Wairoa District Council Rating Review 2020 Statement of Proposal Including the following funding changes: • Creating a new General Rate (capital value) • Simplifying to four General Rate differentials • Moving 10% of the Water, Wastewater, Stormwater and Waste Management rates to the General Rate. • Moving 50% of the Uniform Annual General Charge to the General Rate. WHY DO WE NEED A RATES REVIEW? Our rating system is complex, confusing and out of date. It was developed in the 1990’s when Wairoa had a bigger population, the commercial sector was larger and comparatively thriving and forestry was smaller and more local. The demographic has changed. The population had decreased by 1,000 people. Māori now make up two thirds of the district. Taking this and other societal changes into consideration, it is apparent that what is important, how we view the world, and our priorities are different. The current rating system is unaffordable for many residential and commercial property owners. It does not serve the community well. This review builds on the 2018 review. Most of that proposal was not implemented aside from a change to forestry rating. Councillors have since heard from ratepayers asking why that proposal was not implemented. Councillors have been provided with further examples of rates inequity as a result of the complex rating differential system. Disclaimer: This Statement of Proposal provides an indication only of proposed rating changes from July 2021. It does not represent your actual rates account. The rates invoice you receive from July 2021 will be based on the yet to be finalised Long Term Plan budgets. The amounts shown are based on the 2020/2021 rates. All rate amounts shown are inclusive of GST. Rating Review 2020 Statement of Proposal STATEMENT OF PROPOSAL OVERVIEW OF THE PROPOSAL 2. Simplifying to four differentials of the new We are proposing changes to how we distribute our rates General Rate. across the Wairoa district. The current rating system dates back to the 1990’s. Since These proposed changes would improve rates then the community and our values have changed. We affordability for many people, by reducing the rates for have 34 differentials for land and capital value rates. It is many residential and small commercial properties across overly complex. the district. These proposed changes would however We propose to have four differentials (residential, increase the rates for high value properties, rural and commercial, rural and forestry). forestry, in some cases by a large amount. This change would see residential and rural paying the Council will not collect any more money from these same rate in the dollar of capital value, commercial changes if the proposals are adopted. The total rates slightly higher to reflect the benefits of being in business revenue remains the same, however the system for who and forestry a lot higher to reflect extra costs of pays what is redistributed. The changes reallocate the maintaining roads and negative community wellbeing amount each group of ratepayers pays. effects of the industry. This review is being driven by three major themes: 3. Moving 10% of the Water, Wastewater, • Simple Stormwater and Waste Management rates • Affordable to the General Rate. • Appropriate Everyone pays the general rate. Council propose that 10% of the cost of water, wastewater, stormwater and The proposed changes support our community outcomes waste management is funded by the general rate. This and would provide for improved wellbeing of the recognises the wider district benefits to health, communities of this district. kaimoana, recreation and the environment. There are four parts to the proposal: This change supports the ability to pay rates for residential properties. • Creating a new General Rate (which will be on capital value). 4. Moving 50% of the Uniform Annual General • Simplifying to four General Rate differentials. Charge (UAGC) to the General Rate. Everyone pays the UAGC. It is a fixed rate (currently • Moving 10% of the Water, Wastewater, $726.20). It is the second largest rate behind roading. Stormwater and Waste Management rates to the General Rate. Fixed rates are highly regressive to income. In Wairoa town fixed rates alone (before value-based rates) exceed • Moving 50% of the Uniform Annual General Charge the rates affordability threshold, as discussed on page 4 (UAGC) to the General Rate. We are proposing to reduce this rate by half, adding the 1. Creating a new General Rate (capital value). reduction to the general rate. This change is to help with We propose to simplify those rates charged to everyone rates affordability and would benefit all low value in the general and roading rates (land value), and properties in town and in rural areas. The transfer to the services and recreation rates (capital value) to a single general rate would mean higher rates for rural and high new general rate (capital value). value properties. This proposal would simplify the rating system and transfer rates from the residential and commercial sectors to the rural and forestry sectors. Page 2 of 20 Rating Review 2020 Statement of Proposal OVERALL REASON FOR THE PROPOSAL Every three years Council reviews how we fund our Rates Affordability activities. We are part way through that process. This The threshold of unaffordability is where rates exceed proposal addresses possible changes to how we distribute 5% of household income1. the rates contribution to funding the cost of activities. The outcome of this consultation will be incorporated in a Table 1: Wairoa town affordability revised Revenue and Financing Policy for consultation Wairoa town median rates (2020/21) $3,161 next year. This review does not consider the cost of activities, that is considered in Long-Term Plan Wairoa town median household income2 $42,700 consultation which occurs early next year. Affordability calculation – rates as a 7.4% We have had community pre-engagement meetings at percentage of income Wairoa and Mahia. We have meet with Iwi, farming and forestry representatives. We have listened at these Affordability threshold - rates as a 5.0% meetings; we have listened to feedback after the last percentage of income consultation and have reflected on the views of people at the last rating consultation. Taking all this into account we Median household income for the district is $48,500. have identified three major drivers for change. For many councils in NZ this median affordability • SIMPLE: The current rating system is complex. It benchmark is lower at between 3.8 and 4.2%. This is splits costs between urban and rural and then it always more challenging for small populations looking reallocates those costs 34 different ways (known as after large areas. differentials). The biggest driver for household rates affordability are The result is confusion when we talk about rates fixed rates. Fixed rates are where everyone pays the increases as some rates go up more than others. It same amount regardless of ability to pay. Fixed rates are also results in some neighbours paying a different regressive to income. amount of rates for no clear or obvious reasons. Table 2: Wairoa town fixed rates 2020/21 • AFFORDABLE: The current rating system uses a high proportion of fixed rates, which are impacting on Fixed Rate $ townships. The Local Government Rates Inquiry Uniform Annual General Charge 726 2007 recognised that when rates are greater than (UAGC) 5% of household income, they become unaffordable. In Wairoa township most properties Water rate (Connected) 669 are above this level. Sewerage rate (connected) 570 • APPROPRIATE: It is our view that the current rating Waste management rate 319 system is not allocating an appropriate amount of cost to parts of the district. Urban properties are Drainage rate 203 paying an unaffordable share of the costs. TOTAL $2,487 The Local Government Act 2002 asks that Council Affordability Threshold on decide what is the appropriate share of the rates $2,135 allocation. This is a complex balance of considering Median Income community outcomes, benefits, the effects of individuals or groups actions or inactions, Table 2 shows the fixed rates for Wairoa town total transparency, and community wellbeing. $2,487. This is $352 more than the affordability threshold and means that all fully serviced properties in Fundamentally, rates are a tax and not an exchange of Wairoa town have rates that are unaffordable for more money for a service. We are wanting sectors to pay an than half of the residents. appropriate share of costs that recognise all the factors we must consider under the legislation. 1 The rates affordability threshold was developed in the Local 2 Median household income 2018: Wairoa District $48,500 Government Rates Inquiry 2007 and NZ $75,700 - source: Stats NZ Page 3 of 20 Rating Review 2020 Statement of Proposal We propose to address this by reviewing the activities ABOUT THE NUMBERS funded by fixed rates and who should be contributing to Disclaimer: The rates numbers in this statement are GST those costs. inclusive. It does not represent your actual rates OTHER OPTIONS CONSIDERED account. The rates invoice you receive from July 2021 will be based on the yet to be finalised Long Term Plan As well as our preferred option (Option 1) we have budgets. This is an illustration of what the rates would considered other options, refer page 14. have been for the 2020/21 year under the proposed These options and variations on these options are also policy. It is not what your rates will be next year. presented here for your consideration. In addition to these not changing the rating system (status quo) is an option. WE WANT YOUR FEEDBACK SUPPORTING INFORMATION Look it up This Statement of Proposal includes supporting information that provides further information to assist These proposals impact the rates on each property the reader to understand the proposal and the other differently, some would increase, and some would options considered.