Wellington City Council proposes increase to commercial rates differential

The issue

Wellington saw an average rateable value (RV) increase of 43.4% for residential property and just 22.8% for commercial property. This means that rate contributions would have risen by 7.95% for residential and dropped by 1.2% for commercial since the last financial year.

Wellington City Council has announced that it will be increasing the rates differential from 2.8:1 to 3.25:1 for commercial, industrial and business. This is essentially a political ploy to reduce the risk of a backlash from homeowners; residential rates will increase by 4% and commercial contributions will increase by 3.8%, leaving commercial ratepayers subsidising the benefits of residential ratepayers.

Why it matters

Businesses pay 44% of rates but get far less than 44% of the benefit. Most of what Wellington City Council spends their money on benefits residents not businesses.

Commercial rates in Wellington are already double of those in Auckland. This move would make the current situation even worse. It’s not only inequitable, but it’s also unsustainable, making Wellington less attractive to commercial businesses of all sizes.

Our view

For the council to increase the commercial rate differential before the Productivity Commission’s draft report into local government funding and financing is very disappointing. We strongly recommend that council defer this decision until after the release of the Productivity Commission report in June 2019.

There is no economic literature which provides an economic rationale in support of commercial rates differentials. We recommend Wellington City Council begin reducing the business differential.  While the differential exists, the extra funding it generates should be ringfenced for projects that specifically support and benefit those commercial ratepayers who pay the differential.  There should be specific consultation with commercial ratepayers on what those projects should be.

Recent action

  • Written submission to Wellington City Council on its Long Term Plan (view here) supporting the majority of the Plan with the exception of the Council's proposal to remove free weekend parking.  
  • Comments in Dominion Post, NBR and on Newstalk ZB about the rise of the commercial rates differential.
  • Currently drafting Property Council’s Annual Plan submission.

The Annual Plan consultation will run from 8 April and 8 May. Please click here to find out more.

Should you require any further information or wish to get involved, please contact James Kennelly.

 


Contact | James Kennelly

James recently returned from the UK after six years, where he worked in the House of Commons, then in government relations roles for several regulators, including the Nursing and Midwifery Council, the Charity Commission and a UK Exam Board. Prior to this he resided in Wellington and walked our parliamentary halls under the leadership of Phil Twyford and the then Leader of the Opposition, Phil Goff.

James has an exemplary ability to exercise sound judgement in a political environment, a natural flair for communicating the complex and an easy-going manner that makes him approachable yet reliable.
 

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