Rates up 7% in September quarter

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BusinessDesk: Central govt subsidies reduce local govt deficits in Sept. quarter

14th Dec 11, 1:38pm by BusinessDesk

New Zealand local authorities’ finances improved in the three months to September, with Statistics New Zealand measuring an operating deficit improvement of NZ$43 million due to a rise in grants, subsidies and donations.

Local authorities reduced their operating deficit to NZ$6.8 million from NZ$49.3 million in the June quarter.

The September quarter operating deficit was NZ$72.4 million lower than the NZ$79.2 million deficit in the September 2010 quarter.

Driving the deficit decrease was a 64% rise in current grants, subsidiaries and donations to NZ$355.5 million from the September 2010 quarter, and the highest quarterly income from this source in the last six years, apparently reflecting government spending on infrastructure projects.

Grants and subsidiaries contribute to local and regional infrastructure such as roading, rail and bus services along with civil defense, sport, recreation and the arts.

Total rates income continued to rise, at NZ$1.164 billion, a 7% increase from the same period last year.

The authorities’ costs continued to rise in the September quarter, up 2.3% to NZ$1.969 billion, with the increase attributed to general operating and a 2.9% increase in employee costs.

Local Authority income

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Source: Statistics NZ

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21 Comments

by goNZ | 14th Dec 11, 2:31pm 1323826286

Ow ! my wages didnt go up 7% along with most punters. Time to legislate to stop Local Bodies spending on non-critical items e.g sculptures,swimming pools,V8 races et al

by Elley | 14th Dec 11, 2:50pm 1323827425

My rates (Waimak district) are going up 25%...glurp.

by Kate | 14th Dec 11, 3:35pm 1323830114

Elley, do you know whether that is an across the board rise (meaning everyone will see that rise becuase the council intends to spend 25% more) or have they just shifted a greater percentage of the burden onto rural residential properties?

by Elley | 14th Dec 11, 3:47pm 1323830849

Well, I know that they had mentioned a 10-12% increase accros the board earlier in the year. However on top of that, the council has just decided to move from land-based rates to capital value-based rates despite around 75% of the people who made a submission before the decision was made being opposed to it (according to the local paper). Vive la démocracie I guess! Obviously councillors don't see their role as representing the people who elected them.

Anyway, as a result of that decision a small number of people (with older/lower value houses) are getting a rate decrease but most people (including many of those on lifestyle blocks who receive very little services, eg no rubbish collection, no sewerage, no town water etc) are facing a significant increase, some I have read by over 2K a year.

by Kate | 14th Dec 11, 3:57pm 1323831420

That's what I figured. We're rural residential (no sewerage, no water) but they do collect our rubbish. We own 90+ acres and our rates are half the price of an 800m2 property in town.

by Elley | 14th Dec 11, 4:01pm 1323831671

Yes, I think the point was to stop disadvantaging the "poor farmers" who own lots of land and therefore paid more than their fair share... They've made a lot of people, who don't think farmers are that poor, very unhappy (reading the comments in said local paper!).

We paid a little less, and now will pay a little more, than what we did for our previous house (standard 1970's 3bed/1bath on 750m2 of land, with full town services).

by Kate | 14th Dec 11, 4:11pm 1323832260

Most council's have converted to capital value from land value - much of it motivated by the unrealistic increases in land values - which are likely to be followed very soon by big whopping decreases. So land values tend to fluctuate more radically than overall caital values (meaning the "built" infrastructure more follows the cpi - whereas the land component of a CV is subject to market bubbles and bursts).

Going to CV will stablise things once the "shock" of the transition is over.

Small comfort to those subject to the initial "shock".

by Elley | 14th Dec 11, 4:19pm 1323832789

Yep, and it's no big deal for us but certainly is more of a problem for some, especially retired folks who may have paid off a nice place but don't have the income to go with it any more.

I must say I don't understand 1. why the council ignored what the majority of the people said 2. while the local govt played its part in making the land usable, the actual house built on it is hardly its business (the land has become private the minute someone purchased it!). So it seems strange to make people pay a lot more just based on the house built on that land, when they don't even provide basic services to said land.

by Kate | 14th Dec 11, 9:05pm 1323849932

Had a little look at it.

1. Looks like they got 900 odd submissions from a population base of around 47,000 residents (granted not all of an age to respond to the process!). The justification I hear soooo often from regulators going against the majority opinion of submissions is that the 'silent' are by far and away the real majority - and submissions don't necessarily reflect the opinion of the majority.

So, why bother preparing a submission you say?

Exactly.

That's representative democracy vs participatory democracy for you.

2. 19% of all expenditure in Waimak is on water and sewerage services (the things you don't get benefit from in the rural areas) - whereas 24% of all expenditure goes toward roading (majority of benefit to rural areas). And the money your local council spends on roads has on top of it BIG central government roading subsidies.

Roads are the biggie indeed (they are in my opinion the reason why so many council's wastewater treatment plant isn't up to standard - and hence, human watsewater has become a major source of our freshwater polution).

I read somewhere that NZ had the highest area of surfaced roadway per capita population in the world. I don't think we can sustain this - and reckon the main reason these rural roads continue to be maintained is due to the power of the farming lobby.

by Casual Observer | 14th Dec 11, 11:23pm 1323858237

Not sure a per capita comparison is really all that valid Kate. We have small population and large geographical area. Many councils tarseal rural roads where there are many milk tanker movements. The constant slowing down and speeding up when turning in and out of tanker tracks is hard on gravel roads. Consequently for many councils it is more financially efficient to tarseal a road than maintain it as a gravel road. That is one reason why councils set dairy farm rates at a higher rate than general farm rates or lifestyle block rates. The power of the farming lobby is a bit of a moot point - unless a councillor happens to live on the road - that was a well known reason for some roads being sealed!

by Kate | 15th Dec 11, 12:58am 1323863884

That is one reason why councils set dairy farm rates at a higher rate than general farm rates or lifestyle block rates.

That's interesting, CO as I've not come across that type of differential being applied in respect of roading (i.e. local council rates) but have seen it considered by regional councils with respect to environmental monitoring and water quality improvement.

Which local council(s) do you know of that establish a roading differential - I'd be keen to research it.

by Casual Observer | 15th Dec 11, 11:26am 1323901598

Hi Kate. Southland District Council shows the breakdown of rates calculations as follows on our rates demand. We are charged on 3 different rating values - dairy, general farming (our runoff) and lifestyle (we bought a lifestyle block adjoining the farm but it is run as part of our farm, but rated as lifestyle). Capital value is used for setting rates.

Farm - Roading: Dairy 0.00093911

Runoff - Roading: Farming 0.00050652

'Lifestyle' block - Roading:Lifestyle 0.00031489

All other rating rates are the same across all properties.

From memory Rotorua used to charge higher for dairy - as in Southland the only service the council provided for the area we lived in there was roading - outside of library etc which were urban placed community facilities.

The interesting one I'm watching is here in Whakatane where they are looking to change things like stormwater costs to be a charge against 'general' rates as opposed to currently targetted rates on those who receive the benefit. This has the potential to vastly increase the rates on rural ratepayers who receive none of the benefits and decrease the rates on urban ratepayers who receive all the benefits. We don't farm up here (Lifestylers) so the effect won't hit us the same. Apparently councillors have been receiving complaints form some in town about the high cost of rates in Whakatane. (not sure what the sarcasm smiley is)

by Kate | 15th Dec 11, 12:02pm 1323903761

Thanks. My interest is in the use of differential (targetted) rates as a means to encourage more sustainable design and lifestyle practices. I see quite a bit of misuse of both the General Rate and the UAGC (uniform annual general charge). If we get costs falling where they lie, I suspect people will think twice about the choices they make. As you've pointed out in Whakatane - my general impression is that council's are moving more toward stuffing as much of the costs as possible into these general/uniform categories.

by Casual Observer | 15th Dec 11, 12:39pm 1323905961

Enviornment Southland does have a dairy differential (targetted) rate which increased by 58% this year. This is on top of 'general rates'. The cost to us is $3-400 per year. This rate differential is not going to change our behaviour/practices directly. Sure as farmers we may complain - a common complaint being - shouldn't all who benefit from dairying pay - graziers who make their living out of dairy grazing, especially. Let's face it, with dairy being 15% of land use in Southland and water degradation warnings being sounded down there more than 10years ago - before dairying 'took off', factually there are other things than dairy causing problems. Dairy is part of it, but not the whole of it.

Southland DC now contracts out their roading to Fulton Hogan. I have to say that since that change (approx a year ago) we have had exceptionally good service from them. On our gravel road, within three days of rain some substantial potholes occur. It would take SDC up to 3 weeks (of continuing nagging and then threatening to hold them accountable for any school bus accidents) before they would do anything. We can now go online and lodge the problem. You are replied to AND then phoned with the approx time/date they expect to remedy the problem. Under FH they are there within 24hours and often the same day. In our area, the roads are better maintained generally too, with better quality gravel.

From what I have seen in over 30years of rural living is that petrol prices is an important driver of changing behaviour in rural areas. We had lifestyle neighbours when we lived 25km from town and usually the reason for selling was that petrol increases had made it too expensive to commute to town. Rates don't seem to come in to it as a whole.

by Kate | 15th Dec 11, 1:39pm 1323909549

You are right - they don't presently seem to be that much of a consideration. I agree that dairy is often the brunt of water degradation angst - whereas any number of councils with inadequate sewerage treatment facilities and inadequate overflow management are prime offenders. We had a case in the Manawatu recently where Regional Councilors didn't want to fine the PNCC for breach of resource consent conditions relating to their wastewater treatment plant. Ended up in the resignation of a number of regional council staff resigning over it (the political interference by the elected representatives). If farmers ar going to be asked to pay for the real cost of environmental degradation - then so too should urban dwellers.

by Roger Witherspoon | 14th Dec 11, 3:36pm 1323830211

A commercial building in Nelson:

2004/5 Rates $7685

2011/12 Rates $17642

Same building, no changes to it.

Is this the real rate of inflation? Is the cpi hogwash? Presumably the council costs are as good a sample basket as any.

I don't understand why no one seems able to face up to the rates inflation problem. There is an inflation spike each year when they go up but nothing is done. What causes it, why, why why?

by iconoclast | 14th Dec 11, 4:05pm 1323831904

Central, Regional, and Local government, + instrumentalities are the leading drivers of inflation

by Rumpole | 14th Dec 11, 3:48pm 1323830920

With the Christchurch CBD effectively empty the city council must be a substantial amount short on rate income plus all the red zone properties so will rates go up/central govt help out - I feel 2012 is going to a bad year.

by Rumpole | 14th Dec 11, 3:52pm 1323831162

Roger - time for central govt to mandate a 5% reduction in ALL & I do mean All govt expenditure which will save approx $3.5B and freeze rates for 2 years with future increases beyond the previous years inflation rate requiring the council to resign an seek re election on the basis of their budget. Local rates in UK have been frozen so it can be done.

by Wolly | 14th Dec 11, 4:10pm 1323832248

Clearly the Cabinet of fools is going to have to hike gst to 25% if they are to kill off the remaining life in the economy...if they are lucky the local govt socialists will go after fat 20% rate increases to assist in the butchery....it's the only way Rumpole

by John | 14th Dec 11, 4:30pm 1323833434

Great article referenced by Roger Witherspoon, The communist sector parallels with councils is fascinating, a microcosm of the worlds problems unfolding at a city near you,.

.......The media all over the world, but especially in France, are presenting the crisis as a financial one, as if the governments and the politicians have no responsibility. This crisis is in fact very typical of a communist system arriving at the end of its ability to borrow and make the productive system service the debt it has accumulated, simply because the productive sector is going bust.

And nowhere is it more visible than in France. The "communist sectors"—which I define as the sectors in which there are no market prices and lifetime employment—have grown remorselessly since 1980. The market sectors are falling by the wayside one after the other as everybody can see:.......

http://www.johnmauldin.com/images/uploads/pdf/mwo121211.pdf