The National-led government has been accused of effectively “setting up” councils to fail after announcing a rates cap hot on the heels of its bed-tax U-turn. An announcement on Tuesday that rates rises would be capped at 4% held no surprises for Otago’s elected representatives and came days after the National Party ruled out introducing any new taxes if re-elected, including a bed tax highly anticipated in Queenstown Lakes. Local Government Minister Simon Watts said legislation would halt “excessive increases”, give ratepayers greater certainty and increase focus on core council services. Water services and council fees and charges, such as pool entry fees, would be exempt — Mr Watts said the legislation would be passed “in effect next term”, to come into force in July 2029. Queenstown Lakes District deputy mayor Quentin Smith said the “reannouncement” amounted to “a strange sort of electioneering”. The government had outlined its intention to cap rates in December and the Queenstown Lakes District Council factored this into the early stages of its long-term plan. [Missing Credit]Local Government Minister Simon Watts. Photo:RNZ/Baz Macdonald Though Cr Smith supported minimising rates effects on residents and ratepayers, he said recent government announcements and ongoing sector reform were producing significant challenges in delivering for communities. Taking a bed tax out of contention had removed the opportunity for a hefty revenue source and, alongside costs of ongoing reform, he anticipated the rates cap would put the council under “significant financial pressure and [mean] significantly under-delivering for our community in the coming years”. “If you were intentionally setting up local government to fail, it is hard to imagine you would much differently to what government are currently doing to us.” Otago mayors were downbeat about the announcement — they backed keeping rates affordable but were unsure a cap would achieve the touted benefits. Clutha District Mayor Jock Martin said he remained sceptical rates capping was an “ultimate solution”. “I have inherited an organisation that has endured 11 years of a self-imposed 4% rates cap. “Now, we are facing the consequences of underinvestment from this decision and are confronting the stark realities of our situation.” Ministers appeared to be behaving “more like thrill-seekers than responsible leaders”. He suggested it was time they reconnected with the needs of everyday New Zealanders. Meeting the cap was possible, but it depended heavily on ratepayers’ expectations of future capital infrastructure project delivery, alongside daily council operational costs, Mr Martin said. Waitaki District Mayor Mel Tavendale said maintaining levels of service and appropriate infrastructure investment would be challenging under a cap. “Ratepayers will welcome more certainty, but the costs do not disappear. “We are focused on controlling costs and looking hard at what we do and where savings can be made. “We will also continue to look how we grow funding outside of our reliance on rates.” If councils could not fund essential work, communities might face delayed projects, reduced services or bigger bills later, she said. Exemptions to the cap would be granted in exceptional circumstances, such as natural disasters, and for councils which could “demonstrate prudent financial management and a justified need” to operate outside the target range of 2%-4%. Mrs Tavendale expected the exemption process would be critical and said a practical pathways for exceptional circumstances was needed. Dunedin Mayor Sophie Barker said while some clarity from the government was appreciated, capping rates was a “blunt tool”. “It will impact our ability in the future to maintain investment in the services and infrastructure that people rely on us to provide.” It mightmean higher council service charges, service level cuts and alternative forms of revenue, she said. The council would consider cutting projects from its long-term plan. ruby.shaw@odt.co.nz
