Rates cap debate: Simon Watts responds to mayors’ concerns

The Local Government Minister is pushing back at criticism of his rates cap proposal – reassuring councils they have the tools and the time to comply with any new rules before they’re introduced.

Simon Watts has begun considering feedback from councils on a plan to cap rates rises from 2029, possibly at 2% to 4% a year.

Many councils and mayors have raised concerns, with Christchurch’s Phil Mauger warning it will have significant implications for key services and infrastructure and Wellington’s Andrew Little warning it could lead to higher fees for swimming pools, recreation centres and other community facilities.

Auckland’s Wayne Brown has been particularly outspoken, donning a “rates cap” hat during a council meeting to mock what he called a “piece of ridiculous legislation” and holding up a can of baked beans representing how much he said ratepayers would save each month under the change.

Other mayors – like Dunedin’s Sophie Barker and Tauranga’s Mahé Drysdale – have told Newstalk ZB a rates cap would mean cutting services and making sacrifices.

“The rates cap is hard because we’re not buying pies at the supermarket – we’re buying roads, bridges and things like that,” Barker said.

“We’ve heard stick to roads, pipes and all that core infrastructure, but we won’t be able to afford even the core infrastructure at a 4% rates hike,” Drysdale said.

Watts said the Government was aware of the risks of underinvestment and the need to support growth and would give councils time to plan and adjust by implementing the change in stages.

But he also pointed to the need to contain rates rises – with Newstalk ZB analysis showing rates have surged at a record pace over the past three-year electoral term.

“I expect councils to make full use of the funding and financing tools available to them – ensuring fees and charges accurately recover the costs of providing private-good services, using debt financing to spread the costs of infrastructure over time and maximising the new funding and financing tools,“ Watts said.

“If a council believes it cannot undertake vital work within the target range, it has the option to apply for a variation. Any approval will require a clear plan for returning to the target band over time.”

Auckland Council officers claim the rates cap will lead to higher costs for Auckland ratepayers and have suggested the Government could instead consider a rates “target” – similar to the Reserve Bank’s medium-term inflation target – with consequences for councils that are outside that range without due cause.

Watts said the Government had consulted on the policy design and would be considering all feedback before making any final decisions.

Michael Sergel is Newstalk ZB’s business reporter. He’s been covering business, politics, local government and consumer affairs for more than a decade.