As in the North there were major rate increases among the regional councils, with that common cost driver of new freshwater regulation.

Otago Regional Council topped the national list for rates increases this year with a whopping 48.5%, and a 17% increase to come next year. This council has substantial financial reserves, but our efforts to get them to use them to lower things a bit fell upon deaf ears. We also put the case for more UAGC, which sits at a small $49.32 per rating unit, over the heavy reliance on capital value rates. No dice there either, although our submission and farmers’ concerns did get some coverage in the media.

Otago Regional Council topped the national list for rates increases this year with a whopping 48.5%, and a 17% increase to come next year.

West Coast Regional Council eventually adopted a 32% rates revenue increase after a long-delayed consultation. Environment Canterbury proposed a 24.5% rates increase on the back of a similar rise in expenditure. After push back from ratepayers, including Feds of course, the rates increase was pared back to 12.4% with more borrowing. Still a big increase, but more manageable, and with it a slight increase in use of the UAGC which was welcome.

Environment Southland settled on a 20% increase on the back of what we felt was a very shabby consultation, rounding out some big numbers for the South Island’s regional councils in 2021.

Wins in the Districts

Our submissions fared better with the district councils but still with some setbacks on the UAGC. We opposed Westland district council’s lowering of their UAGC percentage from 21.7% to 17.5%. It could have been worse, with 12.5% also on the table.

At Nelson City we helped preserve a differential for rural land zoned residential larger than 15ha. The differential takes 35% off the rateable value; quite an achievement considering rural is but a small part of the Nelson Council’s population. The UAGC, however, dropped a percentage point from an already low 14% of rates revenue to 13%.

In Grey district we welcomed a 23% increase in the UAGC, but farming properties still copped average rate increases of about 12% after a slight decrease last year.

Invercargill pushed to change course

Feds also played a part further south in supporting rural Invercargill ratepayers save some money, with strong opposition alongside Kennington residents to a proposal to push services off targeted rates on to the general and make changes to differentials. Council argued it was simpler and fairer, we pointed out that rural properties don’t benefit from the services involved, streetlights for example, and that this was simply wrong. Council ultimately changed course, acknowledging our opposition in their adopted Long-term Plan, and rural people got a much lower rate increase for 2021.

The advocacy of Feds’ governance, members and staff staved off a terrible proposal from Christchurch City Council to extend its targeted rate for land drainage and stormwater across the whole district. Remote rural properties were saved quite a bit as a result. The news was not so good in Southland, with a 10.15% district rate increase and indications that the NZTA subsidy for local roads was to be reduced.

Dunedin City Council settled on a 9.8% increase, ignoring our calls for changes to the rating system that has some large farms in their jurisdiction paying more than $70,000 a year in rates.

All up a challenging year for farm finances in the South Island, but with a strong rural voice there was some cover for rural interests. Whatever local government looks like after the major reforms of 2021, the problems for farms from increasing reliance on land and capital value rates to balance council books will continue to require the closest attention.

Filed Under: Councils, Local, Rates, Tax

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