Auckland's household rates up 11pc this year

Auckland's city council has yet to find finance for the $650 million transformation of Aotea Square. Picture / Martin Sykes

Household rates in Auckland City are soaring ahead of inflation, but business rates are holding steady or falling under the second budget being prepared by Mayor Dick Hubbard and his left-leaning council.

Residents face rates increases of at least 11 per cent this year and higher water bills for the first time in six years, in what Green Party councillor Neil Abel is calling a "smoke and mirrors" exercise to contain rates.

Last year Mr Hubbard promised that this year's rates increase would be "substantially less" than last year's 9.7 per cent overall increase.

However, booming house prices have blown that promise out of the water.

About 5 per cent of this year's household rates increase is attributed to house prices rising faster than commercial property - transferring a larger share of the overall rates income to households.

A further 1.8 per cent of the household rates increase is because of an ongoing plan to reduce the higher level of rates paid by businesses.

The net effect of these two measures is that rises in business rates will be less than the rate of inflation and, in many cases, will drop by as much as 6 per cent.

Last night Mr Hubbard said the new property valuations created winners and losers. Outer suburbs like Glen Innes and Panmure had seen big valuation and consequent rates increases, while inner-city suburbs like Parnell, Remuera and Epsom had smaller valuation and rates increases.

He also laid part of the blame for the rates increase on former councils for not properly funding infrastructure projects like footpaths, which required a $150 million funding boost over the next 10 years to bring them up to an average world-class standard.

"The council wasn't putting the appropriate money into footpath maintenance and now it's crunch time.

"I think you could say the same about some of the roading infrastructure," said Mr Hubbard.

But Auckland Citizens & Ratepayers Now leader Scott Milne said the council was "blowing the dough" on councillors' hobby horses such as a $600,000 investment in a sustainable building company instead of solving transport and other infrastructure problems.

The council has no money for about $4 billion of new projects over the next decade, including the $400 million Tank Farm development, a $650 million transformation of Aotea Square, upgrading the city's poor footpaths, recycling initiatives and new swimming pools at Otahuhu and Avondale.

Next month the council will ask ratepayers to comment on a range of options for these projects, which would lead to rates increases of 46 to 65 per cent over the next 10 years.

On top of rates increases, the council is proposing to fund these projects through "significant" borrowings, using a $30 million strategic asset fund and an $18.7 million Auckland Airport share dividend, and increasing development contributions by up to $36 million a year.

The most controversial funding idea is a plan to squeeze the council's water business, Metrowater, for higher dividends. That would lead to water bills rising by 46 per cent to $1200 on average over the next decade.

The Greens' Mr Abel yesterday said the council planned to use Metrowater's water and wastewater charges to contain general rates in a "smoke and mirrors" exercise.

The issue has divided the City Vision-Labour grouping on the council, with Mr Abel, Richard Northey, Leila Boyle and Glenda Fryer opposed to putting the squeeze on Metrowater.

But City Vision leader, Dr Bruce Hucker, argued at a budget meeting this month that it was "prudent commercial practice" to increase Metrowater's low debt-to-equity ratio and use the higher dividends to spend on stormwater.

This would free up money the council spent on stormwater from rates.

The Herald understands the council is also looking at a raid on the assets of the Auckland Energy Consumer Trust to help to plug the funding gap.

The publicly elected trust, which owns 75 per cent of the power lines company Vector, has handed out $453 million over the past nine years to 300,000 power consumers in Auckland.

Last year they got a $180 power credit.

This year it could be $300.