Control rates rises, Local Government Minister Simon Watts tells councils

The directive by Simon Watts is to get councils to focus on the basics. Photo / David Hall

• Local Government Minister Simon Watts describes a proposed 16% rates increase for Tauranga industrial and commercial ratepayers as “material and significant”.
• Watts discussed potential rates caps to address taxpayer concerns and emphasised focusing on economic growth and reducing business costs.

Councils like the Tauranga City Council need to get back to basics, Local Government Minister Simon Watts says.

A bill will be introduced directing councils to get back to basics, Watts said in an interview with the Bay of Plenty Times. He said a rates cap could be considered in the future.

The proposed 16% minimum rates increase for Tauranga industrial and commercial ratepayers was “material and significant”, Watts said during a visit to the city.

Councils needed to focus on core activities to control excessive rate rises, he said.

The economy was facing a tough time as ratepayers, households, and communities tightened their belts.

“That’s what local government should do.”

The Government had recognised feedback from ratepayers and taxpayers about the degree of increases in rates, he said.

“These concerns that we have heard [are] in regards to council expenditure being on items and activities that aren’t seen as the basics or core activities.

“The Government is currently investigating the rates cap and model, which will, in effect, cap the degree of increases in rates.

“We’re working through the detail at the moment, and we’re working together with local government officials in order to design what that model will look like, I think, for councils such as Tauranga City Council.”

Mayor Mahé Drysdale said in an email that Tauranga City Council elected members understood the community’s concern about proposed rate rises.

“We are working hard to find savings which would reduce the average increase for 2025 and 2026 to 10% or lower,” he said.

Commercial and industrial rates increases would be higher than those for residential properties as there was an element of catch-up involved, Drysdale said.

“That has been addressed over the past two years, but we acknowledge this comes at a bad time for businesses that are struggling in the current economic environment.”

Rates had yet to be finalised, but once they were struck, the council rates team did have some ways to assist ratepayers, he said.

“We would encourage businesses and individuals to contact them directly to discuss the available options.”

Simon Watts. Photo / Alex Burton

Watts was in Tauranga to meet with the Tauranga City Council, Western Bay of Plenty District Council and the infrastructure forum, a group of key regional stakeholders.

Watts said the Government saw the potential in this region and wanted to work with local councils to unlock it.

Watts met Drysdale to discuss what the Government expected local councils to deliver.

“Ensuring local councils were delivering the basics well and not spending money on nice-to-haves,” he said.

Watts said ratepayers would judge that and assess how to deliver to their needs.

A cap on rates wouldn’t constrain the ability of councils to execute the delivery of core activities they need to undertake, Watts said.

It would not constrain the ability of the council to derive economic growth, he said.

“Quite the opposite.”

Watts said central government could establish guardrails and regulations that would enable good local decisions to be made.

“It’s not where we want to be participating, but there are things that we can do to enable and help that through more funding and financing tools.”

Local Water Done Well reforms were well under way, and Watts expected to see councils make decisions about their plans and actions in the coming months.

“I’ve been impressed so far with the degree of work under way here at a local level to make that a reality,” Watts said.

He said the rates cap would support and enable more economic growth and productivity within our cities and regions, which was essential for the broader economy.

“In the finalised details around the rates capping model, we’ll share more information.”

Bay of Plenty MP Tom Rutherford said the council didn’t have a revenue problem ... “It has a spending problem.”

“It’s important that Government ministers understand the growth and economic opportunities we’ve got here locally.”

Drysdale said that, like all councils, Tauranga faced significant increases in insurance, electricity, and construction costs, which had to be be passed on.

The Tauranga City Council found $29m in savings since being elected last year, Drysdale said, and would continue to look for further savings.

He did not support the rates capping proposal but favoured standardised benchmarking across councils to help ratepayers compare performance and value for money.

“Once we’ve considered all submissions to the draft Annual Plan 2025 and 2026 and the final rates have been struck, ratepayers will be able to see what this means for their properties.”

The council wanted to work with the Government on potential ways to ease the rating burden on communities, while maintaining the ability to deliver needed infrastructure, Drysdale said.

“Rate capping won’t deliver the growth in our region that the Government wants, and that it directly benefits from through an increased tax take.”