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Rates Review Workshop

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Rates Review Workshop Council Copy Rating Policy Project Workshop Wednesday 15 July 2020 1:00pm – 2:30pm to be held at the: Clocktower Chambers Palmerston Street, Westport RATES POLICY PROJECT WORKSHOP: 15 JULY 2020 Prepared by - Lynn Brooks - Management Accountant Reviewed by - Dean Phibbs - Group Manager Corporate Services INTRODUCTION In this workshop Councillors will continue to form a rating policy. Workshops are held with the final result intended to be that a new rates policy can be created for community consultation. At the last workshop (held on 26 February 2020) it was confirmed how the Natural Differential throughout the district applies. “Natural Differential” is another way of saying that some property is worth more than others depending on the location, so if all rates were charged on the same basis then the higher value properties would pay a bit more rates than lower value properties. The 26 February 2020 paper showed the Natural Differential throughout the district and if all of the residential sector were charged the same differential, no matter where in the district they are located the natural differential provides a discount for an average property in the rural area or in low value built up areas. Through the examples that were shown at the last workshop, a Natural Differential showed that the property values are less outside of the main centres for similar sized property. At the 26 February 2020 workshop there were three outcomes: 1. Councillors instructed that the Natural Differential was sufficient for the Residential Sector. This means that the Residential Sector would have a single differential, and rural areas would not have a reduced differential; and 2. Councillors instructed to look at the rating categories for the properties in the categories which are 4000 sqm to 10ha, and present the results. After presentation of this information Councillors could decide if there was a need for a discount for this particular group of properties; and 3. Councillors instructed that there was to be no exemptions to Short Term Accommodation (STA) such as “under x bed nights STA would not apply” so any property advertising Short Term Accommodation at all would fall into this category. The reason being it’s difficult to administer if this category is based around a number of bed nights, and difficult to “police” by Council rating staff. This paper shows the one change to the last model so that the 4000sqm to 10ha properties are rated at a differential of 1. This paper shows the results of the new rating model with the changes above incorporated. The results showing in this paper also includes the new values from the revaluation of property which came into effect from 1 July 2020 rating year, as well as adjusting the “rates take” to agree to the amounts in the 2020-2021 Annual plan. The revised model shows that 16 differentials would be required. The recommendation is that “natural differentials” provide sufficient discount for the 4000 sqm to 10ha group based on the examples provided in this workshop paper. RECOMMENDATION 1 Do not provide a discount to the Rural Less than 10ha Group. This Property Analysis (see tables below) and attached detailed information shows that there is no requirement This is because the examples show: A rating system based on land value provides a natural rating differential. It is not necessary to introduce more differentials for the 4000m2 to 10ha which is described as the “Rural Less than 10h” Group. It’s not recommended to introduce a discount to the “Rural Less than 10h” group. If introduced, it would add unwarranted complexity It would also provide an unjustifiable discount to some ratepayers. It would also provide an unjustifiable discount to some ratepayers. It would also require a premium from others, without any logic to support the premium or discount provided. The key issue is that general rates are not struck on a “benefit received principle”. The key issue is that general rates are not struck on a “benefit received principle”. General Rates are charged by a Council when a local authority has determined the community as a whole should pay for a service and there is little or no benefit from, or too much cost involved in, funding the activity The key issue is that general rates are not struck on a “benefit received principle”. The key issue is that general rates are not struck on a “benefit received principle”. General Rates are charged by a Council when a local authority has determined the community as a whole should pay for a service and there is little or no benefit from, or too much cost involved in, funding the activity separately from others. (That is a direct quote from "Rating Know How"). Where there is a good reason to charge a service separately to only some ratepayers, this is when a TARGET rate should be applied - for example a Promotion & Development Rate. But Council is not considering target rates, as it has not identified any specific activities that should be funded by ratepayers, and it is considered that all activities of Council should be funded by all ratepayers using GENERAL rates, except for water, solid waste and wastewater schemes. General rates are based on the land value of a property. In other words rates are a tax based on the value of land to pay for the whole needs of the District. This differs from water rates and sewer rates, which are charged as a share of the cost to just those properties who do access, or are able to access the water supply. Which is a good reason to charge those particular services as target rates. Information to support the recommendation not to provide discounts, or to charge a premium to property in the “Rural Less than 10ha” group (4000m2 to 10ha group) 1a: Analysis of (1000m²) residential sections – revision from the last workshop In the last workshop paper Council compared sections of a similar size (1000m2) as a standard base to work out if there is a natural differential. The conclusion was the land value provides a natural differential, and the table is re-presented below because it helps to refresh the understanding of where different property values lie in the District. This table shows the Residential group whether in town, village, country setting throughout the District for a sample of property being 1000sqm. Average 1000m² section value in Buller District, compared to Westport Town as a standard of 1 Location Average 1000m² section value Karamea/Little Wanganui $59,000 0.8 of 1 (20% discount) Mokihinui/Seddonville/Hector $44,000 0.6 of 1 (40% discount) Granity/Ngakawau $34,000 0.45 of 1 (55% discount) Waimangaroa $35,000 0.45 of 1 (55% discount) Westport outskirts (north of Domett Street) $79,000 1.05 of 1 (5% premium) Carters Beach $113,000 1.4 of 1 (40% premium) Westport Central $77,000 1 of 1 (standard) Grey Valley $26,000 0.33 of 1 (67% discount Inangahua $12,000 0.15 of 1 ( 85% discount) Blacks Point $65,000 0.85 of 1 (15% discount) Reefton $46,000 0.60 of 1 (40% discount) Springs Junction $20,000 0.25 of 1 (75% discount) 1b: Comparison of the 4000sqm to 10ha Group to the other Residential Groups The Rural 4000m2 to 10ha group is property spread throughout the district. The table below shows the key numbers for this group compared to the other two Residential Groups. Group Number % of Properties % of Properties % of Properties of valued less valued at $80- valued at $160k+ Properties than $80k $160k Rural 4000sqm 1995 43% 42% 15% to 10ha Residential 2696 89% 10% 1% Main Centre Residential 1003 78% 19% 3% Provincial The table shows there are 1995 properties in the 4000m2 to 10ha group. Of these 1995 properties, 43% of the properties are valued at $80,000 or less. Compared to the Residential Main Centre group (2696 ratepayers) who have 89% of the properties valued at $80,000 or less, and 78% of Residential Provincial group (1003 ratepayers). A greater percentage of properties are valued between $80,000 and $160,000 compared to the Residential groups. A greater percentage of properties are valued at over $160,000 than the Residential groups. 1c: Result if a special differential was introduced for the 4000sqm to 10ha Group If a special differential was introduced for this group, for example a discount, then this would introduce inequities because their general rates would be lower for 43% of this group than for properties of a same value, the only differentiating factor being the land area of the property. This would be the case for 43% of this group who have property valued at less an $80,000. $80,000 is used as a guide because this is the band of land value which is the majority in the other two Residential groups have, most land in the residential sector is valued at $80,000 or less (refer to the table at section 1b above). 1d: So what about the other 57% in this group, who have higher value property than the other Residential Groups? Many of these properties are currently rated on extremely favourable terms, their general rates are heavily discounted depending on the location, for no logical reason. Consider these properties, all valued at $200,000: Buller Gorge near Westport paying $752 general rates, Cape Foulwind paying $568 general rates, Fairdown paying $647 general rates, Birchfield $1,010 general rates, Granity $455 general rates. This shows there is a wide variation to the differentials that apply in each location, and those differentials don’t have any apparent logic.
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