Key Takeaways:
- The New Zealand government has proposed a rate capping system to limit rate increases, but it will not take effect until 2026
- Ratepayers and some council members are concerned that the timeline is too far away and will cause more hardship
- The proposed system has been criticized for being "well-intentioned but poorly thought out" and may lead to underinvestment in critical infrastructure and reduced public services
- The government’s proposal includes a regulator function, which some argue will add another bureaucratic layer and increase compliance costs
- Council members are calling for a more flexible and fast-track process for exemptions, particularly for fast-growing areas or in response to natural disasters
Introduction to Rate Capping
The New Zealand government has announced a plan to implement a rate capping system, which aims to limit the amount by which local councils can increase rates. However, the proposed system has been met with criticism from ratepayers and some council members, who argue that it does not go far enough to provide relief to those struggling with high rates. According to Whakatāne Action Group chairman John Howard, the rate capping system needs to be effective from 2026, as many ratepayers are seeking relief from the current high rates. With a 42% rate increase in the current Long-term Plan and a possible increase of 10.4% this year, many ratepayers are feeling the pinch.
Concerns About the Timeline
One of the main concerns about the proposed rate capping system is the timeline. The system is not set to take effect until 2026, which many argue is too far away. As Howard notes, "for many ratepayers seeking some relief, the timeline is just too far away. It will cause much more hardship." Former Whakatāne mayor Victor Luca, who tried to exert downward pressure on rates during his time on council, also expressed concerns about the timeline, stating that "for a struggling ratepayer, that is not soon enough." This delay in implementation will likely lead to continued financial struggles for many ratepayers, who are already facing significant increases in their rates.
Criticism of the Proposed System
The proposed rate capping system has also been criticized for being "well-intentioned but poorly thought out." Mayor Nandor Tanczos argues that the system will likely make things worse for ratepayers, leading to underinvestment in critical infrastructure, reduced public services, and eventual rates spikes. Tanczos points to the example of New South Wales and Victoria, where similar systems have had "pretty dire consequences for local communities." He also argues that the proposed regulator function will add another bureaucratic layer, increasing compliance costs and staff churn. This criticism highlights the need for a more thoughtful and effective approach to addressing the issue of high rates.
Impact on Local Government
The proposed rate capping system has significant implications for local government. Tanczos argues that the system restricts councils’ ability to respond to local needs and takes away communities’ right to determine their own priorities. He also notes that the proposal now captures core infrastructure like roads, bridges, and public transport, which the government had previously indicated would be excluded. This change will likely have a significant impact on local government’s ability to fund and maintain critical infrastructure. Furthermore, the lack of flexibility in the system may hinder local government’s ability to respond to emerging issues and priorities.
Need for Flexibility and Exemptions
Council members are calling for a more flexible and fast-track process for exemptions, particularly for fast-growing areas or in response to natural disasters. Tanczos argues that local government needs a common-sense, fast-track process for exemptions, which must be flexible and fast-moving, not bogged down in bureaucracy. This would allow councils to respond quickly and effectively to changing circumstances, rather than being constrained by a rigid and inflexible system. For example, in the event of a natural disaster, a fast-track process for exemptions would enable local government to respond rapidly and provide necessary support to affected communities.
Conclusion
In conclusion, the proposed rate capping system has been met with criticism from ratepayers and some council members, who argue that it does not go far enough to provide relief to those struggling with high rates. The timeline, which will not see the system take effect until 2026, is a major concern, as is the potential for the system to lead to underinvestment in critical infrastructure and reduced public services. Council members are calling for a more flexible and fast-track process for exemptions, particularly for fast-growing areas or in response to natural disasters. Ultimately, a more thoughtful and effective approach is needed to address the issue of high rates and ensure that local government can respond to the needs of their communities. By considering the concerns and criticisms of the proposed system, it is possible to develop a more effective and sustainable solution that benefits both ratepayers and local government.
