Mayors proposed rates policy for the draft Long-term Plan

2015-2025

Key information includes:

1. An average rates increase of 2.5 per cent for the first two years, and 3.5
per cent for the eight years thereafter. This compares favourably with the
previous LTP where rates were capped at 4.9% for the remaining seven
years.


2. This years property revaluation will have no impact on the total amount
of rates money the council collects. Property values simply help to
determine how rates are shared across ratepayers.


3. Keep the Uniform Annual General Charge (UAGC) at 13.4 per cent of
general rates ($381). The UAGC is the fixed portion of your rates, which is
paid by everyone. After reviewing the options to increase or reduce the
UAGC, the proposal is to keep the UAGC at its current level.


4. Adjust the long-term business differential strategy to prevent the
revaluation 2014 shifting more rates from business to non-business.
Business rates will be maintained as a proportion (33 per cent) of total rates in
2015/2016, and then reduce over the following ten years to 25.8 per cent.


Councillors will make a decision on 5-6 November 2014, after reviewing the
Mayors proposal.

The public will be able to have their say on all of these proposed rates
changes during the consultation period from 23 January next year.

For more information on rates and the Long-term Plan, go to
shapeauckland.co.nz


Rates provide approximately 45 per cent of the
councils revenue, with the rest coming from
grants, subsidies, development and financial
contributions, user charges and fees.
Council needs approximately $1.42 billion from
ratepayers next year to run the city. This works
out to an average 2.5 per cent increase in
rates to existing ratepayers.
We then determine how much of the
required rates need to be paid by business
ratepayers (33 per cent).

We then set the Uniform Annual General
Charge. This is the fixed portion of your rates,
and is applied to ensure every ratepayer pays
a minimum contribution for council services.

The amount remaining is then split across
all residential and business ratepayers,
based on the capital value of their property.

How your rates are calculated: a step-by-step guide

1. Work out how much money we need from rates to run the city


2. Determine what portion of rates is paid by business


3. Set the fixed amount that is paid by all ratepayers


4. Split across all non-business and business ratepayers, based on
property value

Revaluation 2014 has no effect on rates revenue

This years property revaluation showed an average capital value increase of 29 per
cent since 2011. The average residential capital value increase was 34.8 per cent.

The increase in property valuations has no impact on the amount of rates money the
council collects. If property values go up, no additional income flows to council. Property
values simply help to determine how rates are shared across ratepayers.

If your property value has increased more than the average, your rates will likely
increase. While if the property value increase was below the average, your rates will
likely decrease.

The diagram below shows the relationship between the general revaluation
and rates revenue, both for the current 2014/2015 rating year, and the
2015/2016 rating.

























2014/2015
rating year

2015/2016
rating year
Total
property value
based on 2011
revaluation
$367B
Total
property value
based on 2014
revaluation
$474B
General rates
revenue
General rates
revenue
$1.37

$1.41B
29%
increase
2.5%
Increase*
*Adjusted for growth

Uniform Annual General Charge

The Uniform Annual General Charge (UAGC) is the fixed portion of your rates, and is
applied to ensure every ratepayer pays a minimum contribution for council services.
The proposed UAGC will be $381.
The level at which the UAGC is set affects the amount of rates raised from high value
properties and low value properties.
If the UAGC is increased (e.g. $900), then rates will rise for lower value properties and
drop for higher value properties. If the UAGC is lowered (e.g. $250), rates will rise for
higher value properties, and drop for lower value properties.
The graphs below show the effect of a low and high UAGC on the
total rates you pay for a property valued at $470K vs $1M.





$250
Low UAGC

$2,957
$900 $900
High UAGC
$1,731
$2,669
$250
$1,522
$470,000 $1,000,000
$470,000
$1,000,000
Property values
Property values
Business rates differentials


Auckland Council has a policy to slowly reduce the rates differential on business
properties over a ten-year period.

The reason for this policy was that when all the business rates revenue from the legacy
councils were combined, it was considered that business was paying a high proportion
of the overall rates revenue at 34 per cent.

From J uly 2013, business rates differentials started to reduce by a factor of 0.1 over ten
years. This would have meant a reduction in the business differential from 2.63 in
2012/2013 to 1.63 in 2022/2023. This would have reduced the total percentage of
business rates to 25.8 per cent.

The 2014 general revaluation changed this path, so that if we continued with these
differentials, business will pay a lot less than intended, with non-business (residential
and farm/lifestyle) paying more.

The Mayors proposal will pause the reduction for the 2015/2016 year (i.e. hold it at the
same proportion as 2014/2015), then continue to reduce business rates as a proportion
of the total over the next ten years to 25.8 per cent in 2025/2026.

The graph below outlines these scenarios.













%

o
f

g
e
n
e
r
a
l

r
a
t
e
s

2012/13
2022/23
Current path for rates Current path for rates
74.2%
2015/16
Projected rates path after 2014
general revaluation
Projected rates path after 2014
general revaluation

Non-business Business
34%
66%
2025/26
Mayors proposed rates path
25.8%
Mayors proposed rates path

How your rates are spent in 2014/2015

Your rates are used to pay for things that make Auckland such a great place to live,
such as improved public transport, events, parks and other community facilities. We
continue to invest more than ever before in your communities, delivering more facilities
and infrastructure for Aucklanders.

Rates provide approximately 45 per cent of the councils revenue with the rest coming
from grants, subsidies, development and financial contributions, user charges and fees.

Each $100 of general rates funding is applied to specific areas of council. The largest
proportion of rates is used to fund transport, followed by lifestyle and culture, which
includes funding for events, parks, recreation and art services.





Operating expenditure

Operating expenditure covers the councils day-to-day operations and services, from
collecting rubbish to maintaining parks and issuing building consents. It is forecast that
the Auckland Council group will spend $3.2 billion in operating expenditure to support
service delivery in 2014/15.

Operating expenditure is funded by a mix of user charges, fees, grants and subsidies
and rates. It includes the non-cash cost of depreciation, rates collected to fund this are
then used to pay for the renewal of our assets or to repay councils debt.