Capital Value Rating to Come under Public Scrutiny

A major initiative is about to be launched to engage the community in a comprehensive review of the Far North District Council's rating policies.

This will be the first detailed analysis of the council's predominant funding base since the government's rationalization of territorial authorities in the Far North in 1989.

The review will look at the advantages and disadvantages of both the current system based on land values and the new preference signaled earlier this year for a change to capital value rating.

The council's intention is to establish a fair and equitable rate collection system which recognizes the economic and social diversity of the Far North and the community's ability to pay.

Step one of the process will be to set the scene for a new rating environment and stimulate widespread community discussion on the range of options available, including options for the use of targeted rates and differentials.

Step two will be to refine a firm proposal for inclusion in the public consultation process which forms part of the Long Term Council Community Plan review.

Community discussion papers outlining the options are being prepared, including a website link through which people can look at the rating scenario on their own properties under both Land Value and Capital Value options.

The comprehensive consultation programme will be open to community feedback throughout November.

Revenue & Policy Manager Chris Ellington says the intention is to settle on a sustainable rating policy which complies with legislation and which satisfies the majority of ratepayers.

"The main feature will be a consideration of a change in the general rate base from land value to capital value. But we will also be looking at activities which might better be funded by targeted rates, how the Uniform Annual General Charge (UAGC) component might be changed and how general rate differentials might be applied," he said.

"We want to finish with a robust, transparent, practical, fair and equitable rating system that will carry the council into the future.

"Whatever system is finally adopted must relate to the district as a whole, acknowledging that there will be impacts on some properties which cannot be universally addressed. The test will be to keep anomalies to the minimum through the use of targeted rates and differentials, without creating a formula so complex it will be impractical to administer," he says.

There has been a progressive shift in recent years on how rates are impacting on different sections of the community, driven by increasing property valuations and an expansion of residential subdivision in both urban and rural areas. The particular problem to emerge has been the huge variation in these land valuation increases.

"This was brought strongly to attention in the 2007 revaluations which produced rate increases for many properties in the west and north of the district, while eastern areas enjoyed some rating relief.

"The reality is that a general rate system based on land value is always going to be subject to big swings in the level of rates on different properties. The impact of revaluations is much less marked with a capital value base," he says.

"At issue is whether a capital value rates base is a better option, more closely reflects the principle of user pays and better recognizes the ability to pay, or whether a land value base can be satisfactorily modified with the tools available under existing legislation to better reflect what the majority of the community expects of a rating system.

"The arguments for and against will be discussed in the consultation programme which will go out to the community next month (November)," he says.

Among other issues which the review will address are:-

How some costs might be funded by those who benefit the most i.e. how extensively should the 'user pays' principle be applied and to what activities and services?
Why do we have to pay for services we don't use?
How should cost be shared between different sectors –i.e. the potential for differentials between commercial/residential/farming/tourism land uses?
Is a UAGC necessary?
Should there be a targeted rate for roading?
Should there be targeted rates for waste management/stormwater/sewerage/water?
Should ward rates be included in the general rate?