The council wants to charge commercial property owners more rates. Photo / George Novak
The council wants to charge commercial property owners more rates. Photo / George Novak
A proposal to hike Tauranga's commercial rates has the "worst possible timing", property developer Peter Cooney says.
The Classic Group director says commercial tenants will end up paying the costs, but commissioners say the plan is fair.
In a Tauranga City Council meeting on Monday, commissioners approved plans to increasethe commercial and industrial rating differential to 2.13 in a bid to provide better equity between residents and businesses.
Last year the commission indicated that it would lift the differential from 1.2 to 1.6 as part of the draft Annual Plan budget for 2022/23. This week the commission voted to increase it even higher.
The proposal would be consulted on with the draft Annual Plan and, if adopted, would come into effect in stages. The differential would go to 1.9 in 2022/23 and then to 2.13 the following year.
Commission chairwoman Anne Tolley said the decision was about getting everyone to pay their "fair share".
Tauranga City Council commission chairwoman Anne Tolley. Photo / Andrew Warner
A commercial differential is the difference between the share of rates commercial ratepayers pay compared to general ratepayers. For example, a differential of 1:1.2 means commercial property owners pay $1.20 in general rates for every $1 by homeowners.
The commission also considered plans to increase development contributions and to change the transportation targeted rate for the commercial sector to 3.33 in 2022/23 then to 5 in 2023/24.
An independent report presented in the meeting showed residential travellers made up 50 per cent of trips but paid 80 per cent of the transport rates compared to the commercial and industrial sector.
"This follows on from the Development Contributions Policy where we are trying to get equity," Tolley said.
"We signalled this quite clearly to the commercial sector. I have to say, the responses from the commercial sector have been incredibly positive and hopeful."
The commission approved the plans, with the proviso that council staff would continue to look at further options for the appropriate rating of the commercial and industrial sectors.
Classic Group's Peter Cooney. Photo / George Novak
The proposed changes to the commercial differential were expected to be brought in gradually over a two-year time period in acknowledgement of businesses already struggling due to Covid-19.
Commissioner Stephen Selwood said there were many local businesses suffering economically - "that's why I think the phasing in is a good thing".
"From a council point of view, it would be good to get there sooner but . . . businesses are going through difficult times. I think the two-year plan is a reasonable compromise. There should be an awareness of that in the community.
"We all need to understand there's no such thing as a free lunch. All of the things we need in the city need to be paid for. It's an opportunity for everyone to pay their fair share."
Cooney told the Bay of Plenty Times he agreed that "we need to look at where revenue comes from for infrastructure".
"But this has the worst possible timing," he said.
"We are about to go through tough times, and with inflation going through the roof, is our economy going to handle it?"
Cooney said those in the commercial sector were already struggling and 2023 and 2024 were expected to be the most challenging years since the arrival of Covid-19.
The council should be looking to subsidise commercial operators, not charge them more, he said.
"It will be putting pressure on [property] owners and landlords, which floats down to tenants who will have to pay the extra cost because you still have to have a return," Cooney said.
In Hamilton, the commercial differential is 2.65. In Auckland it is 2.7, Wellington is 3.25, and Queenstown Lakes it is 3.75.
Commercial rates costs are often passed on to business leasees. Differentials take into account that businesses can write off some of their costs.
The draft 2022/23 Annual Plan and budget was expected to be formally approved on February 28 before going out for public consultation.
