Capital-value rating favoured for Rotorua

Rotorua property owners with high-value properties could pay higher rates compared with those who own low-value properties if the council pushes ahead with a radical change to its rating system.

Councillors at yesterday's corporate and customer services committee voted to investigate the introduction of a capital value rating model, signalling its intention to change from the old land-value rating system.

Under a land value-based system, rates are worked out on the unimproved value of a property. Capital value includes the land value and any improvements, such as buildings, and is based on the amount the property might be sold for at market value.

Councillors had four rating options from which to choose: The status quo - a mix of capital and land-value rating with targeted rates and differentials for businesses.A simple capital-value model, plus an adjustment to the rural residential deferential. A simple capital-value model, plus the business and economic development targeted rate allocated more evenly across business, industrial and farming sectors.Or a pure capital value rating system with no differentials.

Councillors opted for the third option, known as Option 2ab, saying it was the fairest across the board, yet still included a differential of .85 for rural residential properties.

This is not necessarily the case under the present land value-based system.

A differential is an arbitrary number used in an attempt to adjust the rates paid by one category of property as compared with another category.

For example, a differential of .85 would mean those properties in a particular area would pay 85 per cent of the rate payable by people in another sector.

The council's corporate and customer services group manager Jean-Paul Gaston said one of the more interesting facets about capital value would be that the council could recoup about $1 million in rates from utility providers, such as communication and electricity companies.

"Generally these companies don't have high-value land holdings and high-value infrastructure. Under a CV model they would pay a share of the general rate, currently they pay little, if anything."

Committee chairwoman Janet Wepa said capital value would be more consistent over time, whereas land value has more "highs and lows" as seen in the latest property values for the district.

"Capital value is better without differentials and option 2ab is the softer approach at this stage.

"We have to put our personal feelings aside and now think about what's better for the whole community."

Council staff would now consider a new rating model for the district's draft long-term plan to be presented at a council budget meeting on February 15.

It would then go out for public consultation.