Reports
2017/18 Rating Method
Department: Finance
EXECUTIVE SUMMARY
1 The
Council has a Financial Strategy that sets a rate increase limit of 3% unless
there are exceptional circumstances. The draft budget as presented has an
overall increase in rates of 3%. This report will outline how the overall 3%
increase impacts on various properties within the City.
2 The
report also addresses the impact of the 2016 general revaluation and the rating
effect it has on individual properties. Given that it is a revaluation year,
rate changes for 2017/18 year will vary depending on what has happened to the
capital value for individual properties.
3 There are
also changes to the community services targeted rate (increase 1.4%), the
Forsyth Barr Stadium differential (increase of 1.4%) and the Strath Taieri
Commercial differential and these are detailed in the report.
4 The
overall effect is a draft budget with a rate increase of 3%.
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1 RECOMMENDATIONS
That the Council, for the purposes of community engagement:
a) Approves
the general rate differential for the 2017/18 year which incorporates the
final step in the phased increase to the Strath Taieri commercial general
rate differential and Tourism/Economic Development targeted rate.
b) Approves
an increase in the community services targeted rate for the
2017/18 year based on the June 2016 Local Government Cost Index (LGCI) of
1.4%, to $230.00 including GST.
c) Approves
an increase in the Forsyth Barr Stadium differentials for the 2017/18
year based on the June 2016 LGCI of 1.4%.
d) Approves
the current rating method for the setting of all other rates for the
2017/18 year
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BACKGROUND
5 The
purpose of this report is to detail the proposed changes to the rating method
for the 2017/18 year and discuss the impact on individual rate accounts.
6 In
addition, the Council requested further work be undertaken on some rating
issues that were highlighted during the previous Annual Plan and this report
provides an update on those issues. These include issues relating to retirement
villages and Maori freehold land.
7 Please
note that unless specified, all rating figures in this report are GST
inclusive.
Financial Strategy
DISCUSSION
8 The
Council approved a Financial Strategy as part of the 2015/16 - 2014/25 Long
Term Plan process. It included a rate increase limit of 3% per annum
unless there are exceptional circumstances.
9 The draft
budget proposes a 3% increase in line with the financial strategy. This is
achieved by various funding mechanisms within the rates policy which will now
be discussed in more detail.
10 The single biggest
impact is the 2016 general revaluation and the effect this has had on the
rating values.
Community Services Rate
11 When the Council
considered the rating method for the 2015/16 year, it agreed that the community
services targeted rate should be increased annually by the Local Government
Cost Index (LGCI). An allowance for the June 2016 LGCI of 1.4% would
increase this from $227.00 to $230.00 for the 2017/18 year. The community
services rate is a fixed charge on all rateable properties.
General Rate
12 The general rate
impact for the 2017/18 year incorporates changes as a result of the draft
budget increase, the final step in the transition to align the general rate
differential for commercial properties in Strath Taieri, changes in the rating
database (for example, new improvements or new houses) and the 2016 general
revaluation.
13 The final step in a seven
year phase-in to align the general rate differential for commercial properties
in Strath Taieri to the full commercial general rate is taken in the 2017/18
year.
Revaluation Impact
14 The latest
revaluation was effective on 1 July 2016 and forms the basis for rating for the
2017/18 rating year.
15 When property values
change as a result of a revaluation, the largest impact relates to the general
rate. For the 2016/17 year, the general rate represented 51% of the total
rate requirement.
16 Table one below
illustrates the overall change in capital value (CV) by property category for
all properties that pay the general rate.
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Capital Value
CV[1]
2016/17
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CV2
2017/18
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CV
Inc/(Dec)
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% Inc/
(Dec)
|
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Residential
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13,353,044,100
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15,231,324,650
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1,878,280,550
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14.1
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Lifestyle
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1,299,934,400
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1,406,207,000
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106,272,600
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8.2
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Commercial
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3,788,166,650
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4,054,771,050
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266,604,400
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7.0
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Commercial Strath Taieri
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25,441,200
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26,486,700
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1,045,500
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4.1
|
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Farmland
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1,386,627,400
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1,672,949,150
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286,321,750
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20.6
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Residential Heritage B&Bs
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4,535,000
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4,895,000
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360,000
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7.9
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Forsyth Barr Stadium
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163,450,000
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181,500,000
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18,050,000
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11.0
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Total
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20,021,198,750
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22,578,133,550
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2,556,934,800
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12.8
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Table 1: Capital
Value by Category
17 Overall, there has
been a 12.8% increase in capital value between June 2016, when rates for the
2016/17 year were set, and now.
18 The impact on the
general rates paid by individual properties depends on whether a properties CV
has changed by more or less than, the overall increase or decrease in CV.
For example, if the CV of a particular property increased by more than the
overall increase, then this property would pay more general rates.
19 In addition to
valuation and budget changes, the total amount of general rates to be collected
is also impacted by the amount of community services rates collected. The
combined increase in general and community services rates as per the draft
budget is 2.8%. The proposed increase in the community services charge
for 2017/18 is 1.4%. This change, combined with any growth in the rating
database has resulted in a 3.1% required increase in general rates.
20 The 3.1% increase in
general rates will not be evenly distributed between the property
categories. These changes are highlighted across various property
categories in Attachment A.
Residential Capital Value Distribution
21 Attachment B
provides a chart showing the distribution of the new residential property
capital values. Each bar on the chart represents the number of properties
within each capital value range. For example, there are 2,164 properties
in the $240,001 to $250,000 band. This is the band with the most
properties in it.
22 In total there are
46,546 residential properties paying general rates, of that, 80% fall within
the $150,001 and $470,000 capital value bands.
23 There are 142 higher
value properties with a capital value of $1.5 million and over. Included
in these properties are 76 blocks of flats, community houses and cribs, 27 rest
homes, halls of residences and boarding houses, 5 large areas of vacant land
and 34 private residences. These properties are noted because their inclusion
impacts on statistical information, for example the average residential
property value.
24 Council policy for rates
on low value properties is that any property with a capital value of $3,500 or
less pays general rates only. The minimum rate is $5.00.
Forsyth Barr Stadium Rates
25 Since the 2013/14
year, the differentiated Forsyth Barr Stadium rates have been inflation
adjusted annually. For the 2017/18 year, it is proposed to increase these rates
by the June 2016 LGCI of 1.4%.
Schedule of Rates
26 Attachment A also
provides details of the individual rates and the amount collected from each
rate.
Overall Impact
27 The following table
shows the overall rate income (including GST) by property category for 2016/17
and 2017/18.
|
Category
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2016/17
($’000)
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2017/18
($’000)
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$ change
($’000)
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% change
|
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Residential
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98,056
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102,158
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4,102
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4%
|
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Lifestyle
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4,953
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4,980
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27
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1%
|
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Commercial
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46,774
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46,885
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111
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0%
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Farmland
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4,312
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4,709
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397
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9%
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Total
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154,095
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158,732
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4,637
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3%
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28 When considering the
impact on individual properties, the relative impact of the 2016 general
property revaluation needs to be considered. The change in capital values
across the city varies by property, by suburb and by category of
property. This means that the rating effect is distributed differently
depending on what has happened to the CV.
29 The table below
shows, for the average value property in each category, the total estimated
rates for 2017/18. The examples include general rates and the community
services rate for all properties. Targeted rates are included for
residential and commercial properties only.
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Including GST
|
CV
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Total Rates
2017/18
|
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Residential
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326,800
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2,133
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Lifestyle
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561,000
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1,787
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Commercial
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1,307,000
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14,813
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Farmland
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1,157,000
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2,934
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30 The attachments
provide further information on scenarios but broadly show that there is no
standard percentage increase because of the variations in capital value
changes.
31 The sample property
rate impacts incorporate:
· The
forecast rate increase of 3%.
· The
final step in the transition to increase the general rate and the Economic
Development/Tourism targeted rate for commercial properties in Strath Taieri to
commercial rates.
· An
increase of $3.00 in the Community Services
rate.
· An
increase of 1.4% in the differentiated rates paid by the Forsyth Barr Stadium.
· An
assumption around CV change.
Rate Maximum
32 Under the Local
Government (Rating) Act 2002, certain rates must not exceed 30% of total rates
revenue. This includes the use of a uniform annual general charge and any
targeted rates that are set on a uniform basis excluding targeted rates set
solely for water supply or sewage disposal. In the rates models provided,
these rates represent 25% of total rates revenue.
Rate Rebate
33 When considering the
affordability of rates on low income households, it is worth noting that, for
the 2015/16 year, around 3,190 residential properties received a government
funded rates rebate. The average rebate was $547; the maximum rebate
available was $610.
Rating Adjustment Possibilities
34 As a result of
submissions made during consultation on the draft 2016/17 budget, the Council
requested further information on rating adjustment possibilities for retirement
village licence to occupy houses and Māori Freehold land. Reports on
these two issues were provided to the Finance Committee on 18 July 2016.
An update on progress since then is provided below.
35 In addition, a
report was requested which considers rating policies for residential properties
being used for short term commercial rental and/or multiple studio rooms.
Rates Rebate (Retirement Village Residents) Amendment
Bill
36 The Bill addresses
an anomaly in the Rates Rebate Act 1973, and extends coverage of the scheme to
those residences of retirement villages who have occupation right agreements
and pay rates either directly or indirectly.
37 The Finance
Committee requested that staff petition Central Government to expedite the
Rates Rebate (Retirement Village Residents) Amendment Bill. This has been
actioned.
38 The Rates Rebate
(Retirement Village Residents) Amendment Bill received a first reading on 9
November 2016 and was referred to the Local Government and Environment Select
Committee for submissions. Public submissions have been invited; the
submission period closes on Tuesday 31 January 2017.
Rates Remission Policy - Māori Freehold Land
39 The Finance
Committee requested that a revised policy be developed for the remission of
rates on Māori freehold land. Council staff are in the process of
developing a draft policy to be considered and consulted on as part of the
2018/19 – 2026/27 Long Term Plan process.
Rating Method Review
40 A scoping report
will be provided to the Finance Committee on rating policies for residential
properties being used for short term commercial rental and/or multiple studio
rooms with a view to addressing any proposed changes during the 2018/19 –
2027/28 Long Term Plan process.
OPTIONS
41 No options are
provided as this report and the draft budget are giving effect to the Financial
Strategy and previous decisions of the Council.
NEXT STEPS
42 If adopted the
proposed rating method will be included in the supporting documentation that
accompanies the draft 2017/18 budget.
43 While the Council is
engaging with the community on the draft 2017/18 budget, rate account
information is available on the DCC website that shows the proposed rating
impact by individual rate account.
Signatories
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Author:
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Carolyn Allan - Senior Management Accountant
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Authoriser:
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Gavin Logie - Acting Chief Financial Officer
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Attachments
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Title
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Page
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a
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Summary of Current and
Proposed Rates
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11
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b
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Distribution of
Residential Property Capital Values
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12
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c
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Summary Information
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13
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d
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Rates Model
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14
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SUMMARY OF CONSIDERATIONS
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Fit with purpose
of Local Government
This decision relates to providing a regulatory function
and it is considered good-quality and cost-effective.
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Fit with strategic
framework
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Contributes
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Detracts
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Not applicable
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Social Wellbeing Strategy
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☒
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☐
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☐
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Economic Development Strategy
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☒
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☐
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☐
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Environment Strategy
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☒
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☐
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☐
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Arts and Culture Strategy
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☒
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☐
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☐
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3 Waters Strategy
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☒
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☐
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☐
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Spatial Plan
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☒
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☐
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☐
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Integrated Transport Strategy
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☒
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☐
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☐
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Parks and Recreation Strategy
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☒
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☐
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☐
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Other strategic projects/policies/plans
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☒
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☐
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☐
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This decision fits with the strategic framework because it
provides the necessary rates funding to implement the activities included in
the draft 2017/18 Annual Plan.
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Māori Impact
Statement
There are no known impacts for tangata whenua.
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Sustainability
There are no implications for sustainability.
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LTP/Annual Plan /
Financial Strategy /Infrastructure Strategy
The proposed rating method will be set out with the draft
2017/18 budget material during the community engagement period.
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Financial
considerations
The proposed rating method will be set out with the draft
2017/18 budget material during the community engagement period.
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Significance
This decision is considered low in terms of the
Council’s Significance and Engagement Policy.
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Engagement –
external
The proposed rating method will be set out with the draft
2017/18 budget material during the community engagement period.
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Engagement -
internal
Internal engagement has occurred with staff in the
relevant departments.
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Risks: Legal /
Health and Safety etc.
Legal risks were considered.
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Conflict of
Interest
There are no conflicts of interest identified.
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Community Boards
There are no known implications for Community Boards.
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Notices of Motion
Department: Office of the Chief Executive
EXECUTIVE SUMMARY
1 Two
Notices of Motion have been received by the Chief Executive Officer. The
Mayor (as the Chairperson of Council) has directed the Chief Executive Officer
not to accept the Notices of Motion for the Annual Plan Council meeting on
23/24 January 2017 as they are not matters related to the Annual Plan (Standing
Order 26.2(b)).
2 With the
agreement of both movers, the Notices of Motion will be referred to the Council
meeting on 21 February 2017 and considered there.
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RECOMMENDATIONS
That the Council:
a) Notes that
two Notices of Motion have been received and will be considered at the
Council meeting on 21 February 2017.
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DISCUSSION
3 Section
26 of Standing Orders provides a mechanism for receiving and dealing with
Notices of Motion. Two Notices of Motion have been received by the Chief
Executive Officer for the Council meeting on 23/24 January 2017 that meet the
requirements of Standing Orders.
4 The first
Notice of Motion was received from Councillor Benson-Pope (seconded by
Councillor Hawkins) and relates to the hospital redevelopment and the location
of that redevelopment on or near the current site.
5 The
second Notice of Motion was received from Councillor Hawkins (seconded by
Councillor Laufiso) and relates to the living wage and how Council and its
companies and contractors remunerate their staff.
6 The Mayor
has directed that the Chief Executive Officer refuse the Notices of Motion as
they are not related to Annual Plan matters which are the subject of the
Council meeting on 23/24 January 2017. He has, with the agreement of the
movers, referred them both to the February Council meeting.
7 The Mayor
asked that Councillors were advised of this.
8 The
Notices of Motion will be provided to all Councillors with the agenda papers
for the February meeting along with any relevant staff advice.
OPTIONS
9 There are
no options as this is a noting report relating to an administrative
matter. A Summary of Considerations has not been prepared as this is an
administrative report.
NEXT STEPS
10 The Notices of
Motion will be circulated to all Councillors as part of the agenda for the
Council meeting on 21 February 2017.
Signatories
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Author:
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Sandy Graham - General Manager Strategy and Governance
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Authoriser:
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Sue Bidrose - Chief Executive Officer
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Attachments
There are no attachments for
this report.
