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Will Capital Value rating win the day?

November 3, 2023 November 2023 No Comments

SWDC is considering a major change to its rating system _ to move from land value as the basis of its annual charges to properties to use capital value as the key _ in other words moving from a “bare land” rating base to rating both “land and improvements.”

If you haven’t seen the statements on the issue, check out: https://swdc.govt.nz/wp-content/uploads/Final-SoP-and-Draft-Policies-for-Consultation.pdf

In summary, it includes the following:

In its statement on the well-advanced rating review it has under way, SWDC notes:

“Capital value is the total value of the land and improvements, i.e. the land and any buildings on the land. 

“Land value is the value of the bare land.” 

It asks: “Do you agree with council’s proposal to change the general rate to capital value from land value?” 

Already many rural dwellers, slugged by 29% rate rises this year, are calling for this change as offering a more equitable system than the current one.

Council also adds: “No system is ideal, however on balance, council believes that capital value is fairer than land value. Considering the overall rating impacts across different groups of ratepayers and individual properties, council considers capital value represents a better correlation to ability to pay than land value.”

Given it says “fairness” is another a critical part of the rating review process, it notes it is “considering affordability relative to matters such as access to services, land versus capital value.”

Transparency is a further key principal guiding its review, which it says means “providing clear information so the rating model is understood, and ratepayers know what they will need to pay.”

Efficient use of private land is a third consideration, including “how to address under-utilised land, low-density land use and land banking.” It asks: “Is land value a more appropriate measure to base rates on than capital value, and/or whether a different rate should be set for vacant land?”

  • Differential rates require considering “how different multipliers are applied to different categories.” For example, whether “there is a need to separate out larger commercial premises from smaller commercial premises?”
  • Then it adds the issue of targeted rates” which relate to the costs and benefits of targeted rates for specific purposes, such as roading, refuse, water and wastewater.

For most rural dwellers, apart from roading they receive little to no benefit from services like water, wastewater (sewerage), rubbish collection, footpaths or lighting.

The council consultation notes ask “who should pay for footpaths?” It’s proposing that 90 percent of the costs of footpaths be paid by urban ratepayers _ the other 10 percent by the district as a whole. It makes no comment on payment for water, wastewater, rubbish or lighting.

Next it asks whether to replace its Rural Road Reserve with an Infrastructure Emergency Resilience Fund after two years of major weather impacts. An Infrastructure Emergency Resilience Fund would expand the current Rural Road Reserve to cover most roads and would be collected from everyone, not just rural ratepayers.

The proposed Infrastructure Emergency Resilience Fund would be collected through a targeted rate based on capital value and would be used to repair infrastructure in an emergency that was not funded by central government. 

“This change recognises that rural roads have benefits for the whole community through tourism, recreation, and farming _ (and) means all ratepayers would contribute to this fund, which would more fairly reflect the contribution from the whole community.”

The review also looks at the district’s burgeoning short-stay accommodation sector like Airbnb, Bookabach, or similar, and whether it should contribute to the economic development rate? 

“Tourism is one of the fastest growing industries in the South Wairarapa and has an impact on the wellbeing of our communities,” it notes. 

“To support tourism in the district, Council has an economic development targeted rate that is used to promote the region, its activities, and events _   currently paid for by commercial and industrial properties. 

“Dwellings used for short-stay accommodation also benefit from the investment in economic development. Should short-stay accommodation properties contribute to the economic development rate?” 

It also asks how should the Council “define and identify these dwellings, for example through self-identification or registration? It adds fees may need to be collected to cover the administration costs.

Ratepayers have till October 15 to submit views under the consultation rules.

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