Rates caps on, says Watts; beans to that, says Brown

Although many would tip their hats to the recent announcement that council rates increases will be capped at four per cent, at least one Super City ratepayer furrowed his brow.

Auckland Mayor, Wayne Brown says the move by Local Government Minister, Simon Watts, could backfire on ratepayers nationwide.

“The government’s offering a slogan, but the reality is that a rates cap won’t solve the underlying problem, in fact, could make it worse,” Brown says. “A rates cap could actually lead to higher costs for future ratepayers, all [to save the equivalent of] a can of baked beans.”

Savings in the short term won’t see householders avoid having to pay towards major infrastructure projects such as the much-vaunted City Rail Link (CRL).

“Councils still have to fund the infrastructure and services their communities need. Auckland also has major commitments such as the City Rail Link, which arose from decisions made by previous governments and councils,” Brown says.

“Auckland councillors have worked to keep our rates increases low, despite the double-digit rates rises up and down the country… and still provide services.”

The rates cap will impact councils’ credit ratings, Brown asserts.

“Credit rating agencies Moodys and S& P Global Ratings have indicated that measures like this could be ‘credit negative’ for Auckland Council,” he adds.

“Auckland has maintained its strong credit rating through prudent financial management, and a credit rating downgrade could increase borrowing costs putting further pressures on rates, infrastructure investment and service levels.”

The mayor’s comments are in response to Watts’ contention that a rates cap will help keep rates affordable.

“For too long, ratepayers have been hit with steep and unexpected rates increases, adding pressure to household budgets at a time many New Zealanders are already feeling the squeeze,” he says.

“Our government is focused on easing cost-of-living pressures and getting councils back to basics. Under this legislation, councils will be required to keep annual increases within an initial target range of 2-4 per cent, putting a brake on excessive increases and giving ratepayers greater certainty.”

The cap will also “sharpen the focus” with regards to value for money for services, Watts expects.
Councils may be given exemptions but only in such extreme circumstances as in the wake of natural disasters.

“Ratepayers nationwide have been hit with median increases of 14.2 per cent and 9.2 per cent over the past two years respectively,” Watts adds. “This rates cap is about driving greater fiscal discipline, keeping rates affordable and ensuring councils are focused on delivering the services ratepayers rely on.”

The caps will take effect from July 1, 2029.