Sound the Alarm on Ratings Change

Opinion – Reihana Robinson

If you live anywhere in Hamilton City, whether renter or homeowner, take a deep breath, sit yourself down, and try to remain calm.

Sound the Alarm on Ratings Change

By Geoffrey and Reihana Robinson
October 1, 2011

If you live anywhere in Hamilton City, whether renter or homeowner, take a deep breath, sit yourself down, and try to remain calm.

Because according to proposed changes to the Hamilton City Council rating system, you and your family budget are about to be hit with the equivalent of a financial tsunami. Under the HCC plan currently open for submissions, there would be a massive rates shift of millions of dollars annually onto residential properties and away from business and commercial properties. The change would cost city households hundreds, and even thousands of dollars in higher rates every year.

This is no false alarm. While HCC has been soft-pedaling its shift to capital value rating as simple, fair, transparent and easy to understand, council’s press releases, consultation documents, and promotional “City News” have all failed to state the real financial impacts on residential ratepayers that would start next year. The public is being snookered.

Few can argue with the change from rating based on land value to rating based on total capital value (CV). Most would agree that a $300,000 house on a $200,000 section should pay the same as a $200,000 house on a $300,000 section. That system makes sense and is used throughout most of the country. It’s time Hamilton made the change too.

But the shift to capital value is only half the story. What HCC is not telling residents is that, unlike their new plan, almost every other major city in New Zealand applies a “differential” rate that charges a higher amount per thousand dollars of capital value on commercial properties than it does on residential properties. They do so for good reason. Businesses benefit enormously from council infrastructure and service spending, as well as a range of economic development programmes, capital projects and events. Businesses can deduct their rates from taxes and pass along any increases, unlike ordinary citizens on a wage or fixed income.

HCC councillors are well aware that Wellington applies a commercial differential of 2.75 to its CV rating system. In Christchurch, the commercial differential is 1.66, Dunedin 2.65, and Lower Hutt Central 3.70. Auckland applies commercial differentials as well.

But Mayor Hardaker and a council majority seek a Hamilton commercial differential of exactly zero, reflecting a radical pro-business agenda. Central city properties in the Business Improvement District would pay proportionately even less. The city’s overall rates burden would shift dramatically onto residential properties. The bottom line – businesses will pay tens of millions less each year, and homeowners will pay tens of millions more.

What would the radical HCC rating system mean to you? More than 91% of Hamilton residential property owners would see their rates bills skyrocket. Fully 48% of residential ratepayers would pay from $100 up to $500 more in rates each year. Another 26% of residential owners would pay a crushing $500 to $1000 more in rates each year. And an unlucky 6% of residents would, incredibly, pay over $1000 more. This is on top of regular rates rises like this year’s record-breaking 8%.

Who would win? More than 84% of commercial properties in the CBD and over 77% of businesses in the suburbs would see their annual rates bills slashed. In the CBD, a whopping 43% of commercial properties would see rates drop by up to $5,000. Another 22% would save between $5,000 and $10,000 annually. And a lucky 19% of commercial properties would see a windfall of more than $10,000 each year.

An internal council memo gives examples of sample impacts. A Fairfield residential property with a CV of $550,000 would see annual rates rise 43% from $2,337 to $3,356. A Huntington home with CV of $445,000 would increase 51% from $1,825 to $2,764. In Forest Lake, rates on a $380,000 CV residence would jump 56% from $1,529 to $2,398. Residents in less expensive suburbs would be hit hardest.

Meanwhile, a typical CBD retail property with a CV of $900,000 would see its rates slashed by over 55% from $11,847 to only $5,331. Rates on a sample suburban commercial property with a CV of $3.4m would plummet 36% from $30,201 to $19,163. And a sample Te Rapa industrial property worth $9.75m would have its rates cut in half from $110,177 to only $54,952.

Whether they own or rent, most Hamilton residents stand to lose. But everyone with a pulse and a breath can voice their concerns in the HCC submissions process from now until October 12.

To get in step with urban New Zealand, Hamilton needs capital value rating. And to be truly fair, it also needs a substantial citywide commercial differential.


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