Finding a fairer rating system

Rotorua District Council is conscious of the need to ensure we have a fair and equitable rating system, especially for businesses in our district which we hope will help drive future economic growth for Rotorua.

We have therefore embarked on a process to consider possible changes to the way rates are allocated. This has been prompted by major shifts in official property valuations that have resulted in distortions to many areas of our current rating framework.

The council is endeavouring to ensure the rating framework remains as fair as possible, and stable enough to minimise the need for further adjustments every three years. Our objective is to give Rotorua businesses, and indeed all ratepayers, more certainty than exists at present.

Valuation of all properties is required under government legislation to provide councils with a uniform basis for levying district and regional council rates. Valuations are carried out by independent valuers and the latest revaluation date was 1 July 2011.

This produced some widely varying fluctuations. For example, the average residential property land value was down -6%, commercial sector down -14%, industrial and lifestyle both down -9%, and dairy and pastoral farms down -38%

The general downward trend in values for all classes of property is in direct contrast to the previous 2008 valuation when values were close to the then peak economic times. Since that time the global financial crisis and other negative influences have impacted on different market sectors.

Recent decreases in property values are most pronounced in the farming and business sectors. However, the effect on rating is uneven across the three key sectors of business, residential and farming.

For example, rural residential properties in the east of the district and around lakes Rotoma, Okareka, Rotoiti and Tarawera have seen average increases in land values of between 10% and 24%.

The latest valuations will affect all rates from the 2012/13 financial year starting 1 July 2012.

However we have concluded that a change in how the general rate is allocated may reduce the impact of the new valuations and potentially provide the council with a more stable rating framework in the longer term.

Currently the general rate is allocated using land values and a number of differentials (multipliers or discounts applied to the calculation). Council has now identified two options that allocate the general rate using capital values instead of land values, combined with a much smaller number of differentials.

The council must make a decision on this in March as it prepares its new draft 2012-22 Long Term Plan. That document will be released for public comment and feedback in April and will provide a formal opportunity for residents and ratepayers to tell Council which option is the right one for the future allocation of rates.