Rotorua District Council chief executive Rotorua's council has been told it needs to consult residents before it puts a controversial rates remission policy into place.
Advice received by Rotorua District Council chief executive Peter Guerin from the Office of the Auditor General late last week will see the council put the policy out for public consultation within the month.
Outspoken opponent of the policy, district councillor Charles Sturt, says he feels vindicated by the decision, saying Mr Guerin has been "caught with his pants down" and urged his fellow councillors to dump the entire policy before the situation got out of hand.
On Tuesday last week, Rotorua district councillors agreed to apply automatic rates remissions to 57 business properties in the district at a total cost to ratepayers of $339,095.
The remission was applied after the Rotorua business community said the council's new capital value rating system unfairly penalised business owners with large increases.
Mr Guerin described the rates increases as "the unintended consequences of capital value rating" saying the policy would be in place for only one year and would not be applied to residential or farming ratepayers facing similar increases.
Mr Sturt said he believed the policy was illegal under the Local Government Act because it had not been publicly consulted on earlier this year and constituted a major change to the Long Term Plan, which was approved by the council on June 29.
Mr Guerin said the Auditor General told the council it should undertake a formal public consultation process before proceeding with implementation of its business rates remission policy.
"While this recommendation is at variance with the independent legal advice already obtained by the council, the prudent action for us now is to follow the suggestion of the Auditor General and go through a formal consultation programme.
"It does mean a frustrating delay, but it is important, from a process perspective, that we get it absolutely right from the beginning with every 'i' dotted and 't' crossed.
"It's arguable that the council could potentially be at risk of legal challenge to its decision if we didn't undertake the special consultative procedure set out in the Local Government Act," Mr Guerin said.
He said it would delay the process by about six weeks and the council would begin the formal process of public consultation at a council meeting on Thursday.
A letter explaining the process was being sent to those business ratepayers affected.
Rotorua Chamber of Commerce head Roger Gordon shared the council's frustration at the delay but said the move to full public consultation was appropriate.
"This process will ensure that the council's decisions around guidelines for business rates remissions are safe from legal challenge and that's critical to ensure certainty for affected businesses.
"The chamber will definitely be taking the opportunity to make a submission in support of the proposals in principle, although we will be expressing our view that the proposed rates remissions should be even more widespread," Mr Gordon said.
Corporate and customer services committee chairwoman Janet Wepa said she was happy to go out for consultation, saying councillors needed to get it [the policy] right. "For months, we have been saying there would be some pain and some people will be unpleasantly surprised when they get their rates bill."
Mrs Wepa said she was glad the independent advice received by Mr Guerin was being acted on.
However, Mr Sturt said he was looking forward to the submission process and hearing from other ratepayers also suffering from the "unintended consequences" of capital value rating.
"The implications of capital value will be felt for years to come - what about the consequences for residential and farming ratepayers?" he asked.