Homeowners hit with new rates bombshell

Dick Hubbard

Rates bills for big Auckland businesses have been slashed by more than $2 million while homeowners are facing crippling bills.

Sky City Casino and shopping mall Westfield St Lukes are two of the biggest ratepayers in Auckland City, paying millions of dollars in property tax each year.

Posting a net profit of $120 million in the past financial year, Sky City Entertainment paid $2.2m in rates this year, a cut of nearly $440,000 from its previous bill. The sprawling 6.4ha St Lukes shopping mall paid $2.4m in property tax in 2006, $373,000 less than last year.

More than two-thirds of the city's top 50 ratepayers, mostly central-city hotels and tower blocks, are paying thousands of dollars less than last year - with the resulting $2.5m burden shifting to residential homeowners, who are now facing average rates rises of 13 per cent.

Other businesses that have received a rates cut of more than $100,000 include electricity supplier Vector Energy, the Village Sky City cinema on Queen St, 277 shopping mall on Broadway, and the Langham, Carlton and Stamford hotels.

Auckland Mayor Dick Hubbard said businesses were paying lower rates because of the "swings and roundabouts" of a fluctuating property market.

For the first time in Auckland's history, Hubbard said CBD properties had fallen in value, which meant that residents had to carry the extra burden of rates funding.

"It's not inconceivable that in three years' time, or six years' time, the pendulum could swing the other way, and businesses could cop bigger increases than the residential. It's very much swings and roundabouts," he said.

Most downtown Auckland businesses are paying less for two reasons: skyrocketing residential prices and a council promise to reduce the amount of rates that businesses pay.

Rates are based on the percentage increase in the annual value of a property, with homeowners charged more if their house increases in value by more than the city average.

Simply put, with the average property value jumping by 44 per cent to $503,000 during the past three years, residents now pay a bigger proportion of the total rates pie.

However, non-residential properties in the CBD increased in value by only 30 per cent on average, meaning businesses now pay proportionately less.

Grant McInman, council data services manager, agreed that a booming property market was to blame.

"The residential market has been quite overheated. That moved a certain amount of money to be paid by residential ratepayers instead of business ratepayers."

That amount was $2.5m.

Another factor in falling business rates bills was an Auckland Council decision to lower the CBD rates differential from 2.4 to 1.8 by 2013.

McInman said reducing the differential, which determined how much higher business rates were than residential rates, was an issue of fairness.

"Should the ratepayer here pay twice as much as the ratepayer over here even if the values are the same?"

David Thornton thinks they should.

The North Shore man has organised the national "No More Rates" campaign and said the differential should have remained at 2.4, because rates were fully tax deductible for businesses, but not homeowners.

Thornton said if businesses rates went up, the costs were simply passed on to customers.

"So you pay in the end. But from my perspective, I think it's better the costs are spread that way, rather than reduce the amount that businesses pay and pass that directly on to ratepayers. Which in my mind is absolutely criminal."

Skyrocketing rates were debated in Parliament when Act Party leader Rodney Hide proposed a rates capping bill to limit increases to inflation plus 2 per cent in any year.

The Epsom MP's bill failed to pass, but the Government has commissioned an independent inquiry to investigate how local authorities are funded.

Hide said rates were the "most iniquitous tax we face" and that property taxes should be abolished.

"I don't think it's fair on pensioners to get hit so hard because their homes have gone up. They can be living in a valuable home but not have the money.

"There's no rhyme or reason for why rates fall on residents, there's no logic."

By the end of next year, the Hubbard-led council will have presided over a 37 per cent average rates rise since being elected in October 2004-an extra $400 a year per household.

But that's not the end of it.

The council plans to increase household rates by 135 per cent and water bills by 50 per cent over the next decade to fund a $2.3 billion capital works programme, which it says is needed to cope with growth, and years of under-investment in core services like stormwater and footpaths.