23 March 2012

Media release

Auditor General called in to look at fairness of Auckland Council rate hikes

Huge rate and fee increases signalled by Auckland Council are unfair, unacceptable and ultimately self-defeating to Auckland ‘s ambitions to be a competitive and attractive world city to work and live.

“They must be challenged,” says Michael Barnett, head of the Auckland Chamber of Commerce.

A proposed business rate differential that is 2.63 times higher than the general rate defies the business-friendly principles adopted by the new Auckland Council and cannot be justified. This means that if a residence has a rate of $1000, a business of equivalent capital value will have to pay $2630.

That is unfair and conflicts with a recommendation of the 2007 Local Government Rates Inquiry that business rate differentials should be abolished.

“As well as business rate differentials, we have major problems with Council’s veiled warnings of big rate increases arising from the merging of the rating systems of the former councils into one system, and massive increases in wastewater charges that could take fees from around $200,000 for some big water users to more than a million dollars,” warned Mr Barnett.

“If the huge rate and fee increases proposed across different areas in the Council’s 10-year draft Long-term Plan prevail, it is inevitable that there will be closures, job losses and options taken to move elsewhere,” concluded Mr Barnett.

He is calling for Council to re-consider. “What’s proposed would be unacceptable in the best of times. In a fragile business environment and a new city seeking to be business-friendly and attractive, the proposals are reprehensible and counter-productive to Auckland’s best interests.”

He called for a business-council negotiation to achieve a practical, realistic and affordable rate and fees package.

In terms of details, reasons given for higher business differential rates are spurious such as that:

• Businesses can afford the business differential because they are able to claim back GST from rates and treat rates as a business expense. That should not be a relevant factor in deciding the incidence of rates.

• There are higher costs to council associated with businesses such as the cost of road maintenance due to heavy vehicle traffic. This should be contrasted with the view that residents in the wider area benefit from having businesses in their locality and therefore should contribute to the costs.

• Many businesses operate from residential properties and will be advantaged unfairly against businesses paying the differential.

• No account appears to have been taken of the fairness and equity associated with the merging of the rating systems of the former councils into one system.

For these and other reasons we have requested that the Auditor General look into the fairness and lawfulness of business rates differentials, concluded Mr Barnett.

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