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Tuesday
Apr122011

Revenue & Finance Policy - Ten year Plan - Rates

The following is an extract on Rate Increases from the Ten Year Plan Revenue and Finance Policy Phase Two document that goes before Council on 15 April. This and the section on Borrowing Limits are the two most important sections of the document, and ones that have clearly been Workshopped to the point where there is unlikely to be any argument on Friday.

The critical part of the section on rate increases is that which limits such increases to Average District rates to no more than the Local Government Cost Index (LGCI) in that year, plus 2%. The LGCI is normally at least 1% over the Consumer Price Index (CPI), and thus our Council is planning to restict itself to probably no more than a 6% increase.

It is appropriate in order to hold this new Counciil to account, that this plan should be compared with the promises made at the time of the recent election by the Mayor, and his new colleagues.

The words "zero rate increase" were repeated ad nauseum, along with some tentative grasps at "CPI". Our tyros have suddenly come face to face with reality, and with determined and persistent staff efforts to protect their revenue patch. Councillors rabbitting on about the need to reduce rates are such a bore!

Limits on Rate Increases

Because the Council chooses to provide and fund its services in a manner that meets the preferences of our diverse communities, it as a result uses a number of rating tools to reflect the cost of providing these services in its different communities. This results in a complex rating structure.

Again to provide predictability in the level of rates required, and address willingness to pay concerns, the Council will endeavour to limit annual increases in the 'District Average Rate Requirement'   to that of no more than inflation (the consumer price index (CPI)) as its comparable to general household costs, while recognising the diversity of our communities by providing the flexibility for individual local

communities to pay higher local rates for additional projects or services. This will be a challenge as many local government costs will increase at a higher rate than CPI even if service levels remain the same. 

While the Council will continue to consider affordability issues when setting rate levels each year, it isalso required by legislation to include a statement on quantified limits on rates increases. Staff recommend that limiting the increase in the Council's 'District Average Rate Requirement' to no morethan the forecast   % increase of the local government cost index (LGCI) plus 2% for that year would be more realistic as this better reflects the realities of higher local government costs i.e. the cost of The 'District Average Rate Requirement' is calculated as total rates requirement divided by totalnumber of rating units.

It also recognises that from time to time Council will need to increase the level of service that it is providing to meet, for example, community needs and new resource consent requirements. Individualproperties may experience smaller or larger increases depending on movements in property values, the services that they receive and their location. 

This approach will limit the extent to which the Council can undertake new or increased services and projects unless savings can be found elsewhere. As it provides for little contingency, this reflects a conservative approach. In looking at this proposal it is important to recognise that it is a policy 'cap'and that the Council is aiming to restrict rating movements to no more than the movement in the consumer price index. 

The Council does not intend providing for different rate increase limits for individual community boardareas. Rather it will focus on the overall District Average Rate Requirement movement and then look to prioritise the desires of different communities within the district average.

Limit of Rate Increases in Summary: Staff recommend limiting the increase in the Council's 'DistrictAverage Rate Requirement' to (at minimum) no more than the % increase of the local government cost index (LGCI) plus 2% for that year. At an individual community board level, rate increase limits may differ.

   

 

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