OPINION: Invercargill ratepayer Alan Swallow raises some points on how our rates are struck and Invercargill City Council chief executive Richard King responds.

Congratulations to all involved in lifting the lid on the Invercargill City Council rate-setting fiasco, this must bring the validity of the present rate strike into question.

The chief executive's claim that dropping the differential on the business rate wouldn't affect the residential rate is hard to accept; logic suggests that if one sector pays less then another must pay more to make up the difference.

The figures you have quoted, showing the increasing proportion of residential rating against the decreasing commercial rate, supports that fact.

It has been explained to me that positive differentials on the business sectors were applied to bring some fairness to the residential ratepayers who could not claim their rates against tax liability. Dropping the differential destroys that element of fairness.

Venture Southland carries out the city's Enterprise and Destination Marketing activities at a cost of $1,658,000.

While this levy appears in the final plan as both a draw against the General Rate and a 90-to-100 per cent Targeted Rate, the much more readable Summary describes the funding source as being a Targeted Rate on the commercial sector. While funding the Inner-City Development is to be from a targeted rate that doesn't seem to include the $30,000 a year budgeted for City Centre promotion.

These anomalies occurred in April which gave plenty of time to correct them before your competent reporter picked them up.

The confusions and contradictions which seemingly escaped the scrutiny of those we pay, staff and councillors, to administer the city efficiently are a sad state of affairs which brings the value of the public submission process into question.

Invercargill's economy must be badly disadvantaged by the current council's extravagant spending, rating policies and crippling line charges, (EIL). There is only so much money to go around and the more the council collects the less is available to spend shopping.

I am also disappointed to learn that the Auditor was willing to accommodate back-door lobbying by a single councillor to alleviate this situation.
ALAN SWALLOW, Invercargill

Changes ensure a fair system for all

Rates are always an emotive and difficult issue because they strike at the heart of what we all hold dear - our homes and the impact on our financial security, Invercargill City Council chief executive Richard King explains. 

Rates can also be a very complex issue and because of this it can be difficult to communicate. Some groups are very good at mobilising to get their point across and their views to the forefront in the media.

The job of the council is to try to be fair to all sectors - to look after our residential ratepayers but also to encourage business, farming and industry. Concerns by the farming sector that they were paying too much in rates for the services they received led to the council reviewing the rates system.

Also last year the city's overall capital value dropped by 4.2 per cent, which for rating purposes would not matter too much if all sectors in the city had reduced by the same amount. They didn't.

Rural properties went down 11.2 per cent and commercial was down 7 per cent in comparison to residential properties which were down by 4.3 per cent.

Unless changes were made, residential properties were going to be paying a much higher share in the future than businesses, for example, as Allan Swallow correctly points out.

There is a long-standing principle that rates must be "fair and equitable" so we do need to look at the impact that rates have on the various property sectors, because if you are a business, then the GST component of rates can be offset and rates are a tax-deductable item. These rules do not apply to residents.

In exchange for dropping the "add on" differential rate for commercial ratepayers, the council decided that the commercial community would pay for the costs of the central business district upgrades (including $30,000 per annum for city promotions) and that these costs would be removed from residential ratepayers. This, along with other changes, produced the results shown in the table, above right.

So after the revaluation and the changes made by the council, there is little difference in the rating impact from last year to this year between the sectors.

We have already acknowledged the errors in the Long Term Plan which caused confusion about how the city's contribution to Venture Southland was to be funded. This activity has always been funded from the general rate and will remain that way. Had the decision been made to put this charge solely on the business community, then an explanation would have been needed. Also the impact would have been unacceptable to the commercial community and ultimately the activities of Venture are to promote job opportunities that benefit everyone.

The annual budget set by the council is largely determined by what the residents want and need. This year's rate increase was just over 4 per cent which, after allowing for additional expenditure on, for example, the CBD, the museum project and our share of improvements to Stadium Southland, the increase is below the projected CPI and the Local Government Cost Index for the same period.

The council is committed to an ongoing objective of reducing operating costs wherever practicable. The financial position of the council is also extremely sound. Despite all the negative publicity about the high level of debt carried by local government in New Zealand, as at 30 June, the external debt of the council was only $33 million and Invercargill City Holdings (Holdco) $35 million, a combined debt of $68m. This debt is backed by the "saleable assets" of the Holdco Group conservatively estimated at $130m.

Whilst nobody likes paying electricity bills, it would be drawing a very long bow to describe Electricity Invercargill Ltd's line charges as "crippling". The following quarterly survey of domestic energy prices describes the true picture and shows that Electricity Invercargill's customers have among the lowest charges in the country. In addition, because Electricity Invercargill's network is underground, we enjoy the benefits of uninterrupted power supply and a pleasing streetscape (see separate attachment).

The Office of the Auditor-General is responsible for the oversight of the long-term plans of the council and its annual reports. They seek information and explanations in the course of their activities and also provide helpful advice to elected members and staff. They do not and never have in my experience, allowed themselves to be influenced by lobbying, including by the prime minister.

The council has reviewed its rating system to ensure fairness among the various sectors. It has adopted its Ten Year Plan that has been approved by the Office of the Auditor General. It means that we are on track to implement our vision for Invercargill City which is “creating an exciting, innovating, safe, caring and friendly city, offering lifestyles based on a healthy environment and a diverse, growing economy”.

WHO PAYS WHAT

Type	Current strike	Previous strike	% of total current	% of total previously
Commercial	4,938,011	5,661,851	9.63	11.52
Residential	36,277,588	34,022,851	70.74	69.25
Farm	4,000,249	3,694,522	7.8	7.52

- © Fairfax NZ News

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