Rates war unites city and farm

Dick Hubbard

Soaring rates have united the leaders of New Zealand's biggest city and the farmers to push for a radical overhaul in the way councils are financed.

Auckland City Mayor Dick Hubbard and Federated Farmers president Charlie Pedersen say the decades-old system of using property values to collect rates needs changing.

Federated Farmers wants a Royal Commission into the financing of local government, while Mr Hubbard says the Government should hand back GST on rates to councils and start paying rates on Crown-owned properties such as schools, hospitals and Department of Conservation land.

Their call comes on the eve of the Local Government New Zealand conference in Wellington and days after a Herald series on rates, which revealed that Auckland rates and water bills would race ahead of inflation over the next decade towards $4000 for the average family.

Prime Minister Helen Clark and Local Government Minister Mark Burton will address the conference but will not make any major announcements on new revenue sources to take the burden off ratepayers.

The Government is waiting for ideas from a local government funding project, due to report in October. Last week, Mr Burton told the Herald Crown contributions in lieu of rates on Crown land were being looked at but "it is too early to indicate possible outcomes".

Last night, Mr Hubbard said the project, delayed for years, was going nowhere and an inquiry was needed to come up with a "radical overhaul" because rates were increasingly becoming an unfair way to finance sophisticated cities.

"There has to be some formula for a certain amount of central Government funding to come through to cities. At the moment we have to go to Government cap in hand on a case-by-case basis and that depends on the whim of Government, amount of funding and strength of the calls.

"The logical first step would be GST on rates. It is ... untenable that GST on rates goes to central Government because that is clearly just a tax on a tax," said Mr Hubbard.

Federated Farmers believes that rates are becoming more out of touch with what is needed and what is fair for farming communities. Its survey of 83 councils shows rate rises averaging 8 per cent over the next three years.

Mr Pedersen said: "We hope the Government is listening to the concerns from both ratepayers and councils."

Local Government New Zealand president Basil Morrison said he believed that property-based rates would remain the main source of councils' funds but the Government should meet more of councils' costs.

He said councils had received substantial increases in Government funding towards the new rates rebate scheme, roads and transport and wastewater schemes in areas such as Northland, but on the other side of the ledger councils faced rising compliance costs arising from new laws ranging from the Building Act to microchipping dogs.

In the past five years, Government contributions to councils have increased 50 per cent, from 8 per cent to 12 per cent of councils' incomes.