“The largest upwards contributor to the annual inflation rate was local authority rates and payments, up 12.2 percent. Rates contributed 13 percent of the 2.7 percent annual increase.”
Just why local authorities need to increase their annual income from constituents so much each year remains mysterious.
This is my personal story, a resident and ratepayer who lives down a dirt road in Central Otago.
My first rates bill for the 2025/26 year arrived yesterday. After media reports suggesting the average price rise for the our District Council would be in excess of 12 percent, I held my breath opening the envelope expecting a hefty increase.
I’m fortunate. The price for 12 months went up a mere $168.18 or just 5.62 percent.
But then considering I get virtually no council services – no water, no sewerage and no rubbish collection – why should I pay council rates at all, let alone have them increase beyond the rate of inflation each year?
I think it’s called socialism. Yes, I use council roads, walk in their parks and dump my rubbish at their transfer station (for a fee). But the breakdown of my rates for the year comes with some ill-defined descriptions of how the money is spent.
For instance there is the General Rate and the Uniform General Annual Charge which together make up 41 percent of the rates bill. They’re used to fund “in whole or in part” the “general activities of the council.” These include “housing, district grants, community development, community engagement, regional identity, strategy and policy, communications, roading, noxious plant control, governance, service centres, airports and other infrastructure.”
I understand roading and noxious plant control. The council owns 98 social housing units and manages three airports. It pays salaries for the Mayor, eleven councilors and twelve Community Board members.
(Yes, it’s ridiculous. A district with 27,000 people has 28 elected representatives!)
But what is “community engagement” or “regional identity”?
Because later in the rates breakdown I’m coughing up $139 for “tourism,” $150 for the library and $982 for the “Community Facilities Charge.”
The recently adopted Long Term Plan (LTP), taking us through to 2034 offers some insights into how money is to be spent over the next decade. The line entitled “Personnel costs” is illuminating.
This financial year those personnel costs will be $14.4 million or 20.4 percent of council expenses. But next year, when rates are forecast to rise by an average of 9.61 percent, personnel will cost $18.1 million or 21 percent of expenses.
That’s just a preamble to an explosion in staff costs.
Despite rates forecast to drop dramatically in 2027/28 because the water assets will be divested to a combined Council Controlled Organisation (CCO), personnel costs are expected to soar.
That year they’ll be an extraordinary 26.42 percent of council expenditure. The actual number is $19.067 million out of $75.994 million in total costs.
And so it goes. The percentage of council expenditure on personnel through the rest of the Long Term Plan is between 24.8 and 26.2.
In other words over a quarter of the Central Otago District Council annual expenditure will be on “personnel costs” or in layman’s terms, staff salaries.
Here’s another thing. The forecast annual surpluses for this council over the next decade are between $8 million for the financial year just finished to $26 million in 2034.
To be fair, a lot of those numbers are based on a successful land sales programme over the next ten years, sales which are forecast to net $96 million.
But it all adds up to one thing. Central Otago District Council is in a robust financial position. It has little debt with debt servicing forecast to be no more than 5.7 percent of total revenue at any stage during the next ten years, and in 2034 it will be just 0.3 percent of income!
If the CODC was on the share market, I’d buy.
Yet rates are expected to increase by another 9.6 percent next year before dropping a remarkable 27 percent in 2028 once the water services are divested. I’ll believe that when I see it.
Will Local Government Minister Simon Watts get his rates capping bill into law before the 2026/27 rates are set?
Or will Stats NZ be telling us again in a year’s time that local authority rates are still the largest contributor to the annual inflation rate.
I wouldn’t bet against it.
POSTSCRIPT: An LTP is a challenging read. CODC’s is a mere 491 pages. Yet much of it must be filling in the gaps in a template provided by a Wellington bureaucrat. For instance on page 352 there is an explanation as to why Māori freehold land will not pay the General Rate but only pays targeted rates for water, sewer and solid waste services. At the bottom of this page there is a note to say there is no Māori freehold land within the Central Otago District!
Peter Williams was a writer and broadcaster for half a century. Now watching from the sidelines. Peter blogs regularly on Peter’s Substack- where this article was sourced.
2 comments:
Just another example of an apartheid system. Similarly, much is made of the booming Māori economy-never is it suggested it is quite likely due to taxpayer funded fraudulent Treaty Settlements. I imagine there would be many businesses prosper with such largesse.
It's a wealth tax, pure and simple.
Ours went to 32%.
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