Scheme could let elderly off rates until they die

By ROSALEEN MacBRAYNE

Elderly people struggling to afford rising council rates are being offered a rates "holiday" until death, when the money owed will be deducted from their estate.

A handful of councils led by Western Bay of Plenty and including Rodney, the Far North, Thames-Coromandel and Gisborne, will offer residents over 65 years of age an unlimited stay on their rates bills.

Details are still being finalised, but the scheme will start on July 1.

Thousands of ratepayers could be eligible.

Other local authorities are waiting to see the idea in operation and may adopt it if it proves popular with people who are asset-rich but have low cash incomes.

But the superannuitant organisation Grey Power is not recommending that its members join the scheme.

It is concerned about the interest being charged on the accumulating bill, the effect on personal and household insurance and the possibility that councils will sell the debts.

Grey Power vice-president Don Chapman said he had a close look at the scheme late last year, and would not take up the offer.

"I don't feel happy with it myself, but it's going to have to be a personal decision because other people may be in a different situation to me or have a different frame of mind."

Areas testing the scheme are those with high numbers of elderly ratepayers.

Western Bay of Plenty District Council, with a population of 38,000 in coastal settlements and the rural area bordering Tauranga city, is typical of fast-growing districts.

Costs associated with this growth are falling on councils with higher than average numbers of retired ratepayers struggling to meet dramatically rising rates as property values soar.

The rates holiday plan came from Western Bay's general manager, Glenn Snelgrove, and is based on similar schemes in Canada and the United States.

Western Bays council staff have been working on the concept for two years. Other councils joined in six to nine months ago to share legal costs and ideas. Government representatives, including Attorney-General Margaret Wilson, have worked with the councils.

But Local Government Minister Chris Carter would not comment on the scheme until he received more information on how it would operate.

A spokesman for New Zealand First leader and Tauranga MP Winston Peters said the offer sounded interesting, but he would recommend people look long and hard at the small print.

To reassure elderly people worried about being ripped off, applicants in the Western Bays will be encouraged to have independent advice before signing up.

They can expect to pay a fee of between $50 and $200 to join, although councils could vote to carry the administration costs.

Local authorities are aiming for a consistent approach and want to discourage people joining and then pulling out of the scheme.

A floating interest rate, possibly starting around 7 1/2 per cent, will be charged on the rate debt.

Western Bay of Plenty's chief financial officer, Philip Jones, said dozens of inquiries for information had been received, but he was not expecting great numbers of older ratepayers queuing to join the scheme.

"My personal view is that it is going to take a while to get up a head of steam."

Most people aged 65-plus were averse to debt and might resist the offer, even if it meant the difference between being able to stay in their homes or having to move to a lower-rated property.

"But baby boomers are quite used to large debt and may have a different slant on it."

Ratepayers younger than 65 could also apply for rates postponement, but they would be limited to 15 years on the scheme, he said.

In theory, they did not need to be mortgage free but would "probably have to be" because banks would want to protect their interest in the property.

Residents would be able to negotiate with their local council to transfer the accrued sum to another house, said Mr Jones.

In the Western Bay of Plenty, annual rates average $1500.

How it works

* A scheme giving elderly ratepayers the option of a stay on rates until death is to go on trial in areas with high numbers of senior citizens.

* Councils will recover rates from people's estates. The scheme could spread as the population ages.

* The 2001 census showed New Zealand had 450,426 people aged 65 or over, double the 1951 figure.

* The retired population is expected to reach 1,181,000 by 2051.