Tauranga rates rise: Businesses have mixed reactions to council proposal

Business owner Richard Drummond says rates increases will hit workers. Photo/File

"It was only a matter of time." "What a load of crap." "[It will] literally make people poorer." "Not too concerned."

That's a sampling of reactions from Tauranga's business community to news the council wants to put rates up.

On Wednesday, the council drafted a 12.6 per cent average citywide rates increase. It also proposed to put more of the rating burden on commercial ratepayers.

The split between what proportion of the total rates take is paid by commercial ratepayers versus residential ratepayers is called a differential.

In Tauranga, it is 1.13, having been incrementally increased since the differential rating system was introduced in 2018.

This was due to go up to 1.2 in the coming year, but the council has proposed upping that to 1.3, meaning the commercial sector would pay 30 per cent more than residential.

Research by council staff presented in the meeting showed that even with the extra increase, Tauranga would still have a lower differential than Hamilton (2.57), Auckland (2.8), Christchurch (1.69), Dunedin (2.45) and Wellington (3.25).

Tauriko-based Kiwi Bus Builders owner Richard Drummond said the impact of the increases would trickle down and hit workers.

Richard Drummond in his Tauriko workshop. Photo/File

They would drive up rents and impede wages "and literally make people poorer".

Drummond, who spoke out in 2018 when the differential system was introduced, said the business was already struggling to accommodate additional costs.

"I have closed our Wellington branch [as of] January 20 because costs are beyond what our industry can pay."

He was already seeing prospective staff choosing Hamilton over Tauranga due to the increased living costs in the Bay.

Factory workers seeking more money for increased rents would be denied and sent to the council, he said.

Greerton business owner Mathew Manninen said the idea that the commercial sector had not been paying its fair share was "a load of crap".

"Show us the numbers."

Greerton Lotto owner Belinda Sands is not too concerned about the rates increase. Photo/File

Greerton Lotto Shop owner Belinda Sands said she was not too concerned about the increase.

"I imagine those in premises worth lots of money would be more so. I just hope the increases go towards real stuff, not museums - roading has to be their priority."

Another business owner in the village, Ron Mcdiarmid, said the council should not bother "consulting us" as past experience had shown it did not listen.

The Bay of Plenty branch of the Property Council, meanwhile, has backed rates increases but continued its stance against increasing the differential.

Branch president, Carrus developer Scott Adams, said a rates increase was "only a matter of time".

Scott Adams, president of the Bay of Plenty branch of the Property Council. Photo/Supplied

"The previous Council has been appeasing its fast-growing voter database by under collecting and suppressing general rates for decades. At the same time, the cost of the capital programme has increased.

"A clear plan for the city is needed. If this means a rate increase which aligns with plans for future development, and does not increase debt for future generations, then we are one step in the right direction - but increased rates alone will not solve Tauranga's housing and transport woes."

The council opposed the differential increase as "commercial property owners end up cross-subsidising public amenities that all ratepayers use".

The city council should better use alternative funding mechanisms as proposed by the Productivity Commission.

"Tauranga City has no choice now but to collaborate with the Crown and the private sector to ensure the city prospers," Adams said.

Tauranga mayor Tenby Powell said most of the feedback he had received to the rates proposals from the commercial sector so far had been "very positive".

"They're just looking to see what they're paying for.

"We need to make sure that we are delivering outcomes in a way that is very different to the previous council and I'm confident that with Marty Grenfell as our chief executive, and the executive team that he has, we will be able to do that."

He acknowledged some businesses would be hurting.

Tauranga mayor Tenby Powell, right, and deputy mayor Larry Baldock. Photo/File

"The challenge that we have is we have a balance sheet at Tauranga City Council, which is completely and utterly overburdened.

"Collectively this council has said the local government funding model for high growth councils is broken."

As a result, the previous council had struggled to fund infrastructure to open up new land for housing, which was urgently needed to avert predicted skyrocketing house prices and a deepening housing crisis.

"We have got to do something to change our balance sheet to be able to open up those tracts of land."

He was working daily with central Government on plans for funding vital infrastructure - roads in particular - in the Western Bay of Plenty sub-region.

Deputy mayor Larry Baldock said the council needed to inform people about what the rates will provide for.

"It is not museums, stadiums and a list of nice to haves. Those items are not on the list. It is what is needed to keep the city open for business and to address the need for housing and the completion of major infrastructure upgrades like water, wastewater and stormwater to avoid increased flooding events."

Weekly impact of proposed rates increase on commercial ratepayers

$550,000: $9
$1.070,000: $20
$2,010,000: $41
$2,620,000: $55
$25,626,000: $572.