A Rates Assistance Scheme (RAS) workshop was held after the finance and policy meeting last Tuesday.
Local Government New Zealand (LGNZ) interim chief executive Scott Necklen and Cameron Partners partner Hugo Ellis spoke at the workshop attended by Mayor Tom Campbell and seven councillors.
Mr Necklen said there were three options available in the proposed scheme.
Developers would be able to defer development levies, residents could borrow money for projects that improved their properties and residents could choose to postpone their rate payments.
About five years ago, factors including an ageing population and the increase in cost of living had prompted the development of the scheme, Mr Necklen said.
Being able to postpone rates payment could be very helpful to older residents, he said.
“This would be a way to simply give them choice to fund or finance their rates in a different way, as opposed to a reverse mortgage or potentially having to think about selling up.”
LGNZ, the Local Government Funding Agency and Cameron and Partners have been the main drivers for the development of the scheme.
So far 21 councils had been informed of the scheme and eight had been funding the development stage.
However, he was not looking for any funding input from Invercargill.
“Just looking for your in-principle support that if we were to move forward with the ratepayer assistance scheme, you would enable access for your ratepayers to use the ratepayer assistance scheme.”
Further down the track Invercargill would have the opportunity to be an equity shareholder, he said.
If the council chose not to be a shareholder residents could still access the scheme, he said.
The scheme would operate in a similar way to the local government funding agency which made money available to councils at a cheaper than market interest rates.
A business case has been presented to the Minister of Local Government Simon Watts and the Department of Internal Affairs who had “signalled their interest”.
Mr Ellis said a rates postponement scheme had been operating in British Columbia in Canada since the 1970s.
The province had a similar size population, demography and property tax regime to New Zealand.
About 4% of ratepayers used the scheme.
The rates would be repaid “either be on sale of the house or when the ratepayer actually dies and the property is then sold”, Mr Ellis said.
Cr Trish Boyle asked if a resident joined the rates postponement scheme would it be like taking out a mortgage on the property.
Mr Ellis said it would be similar to a mortgage in that there would be a debt attached to the property.
Mr Necklen said at present residents could either use their savings to pay for their rates if their income did not cover it or take out a reverse mortgage.
The scheme would give residents access to a cheaper interest rate.
“We estimate that the interest rates alone will be four to five percent below what reverse mortgage companies charge and then there's fees on top of that as well and the RAS will charge a one-off hundred-dollar establishment fee, whereas the fees for rates for reverse mortgages are much much higher.”
Invercargill City Council legal and governance manager Michael Morris said if the council decided to continue exploring the scheme the next step would be for a report to be presented to the Finance and Policy Committee.
