Keith Kelly: Landowners getting desperate over council demands

The annual battle of Auckland's long-suffering ratepayers for fair rates looms as councils finalise their budgets.

But although modern local government is empowered to do pretty much anything, its collecting powers are restricted to a narrow, archaic funding base.

Confusing at best, the system regretfully does a great job of preventing communities from evaluating council spending of rates-based incomes.

Since the Local Government Act 2002 came into effect, a great deal has been written on empowering communities to seek their own outcomes through their local council (whatever that means).

However you look at it, councils simply provide a range of social and amenity services, some infrastructure, and support for tourism - all supposedly in response to community demand.

These services are paid for by a tax on land or capital value in the form of rates. Sadly, the relationship between rates paid by the rural property owner and their access to council services is a continuing area of concern.

One of the many flaws of rateable values, particularly in a high-growth region such as Auckland, is that they are generally based on a potential use or development of land.

For a farmer it may be the subdivision potential. Proximity to a beach triples the desirability of land but adds nothing to its production capacity. Despite receiving no income from this perceived potential value, the landowner has to pay on an ever-increasing rate for a range of basic services.

From a tax perspective this is unprincipled, inefficient, and frequently punitive. But it's permitted to continue, and the signs suggest we're up for another Auckland rates debacle as rates pressure grows massively in the rural fringes.

For rural landowners, it's getting desperate. Rates grow year after year, often haphazardly, as council expenditure grows and rating valuations charge ahead with no thought to services received.

A farmer's rates can climb by thousands within a few years as a result of a subdivision some distance away.

The expanding role of local government assumes some real significance when general rates get up towards $10,000-plus a year.

Federated Farmers has worked hard to get the basis of local government funding in the spotlight for a long time. Questions must be asked of a central government that has allowed this debacle to weaken the good governance of its local counterparts while crowing about having reformed and modernised local government. All that flows from Wellington are platitudes about togetherness and community vision going forward, while the real problems of funding, fairness and accountability are forgotten.

Nothing will change without genuine rates reform. The key to good public policy is how it is funded, and until all of the community shares equally in funding local government's costs, and as long as councils continue to cloud over income and expenditure, there will be resentment between town, business and rural ratepayers.

* Keith Kelly is president of Auckland Federated Farmers and farms sheep and beef at Clevedon.