By Nigel Billings and Nick Clark
Winter is upon us and Federated Farmers is in the thick of it fighting for hard-working farmers against the rates hordes.
It’s a hard battle but one worth fighting. We’re staring down the barrel at a swarm of huge rates rises which will add thousands to many farmers’ rates bills. Based on long-term plan consultations we’ve worked on (around 65 this year) we estimate that for 2021/22 district and city councils’ rates will increase on average around 7% while the average for regional and unitary councils is over 13%. Last year’s relative frugality in response to COVID is but a distant memory.
Those are the overall averages and they don’t necessarily reflect what’ll be happening for farms. In some areas farm rates will be dropping, mainly where rateable valuations have been revised and there’s been a surge in residential house prices relative to farmland (which has been more stable). According to example property tables in council consultation documents farm rates will drop in places like Thames-Coromandel, Waitomo (where it’s changing its approach to funding depreciation), Rotorua Lakes, Horowhenua, Tasman, Marlborough, and Clutha.
But in many cases farm rates are going through the roof relative to average increases.
Some councils have made deliberate calls to load more costs on to farmers. Central Otago is changing its rates system to provide relief for the accommodation sector and keep residential increases down. Farmers are seen as a soft target to fleece and the result is 35-52% rates hikes for farms compared to an overall average rates increase of 6.7%. A ‘large farm’ in Maniototo will see its rates soar from $17,959 to $27,383, a $9,425 increase.
In the name of ‘fairness’ (for whom I wonder?) Christchurch wants to extend its land drainage rate across all properties, serviced or not, meaning 80% of remote rural properties will suffer rates increases more than double the 5.56% average – not just this year but also over each of the two following years, by which time their rates could be 40% higher than currently and they will pay many times more for land drainage than a fully serviced urban resident.
And many councils, like Far North, Wairoa, and Invercargill, are reducing their uniform annual general charges (UAGCs) and loading more of their costs onto the property value general rate, hammering farmers. In Far North’s case it wants to take the extreme approach of getting rid of its UAGC and fixed roading rate and putting it all on the general rate, meaning farms up there will suffer 30-60% rates increases.
Regional councils are having to dramatically increase their spending to fund huge regulatory burdens placed on them by central government, especially through its new freshwater rules and requirements to re-do regional water plans, despite in some cases having only just been done at great expense! Regional rates are set to surge 47% in Otago, 24.5% in Canterbury, 20% in Southland, 19.8% in Northland, and 19.5% in Hawkes Bay. Again, the impacts on farmers will be more or less depending on councils’ rating systems.
The Federation has for many years been the farming community’s primary voice on rates. When community views are heard on what council rates will look like there will always be an effort from among our staff and governance to make the case for farmland.
It can be hard to grasp just how difficult this work is. It requires supreme insight into how rating systems work and an intuition as to where to look for changes that might affect farm rates beyond the headlines.
The experience is especially frustrating this year. Amidst all the razzmatazz of glossy council consultation documents and social media blitzes it is getting ever more difficult to get hard numbers on rates.
Farmland’s share of the rate take in a district or region is these days impossible to calculate and certainly isn’t provided up front. There might be an example of rates on an average farm, but it’s difficult to figure what’s driven the rates to that level and in too many cases the examples aren’t reflective of a real farm.
For example, Waikato Regional Council’s rural example properties are all based on capital values of $2 million. Few commercial farms have property values that low, so grossly understating rates impacts which rise with higher values. Yes, there are rating tools allowing people to see the impacts on their own properties but for most people doing submissions the consultation document is the key reference.
For new projects and proposals councils generally serve up an average cost across all of the district or region’s ratepayers which is far removed from the small fortune often asked of individual farms.
Fundamental components of any council’s rating system such as the extent to which a council uses uniform charges – rather than land or capital value rates – make a huge difference to farms, but there’s not a lot of detail in your modern brochure-style consultation document and social media-heavy process.
At Federated Farmers we’ve become experienced at an almost forensic crunching of numbers to determine what proportion of the rate take is fixed and whether there’s room for more. This helps us with credible submissions and persuasive advocacy to councils.
If we can get a rating policy change, even a small one, it can make a difference to an individual farmer in the hundreds or even thousands of dollars. Last year in Opotiki we managed to overturn the council’s proposal to change its rating system, saving a typical dairy farmer $867.
The long hard season will be over in June after which councils will deliberate and adopt their LTPs and set their rates for 2021/22. We’ll then be able to see how we did on behalf of the long suffering rural ratepayer and whether we’ve managed to turn back or at least slow the hordes.