Auckland’s $5.5 billion City Rail Link and North Shore ferries are being cited as the type of services that could fall victim to a Government-imposed rates cap.
Yesterday, Prime Minister Christopher Luxon and Local Government Minister Simon Watts implored councils to “stop doing dumb stuff” when announcing annual rates increases would be capped at between 2% and 4%.
Auckland Mayor Wayne Brown has reacted angrily to the proposed rates cap, arguing it won’t work, will kneecap major projects like the City Rail Link (CRL) that the city needs, and prevent the council from servicing infrastructure in greenfield areas.
On the same day, Brown proposed a 7.9% rate increase next year, primarily to fund the $235 million cost of running the CRL when it opens to passengers.
How else does the Government think the council would pay for projects like the CRL, the mayor asked, saying the country’s largest public transport project was the result of decisions made by a previous National Government and council.
“If they want a rates cap, we’ll end up with a CRL with no trains or drivers,” Brown said.
“Putting a cap on rates isn’t going to solve anything. It will just defer (things) for a couple of years, then ratepayers will be paying even more.”
At the other end of the cost scale, Manurewa-Papakura councillor Daniel Newman cheekily singled out ferry services across the Waitematā Harbour as a potential council-run asset that will need its costs scrutinised.
That’s because Watts is the MP for the North Shore, whose constituents enjoy the popular ferry services to Devonport and Bayswater.
“The ferry services to and from his electorate are very expensive. Whether we can afford them is a different matter, so let’s have that debate,” Newman said.
Auckland Transport is already trimming ferry costs by turning its back on the more expensive, climate-friendly electric option, with a tender out for four diesel-powered ferries.
Asked whether the council could have raised rates by 7.9% to cover CRL operating costs, Watts said exemptions under the rates cap model are still being developed and will be subject to the regulator. He declined to comment on individual circumstances that may or may not trigger an exemption.
“A number of things go into rates increases. I am confident councils can deliver critical infrastructure like the City Rail Link by managing their operations and balance sheets and using tools the Government has provided, such as development levies,” he said.
Responding to the mayor’s concerns about the affordability of servicing greenfield infrastructure, Watts said: “The Government has been clear, we are not capping infrastructure, we are capping inefficiency.”
Brown has also noted that capping rates will not affect the three-yearly revaluation process, which drives fluctuations in rates. The most recent revaluation saw many residents on the rural outskirts of Rodney and Franklin hit with increases of more than 20% this year.
The minister said capping rates would not affect triennial revaluations, noting that the policy sets a total cap while allowing councils to decide, based on local circumstances, how to distribute the overall rates taken among rating units.
Former Auckland Mayor Phil Goff said the rates cap was purely political and would prove as workable as Sir Robert Muldoon’s price and wage freeze in the 1980s.
Yes, local government had to focus on value for money and finding savings, Goff said, but a rates cap was not the way to do that.
It contradicted National’s promise to restore localism and placed the blame on someone else for failing to curb the cost of living rises in its own area, he said.
Former National leader and Auckland Chamber of Commerce chief executive Simon Bridges said Government efforts to keep downward pressure on rates were positive, but questioned the timing and whether a rates cap was overly simplistic.
“We want downward pressure [on rates], but a blunt instrument like this raises the question: what does local government do?” Bridges said.
Bridges suspected the reason the Government hadn’t imposed this earlier was not only because the policy work hadn’t been done, but also because it knew Auckland still had to pay for the CRL.
There would always be another CRL, Bridges said, and major projects that local government legitimately had to fund. If it wasn’t through rates, would other funding tools be provided?
In Auckland’s case, would the council be expected to cover the cost of things Aucklanders clearly wanted? Most people didn’t care whether the money came from central Government or local government coffers, Bridges said.
Asked about the mayor’s push for a bed tax to fund events, Bridges said he was agnostic about where the money came from. But if the Government didn’t support a bed tax, it was up to them to say where the funding would come from.
Funding for major events in Auckland had fallen year-on-year from about $30 million to $7m, with Bridges noting that good cities needed significant events that required public investment.
To its credit, the Government had committed $50m to events funding over 18 months, and Auckland would receive its share, Bridges, who also chairs the Eden Park Trust – currently pushing for more concerts and events – said.
“Then what? Then Wayne Brown’s bed tax argument comes into play,” Bridges said.
Cameron Bagrie, who advised the Government on the rates cap policy proposal, said councils’ current balance sheets “are just not sustainable”.
Bagrie said the new rules would leave councils only responsible for necessities such as rubbish, but more user-pays could be added.
Labour leader Chris Hipkins said he agreed with the rates cap in principle, but questioned how councils would still be able to pay what’s expected of them – their infrastructure, water, roads, parks, pools, libraries and so on – with it in place.
Consultation on the rates cap will begin immediately, with legislation scheduled for passage in 2026. This would allow a transition from January 2027, with the full model in place by July 2029.
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