Commissioners to consult on rating proposal

Council today approved a proposed rating change for the commercial and industrial sector as a further step towards ensuring the sector pays a fair share of the city’s operating and infrastructure investment costs. The proposal will be consulted upon as part of the 2022/23 Annual Plan.

Excluding water charges, the commercial sector is currently contributing 23% of total rates revenue. This is significantly less than most New Zealand metropolitan local centres, where the commercial and industrial sector contributes an average of 30% of total rates.

A review of the rating system was requested by commissioners last year when they approved the 2021/31 Long Term Plan, to explore options for sharing the cost of investment in infrastructure, particularly transport, more equitably.

Commission Chair Anne Tolley said independent research shows that just over half of the daily trips on the city’s transport network related to commercial and industrial activities, but the sector contributed less than a quarter of transport rates revenue.

“That means residential ratepayers are paying more than they should, compared to the benefits they receive, and that anomaly needs to be addressed.”

Commissioners resolved to propose a change in both the general rate differential and the existing targeted transport rate, which would see the commercial and industrial sector contribute half of the funding for the transport activity. The existing general rate differential of 1.6 (which means a business pays $1.60 in rates for every $1 paid by a residential ratepayer, for a property with the same value) is considerably lower than other metro councils and the proposed change will bring Tauranga more into line with other centres.

Anne said the commission understands that many businesses are facing economic headwinds at present, but the council would work with the sector through the annual plan consultation process to find and implement a fair solution.

“The options available to us are to increase the commercial general rate differential from 1 July 2022, or to phase the change in over two or three years, to smooth out the impact on commercial ratepayers. Our preferred option is to phase the change in over two years, but we are very keen to hear the commercial sector’s and the community’s views on that,” Anne said.

Today’s decision comes as council’s latest budgets are for $61 million for the transportation network projects in 2022/23, rising to over $300 million by 2030/31 to reflect the increasingly significant investment needed in the transport network. Over $2 billion is budgeted for the transport activity over the next 10 years.

Property owners will be able to see the impact of the proposed changes on their rates via a rates calculator available on the Tauranga City Council website once the Annual Plan consultation begins on 25 March.

The latest city-wide revaluation of business properties reflects the impact of COVID-19 on the hospitality and retail sector, in particular.

Lower than average property value increases for central city properties mean that around 29% of commercial properties in the CBD will have no rates increase, or even a rate decrease in 2022/23.  Almost two-thirds (63%) of CBD commercial properties will have similar or lower increases than residential areas where valuations have increased considerably.