Thursday, 19th March, 2015

An initiative to reduce the proportion of Auckland Council’s revenue generated from rate payers has been proposed by Auckland Chamber head Michael Barnett.

Auckland Council’s 10-year budget shows that 45% of council’s revenue comes from rates.

As well as services, costs covered by rate payers include a sizeable chunk of debt interest costs to help meet the City’s growing debt.

The 10-year budget indicates that the level of net debt increases from $5.4 billion to $6.5 billion. The interest cost for this debt covered by each rate payer rises from $576 in 2015/16 to $695 in 2024/25.

For example, an urban residential property with a capital value of $750,000 has an estimated total rates bill of $2,274 (including GST) for 2015/16. The net interest cost is equivalent to approximately 19.4% of this rates bill (or $441) in 2015/16.

“That’s unfair. The rate payer burden is getting out of hand,” said Mr Barnett. But the plan shows no intent for new thinking. Over the 10 years, the proposed average 3.5% rate increase per year represents a cumulative rate increase of 41%.

“Few businesses would survive if they planned in advance to add an average 3.5% level of cost every year to their enterprise, especially with inflation currently below 1%.”

With firm leadership, the Council should be able to plan to deliver significantly lower or ‘nil’ rate increases in some years, especially given the low inflation – low interest rate economy we are currently enjoying.

Annual rate increases should be limited to cover inflation, and this should be enshrined as a principle, said Mr Barnett. Any increase above the inflation rate should be clearly tagged to indicate what service improvement it will provide for, and a statement provided as to why the ‘increase’ could not be provided through user charges or offset by grants and/or subsidies or other sources.

To start a step change to get a more balanced portfolio of revenue sources, he has suggested the Business Leaders Group that he chairs lead a search for new revenue sources from all possible areas – partnering with other organisations especially the private sector, central government, and charitable and community groups. “It won’t be easy, but it’s necessary, if Auckland is to progress.”

For more information contact Michael Barnett, mobile: 0275 631 150.
Michael Barnett, Chief Executive, Auckland Chamber of Commerce.