Tauranga commercial ratepayers have had it too good for too long and that’s about to change, Tauranga City Council’s commissioners have signalled.
The council is proposing to heap a bigger proportion of the city’s rates burden on commercial property owners.
Commissioner chairwoman Anne Tolley led discussions about proposed changes to the council’s rates differential – the split between commercial and residential rates – at a council meeting on Monday.
The meeting also discussed a dire need for investment to address the city’s many issues.
Updated draft rates increase figures showed an average 22 per cent rise in the next financial year, followed by 12 per cent and 9 per cent in the subsequent years.
Tolley told council executive staff members she had heard criticism the city’s community “had borne the costs of growth unfairly”.
“If you look at the differential, it tends to suggest they are correct. We are looking at some quite big increases … It’s time for a good look at the fairness of how the cost is responsibly apportioned,” she said.
“This is a big hit to residents and commercial is able to claim tax that an individual homeowner can’t. I’d like to see it stepped up higher so it’s more in line. We are still a huge way off what other metros are paying.”
Tauranga’s commercial ratepayers currently pay a differential of 1.2, meaning they pay $1.20 to every $1 residential ratepayers pay for property of the same value.
Figures provided to the Bay of Plenty Times by the council showed this was the lowest differential of nine of New Zealand’s metropolitan councils. The second-lowest was Christchurch with 1.7 and the highest was Palmerston North with 3.3.
The council is considering proposals to lift Tauranga’s differential as part of its draft Long-Term Plan.
The preferred option was to push the commercial differential to 1.6 in 2021/22.
That would mean commercial ratepayers would pay $1.60 for every $1 residential ratepayers pay.
Another option was phasing in a 1.6 differential over the next two financial years, with an initial lift to 1.4 in the first year.
Targeted rates for specific areas of spending were among other changes to rating policy up for discussion.
The council introduced a commercial differential in 2018, when it did its last Long-Term Plan.
Prior to that, commercial and residential ratepayers paid the same rate per dollar of property value.
Initially, a 1.6 differential was proposed, to be phased in over three years, but this was ultimately pegged back to 1.2 by 2020 after an outcry from the business sector.
Moves last year to push it up further also met with resistance and were ultimately abandoned as the economic impact of Covid-19 hit.
After Monday’s meeting, Tolley told the Bay of Plenty Times she was interested in creating a better balance between residential and commercial rates.
“We want to ensure there’s some equity. We want to have a look at what other forms of funding there are and how we can unlock that,” she said.
“The challenge for us then is getting to be to have a sensible conversation about how best to manage that. We have this two-pronged investment to make – one is catch up with the growth that is happening … The other thing is the underlying lack of investment.
“It’s getting harder and harder for people to live here … already we are seeing huge social injustices.”
Commissioner Stephen Selwood said there was not much point in having low rates when the city was dealing with some of the highest house prices in the country.
“You’ve got to look at the total cost of living.”
Both commissioners acknowledged there would be businesses that had already been impacted by Covid-19.
Ray White Commercial salesman Philip Hunt told the Bay of Plenty Times the proposal was a “real concern”, especially for the CBD.
“The greatest concern I have is that the CBD retailers and few office tenants that are left are seen as a cash cow and have been constantly hit by escalating increases in costs, including rates.”
Hunt said the increases were somewhat inevitable, in his opinion, due to the council’s situation.
“But they need to be justified with some positive decision-making.”
He said a lack of leased parking was also an issue for the CBD and Ray White Commercial was seeing more business operators asking about moving out of the area than into it.
“I think council would be very wise to take these issues into account before making a hasty decision in lifting commercial rates for what already is a failing CBD.”
Tauranga Chamber of Commerce chief executive Matt Cowley said the city was in crisis with idle traffic, rising rental and housing costs and staff asking for higher wages all costing businesses.
However, some businesses accepted they may have to contribute more as “it’s better than incurring costs as the city’s issues worsen over time”.
“Other than those impacted by closed borders, I hear most businesses would prefer action over inaction,” he said.
Cowley said the biggest issue was a general lack of trust the council would deliver good outcomes for invested money.
“Increasing the commercial rate just dumps money into council’s general bucket. New funding from businesses should be targeted and ring-fenced to a specific activity,” Cowley said.
“This will achieve the same outcome but there would be greater certainty of how the money will be invested.”
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