Whanganui Mayor Andrew Tripe says the council is "focused on the basics but the basics are increasingly expensive to deliver”. Photo / NZME
Mayors say the Government’s proposal to cap rates rises is not a surprise and councils are “well aware of the need to be affordable”.
This week Prime Minister Christopher Luxon and Local Government Minister Simon Watts said consultation would begin immediately on limiting annual rates rises to between 2% and 4%.
The cap would come into effect in 2029 but Watts warned the Government could intervene if councils set rates higher than the cap after 2027.
Whanganui District Council had an average rates rise of 2.2% for 2025-26, the lowest in the country.
Mayor Andrew Tripe said the Government’s move had been well signalled.
“It is important we continue to provide household and business budgets with greater certainty and affordability,” he said.
“At the same time, let’s not lose sight of the wider picture – electricity and insurance have both increased by more than 10% in the last year, and central government tax revenue has grown by over 6%.”
He said any national cap must still allow councils to invest in essential long-term infrastructure.
“More than 90% of our capital investment in the current long-term plan is infrastructure and I am keen to see that continue.
“We are focused on the basics but the basics are increasingly expensive to deliver.”
Ruapehu Mayor Weston Kirton said the announcement was expected but there were a lot of unknowns about the effects capping would have on smaller councils.
“It almost suggests we can’t do much in the way of capital works because we can’t borrow any more,” he said.
“It’ll be hard work, but, at the same time, it’s a goal we should strive for,” he said.
“The Government won’t take any prisoners with this.”
Speaking to the Chronicle in April, Luxon said councils’ “core business is to deliver services to ratepayers and do the basics brilliantly”.
A Whanganui example of “frivolous” council expenditure was the proposal last year to build a $50 million hotel and multi-storey carpark, he said.
“It’s lovely and it’s a nice-to-do, it‘s not a must-do.”
The hotel plan was scrapped following public consultation on the council’s long-term plan for 2024-2034.
Rangitīkei Mayor Andy Watson said his council and the local government sector were “well aware of the need to be affordable”.
“I’ll certainly be going back to my chief executive and staff and saying ‘This doesn’t kick in until 2027-29 but that’s where we need to be aiming’,” he said.
“Then, we need to understand what services we would no longer be providing or, to balance the budget, how much we would increase the cost of services we deliver.”
Rangitīkei District Council had an average rates rise of 8.9% for 2025-26.
Whanganui MP Carl Bates (National) said councils would have the opportunity to exceed the cap in exceptional circumstances and with the approval of a regulator.
“What exactly that relates to is being consulted on and being worked through,” he said.
“But I think it makes us think very carefully, as councils across the country, what it is that our ratepayers want and are willing to pay for.”
In a statement, Watts said the target range for rates increases was based on long-term economic indicators, such as inflation at the lower end and GDP growth at the higher end.
Watson said keeping costs within the parameters of the Consumers Price Index (CPI) would be a challenge, and one the Government did not meet itself.
CPI, a measure of inflation, tracks the changes in the prices households pay for goods and services.
“Up to 40% of our costs in a normal year are in roading and, unfortunately, roading doesn’t follow the CPI,” Watson said.
“But we need to comply because, in all likelihood, this will become law.”
Ruapehu District Council had an average rates increase of 9% for 2025-26, in line with the first three years of its 2024-2034 long-term plan.
Kirton said staff were “working frantically” to lower that figure for 2026-27.
“In my view, you put the 2% [rates rise] scenario out [to the public], you put the 4% out, and maybe put 5% out because we still have a window to do it, and say ‘this is what’s going to be cut’.“
Tripe said if the cap did not keep pace with the rising cost of delivering essential services, councils may need to look at alternatives, including changes to service levels and increases to user fees.
“These are difficult conversations, and we will work hard to avoid them, but it is important the public understands the implications of a strict cap.”
Mike Tweed is a multimedia journalist at the Whanganui Chronicle. Since starting in March 2020, he has dabbled in everything from sport to music. At present his focus is local government, primarily Whanganui District Council.