The Ratepayer Assistance Scheme is a local government-led initiative in the works from Local Government New Zealand that aims to help tackle affordability issues.
Under the scheme, ratepayers over 55 would be able to defer up to $4000 of rates a year, effectively taking a loan from the scheme, which would pay the council the loaned amount and the ratepayer would opt to repay that to the scheme when they liked, or when they sold the property.
The scheme would charge interest on loans to ratepayers at 2% below floating mortgage rates.
The proposed scheme, presented to council by LGNZ interim chief executive Scott Necklen and Cameron Partners partner Hugo Ellis, this week is being explained to councils around the country as LGNZ seeks early support.
There would also be loans for ratepayers to install renewable energy sources in their homes at low interest rates and deferred development contributions, providing up to $60,000 up front for councils to build new housing units spread over a 30-year repayment period.
Mr Necklen spoke to councillors about committing to the fund early.
That would convert into shareholding and provide up to 5.6% cash returns when the fund broke even, in an estimated five years.
There was already cross-party support in central government although no legislation had been put forward and no funding had been sought, he said.
A pledge by councils would be non-binding, as in later stages it could agree to not commit to funding but still be able to offer services to ratepayers, but would not receive returns or have rights as a shareholder.
Mr Ellis said the entity would be entirely non-commercial and run as a local government organisation using high credit ratings to pay back councils and address commercial issues.
Debate around the Gore council table began with deputy mayor Joe Stringer calling the idea of cheap credit a “risk”, citing the 2008 financial crisis.
Cr Stringer said if rates were put on hold for 30 years at a 2% interest rate and the money put into an active growth fund, a ratepayer could enrich themselves. He called it “money for nothing” and said it could “come down like a house of cards” if too much cheap credit flooded the economy and drove up inflation.
Gore Mayor Ben Bell pointed out Cr Stringer was arguing “against ratepayers having more money” and Cr Paul McPhail said he was in favour of the scheme despite the potential for a “few flash Harrys”.
“I’m thinking a little old lady, old house, she’s got to 70, 80 years old, and can’t afford rates. This is an option for her,” he said.
Cr Donna Bruce said she was against the proposal, calling it “kicking the can down the road” for councils who had to make rates affordable, not give out loans.
“[Councils] have a responsibility to look at what we’re spending. We should cost control within council not encourage residents to borrow,” she said.
She compared it an “ambulance at the bottom of a hill” and Cr Mel Cupit agreed with her concern over councils “asking ratepayers to get into debt to pay rates if we’re not cutting costs”, while also pointing out it had not been passed through legislation nor had costs been established.
Cr Torrone Smith said that as someone working in the lending space, he saw people and their need for such an option, and said the loan could work as a more forgiving reverse mortgage.
“It’s offering an option to ratepayers that doesn’t currently exist or is too expensive. It’s not as though we’re only going to do this and not reduce rates, it’s just another option,” he said.
Mr Bell said he was an early fan of the proposal as it not only allowed people an avenue to defer rates and payments, but also a chance for the council to get another income stream.
Cr Coates, in reply, said it was “making money from people who are struggling”, to which Mr Bell said a reverse mortgage was a more daunting option, because instead of the money going to a non-for-profit and back to the community, it would instead go to an overseas bank.
A division was called for the table, with all three resolutions being passed with a vote of 10 to 2. Crs Cupit and Bruce voted against.
The Queenstown Lakes District Council already supports the scheme and the Central Otago District Council has also shown in-principle support.
