Tauranga City Council is reviewing the level of rates contribution from the commercial and industrial property sector to ensure it is paying a fair share towards council investment in transport and infrastructure. The review is one of two options council is considering to address the imbalance in the city’s current rating system.
Excluding water, the commercial sector is contributing 23% of total rates revenue this year. This is significantly less than most New Zealand metropolitan local authorities, where the commercial and industrial sector contributes an average of 30% of total rates.
Commissioners adopted an increase of the commercial differential from 1.2 to 1.6, which took effect from 1 July this year and they also asked staff to review the level of rates contribution from the sector to fund council’s activities through the 2022/2023 annual plan. A progress report was received by the council yesterday and a final report will be completed for council consideration in February.
As a result of the strong residential housing market, the latest city-wide revaluations are likely to increase the burden on the residential sector to fund council activities.
Staff have carried out analysis and modelling of the factors that would achieve a more balanced rating system, based on the level of resources currently used by residential, commercial and industrial ratepayers.
Commission Chair, Anne Tolley said commissioners wanted to ensure that the rate funding mix is better balanced across our community.
“Our strong housing market means we need to make sure that the revaluation of the city does not shift the rates burden from the commercial and industrial sector to the residential sector, because we know that Tauranga’s commercial rates are already much lower than they are in other cities.
“We have looked at the transportation activity in particular, to review the funding mix of who pays and who benefits. Initial findings indicate that the commercial and industrial sector enjoys half the benefits of the transportation network, but only contributes around 23% of the rates to fund it. We believe this needs to change to be fairer to everyone.”
“There has been underinvestment in many activities over the last few years, but particularly in the transportation and community facilities space, as previous councils worked to keep property rates comparatively low. To catch-up, we need to find new funding sources, including rates. Tauranga deserves a city with at least the same level of amenity enjoyed by other New Zealand population centres.”
“We’ll be reaching out to the commercial and industrial community to get their initial thoughts and look for ways to rebalance the transportation funding in early-2022. Any proposed changes will be consulted upon as part of the Annual Plan 2022.”
Commissioners are also looking at other levers available to it to rebalance its revenue streams and ensure that services and infrastructure are paid for by those gaining the most benefit from them. That will include a review of development contributions, with the intent that current growth should pay an equitable amount towards the costs of future growth – with commissioners signalling there will be an increase in the 2022/23 year. This approach is a continuation in direction from the Long Term Plan, where investment in activities like transport will take many years to come into effect, but council need to take action now to ensure the best possible outcomes for the city.