Continuing to treat business as a "cash cow" to fund rates will make growth stagnate, says a local business leader.
Rotorua Chamber of Commerce chief executive Roger Gordon has responded to Pukeroa Oruawhata Holdings' claims that a proposed change to Rotorua's rating system could see the city lose a potential $10 million business with up to 90 jobs.
"Until Rotorua's council stops seeing big business as a cash cow to fund city rates, this city will continue to experience stagnation of growth. This is just what we don't need," he said.
But the Rotorua District Council's Corporate and Customer Services group manager, Jean-Paul Gaston, said most councils in New Zealand used a capital value-based rating system and the rest were looking seriously at applying it.
Mr Gordon said unfair allocation of the rating burden on big business was caused by the application of a 2.2 differential on the capital value of businesses. He said a chamber survey showed the rates of 32 of Rotorua's largest employers would rise more than 25 per cent under the changes.
"This will have considerable impact on these businesses and result in a serious assessment of maintaining or increasing staff levels. Companies are not going to invest in property and business developments if it means an unreasonable increase in their annual rates bill," he said.
News the rates change could cost Rotorua a significant new business came out in a submission by Pukeroa Oruawhata Holdings to the council's draft Long Term Plan last week.
The chamber wants the council to adopt a rates model with fair distribution across all three major sectors - business, farming and residential.
Mr Gaston said this was not the case district-wide. "Under our council's proposals to change to capital value rating, 1100 Rotorua businesses will actually see their rates go down next year while around 850 will increase.
"Some of the more significant increases would apply to large-scale business operations who up until now have paid only the same amount of rates as much smaller businesses occupying similar sized pieces of land. That is widely regarded as being unfair to our small businesses," he said.
Mr Gordon observed the Long Term Plan said differentials were used to make a fair allocation of rates across the entire rating base, but he disagreed.
"The proposed plan sees farming businesses enjoying an 11 per cent reduction in rates. A 2007 review of the New Zealand rating system emphasised that shifting the rating system from a land value-based system to one based on capital values made paying a business differential unfair and unnecessary."
Mr Gordon said council's mandate to move to capital rating, where properties of equal value paid equal rates and everyone was treated the same, should mean exactly that.
"The council has been doing some excellent work in establishing a council-controlled organisation to implement the Sustainable Growth Strategy and target more jobs and higher incomes. Surely the council realises business provides Rotorua's jobs and wealth creation. This is a benefit to all Rotorua residents."
Mr Gaston said that under the rating proposal large national utility companies, such as telecommunications and energy businesses, who had until now been able to avoid paying rates, would start contributing to general rates for the first time.
"Mr Gordon is one of more than 400 people who have made submissions on the draft Long Term Plan and a significant majority of those submitters support the council's proposals to change the rating system.
"Mr Gordon's advocacy for big business and the contrary views of other submitters will all be considered by the mayor and councillors before they make any final decisions."
Those deliberations are taking place at meetings set down for June 5 to 7.