Brian Rudman: To hell with the rates, the holiday's on the house

As the first cold snap of winter bites, the thought of dragging my aching bones off for a couple of weeks in the sun anywhere north of here, starts to grow. Particularly if I could persuade the local council to pay.

I'm talking rates postponement, a scheme which delays one of life's inevitabilities - paying local body rates - until you encounter another - death. By which time, what the hell?

Aimed at ratepayers aged 65 and over, but not exclusively so, the principle is simple: Instead of paying rates out of your income, you make the property that causes all the council bills do the paying instead. The day of reckoning occurs when you sell or die. Then the council has first spot in the queue to recover the rates owed, plus interest and a small service charge.

Western Bay of Plenty District Council led the way in 2003 with a modern rates postponement scheme, and five other councils, including the district councils of Rodney, Far North, Thames-Coromandel and Gisborne and Environment Waikato, have jumped on the bandwagon.

In this round of long-term planning deliberations, another 10 councils, including North Shore City Council, are considering it. An options report goes to North Shore's strategic management committee next month.

To me, it seems to be a win-win proposal for all concerned, except perhaps, for the odd ungrateful child who might be a little put out to discover that the house they inherited is not, once the council debt is settled, worth quite as much as expected.

To avoid any such post-funeral surprises, McKinlay Douglas, the Tauranga-based public policy company that has devised and runs the scheme for the various councils, insists on a compulsory "decision facilitation" meeting before customers sign up, at which their heirs or benefactors, can debate the proposed whittling of their inheritance.

Personally, I would have thought the right time to tell the kids was after you had made the decision and bought the sunshade and air tickets.

To my surprise, only three elderly people have joined the Rodney scheme, despite its being available for more than a year. It appears the uptake in other participating districts has also been low.

I can only surmise that to people of my - and my parent's generation - debt is something you've been brought up to avoid or stay out of, if at all possible. Possibly the stigma attached to the old rates relief policy, with its demeaning means testing, also lingers.

North Shore City's present policy is typical, and I single it out only because the procedure is outlined in a recent background paper. Rates relief is available only in cases of "extreme financial hardship" and as a general rule the ratepayer will still be required to pay the first $500. The council also "has to be satisfied that the ratepayer is unlikely to have sufficient funds left over, after the payment of rates" to (I precis) survive.

Under that regime, the latest model of which was introduced in July 2003, four ratepayers inquired, of whom two applied and just one was successful.

The McKinlay proposal does away with this poor-house procedure. Instead of crawling to the council, cap in hand, pleading for relief, you bowl up to the counter and say, "Here's my house title, I want to join the scheme".

Who knows, in time, rates postponement could be a seen as a smart and sensible investment decision, especially for those on fixed incomes wanting to stay put in areas of rocketing land values.

Under the McKinlay scheme, it could also be available to those under 65, but in those cases, the rates postponement would be for a maximum 15 years only. Keith McKinlay says this could help, for example, a solo parent caught with bulging education costs. In such circumstances, "It's a highly flexible way of allowing people who might otherwise be under real pressure, to control that pressure".

What surprises me is that I've heard no talk of it as a solution, in Auckland City for example, to situations such as that on Waiheke Island, where soaring property prices have led to elderly, long-term islanders, screaming about equally steep rates increases.

Transferring that debt to those who will, in due course, reap the capital gain, seems the neatest solution going. And to think that Rodney District, for once, is leading the way.