“Tauranga City Council’s plan to keep the business rate differential at 1:1.2 only adds a nail in the coffin of small businesses in the Bay”, says Property Council Bay of Plenty Branch President Scott Adams.
In its revised draft Annual Plan, the Council proposed to continue the process started in 2018 to shift more of the city’s overall rates burden on to the commercial sector.
However, the Council’s proposal that businesses continue to pay $1.20 in general rates for every $1 paid by homeowners for properties of the same value has local property owners up in arms. Mr Adams says the timing of the move is “woeful, particularly with no clear economic plan for the city” and that the Council’s comparison to higher commercial rate differentials in other cities “does not compare apples with apples”.
If the proposal got the go ahead, the median residential ratepayer would see a 1% rates increase, whereas the median commercial ratepayer will see an 11% increase, with top-value ($25m plus) properties being hit with a 24% increase.
Adams says that Property Council members are happy to pay their fair share but disagree with the rationale of commercial rates differentials and welcome alternative funding mechanisms such as targeted rates and ‘user pays’ schemes.
“There is no economic literature which provides an economic rationale in support of commercial rates differentials, says Adams. Our position of abolishing rates differentials is also consistent with the 2019 New Zealand Productivity Commission report on local government funding and financing, as well as with Central Government’s 2007 Local Government Rates Enquiry”.
“The Council’s clear lack of planning equates this proposal to nothing more than inequitable vote grabbing, says Adams. “Using businesses to subsidise lower value residential rate payers at a time when local businesses are doing it tough is extremely short-sighted.
“These businesses are employers, community members and contributors to our city’s economy. Without them, we risk stalling the region’s post-COVID recovery.”
Adams warns that if the proposal goes ahead, Tauranga could be facing an up-hill battle, saying “by adding a further mountain for business owners to climb, Tauranga City Council is effectively stamping a ‘closed for business’ sign across our region.”
“Higher occupancy costs ultimately mean there is less incentive for investors to invest in Tauranga, investment that is critical to the recovery, rebuild and vibrancy of the Bay of Plenty. We’ve seen this in Tauriko, where higher costs have pushed developers into neighbouring Hamilton, where it is more affordable to own and develop property.
“We implore the Council to work with local property owners and consider alternative ways of raising funds in the Long-term Plan 2021-31, that would see our community through this tough economic climate and best positioned for recovery and future growth”, says Adams.
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