A question of affordability

A question of affordability


RATING POWERS− COUNCIL'S DISCRETION− DIFFERENTIAL RATING

− PROPORTIONAL BENEFITS CLAIM− WELLINGTON CITY− LOCAL GOVERNMENT

− FIDUCIARY OBLIGATIONS− UNREASONABLENESS− JUDICIAL REVIEW


In WELLINGTON CITY COUNCIL v WOOLWORTHS NZ LTD & ORS (CA, 24/5/1996;

Richardson P, Gault, McKay, Keith and Blanchard JJ, CA 17 and 46/96)the CA allowed WCC's appeal from the HC decision that a differential rate was unlawful in imposing too great a burden on commercial ratepayers with insufficient benefits to that sector. After examining the scheme of the Rating Powers Act 1988 and the Local Government Act 1974, the CA emphasised the absence of a direct link between values and benefits, the wide discretion given councils (and their electoral accountability), the need for a broad "political assessment", the limits of Wednesbury unreasonableness, and the "clear and extreme" nature of MacKenzie DC v ECNZ [1992] 3 NZLR 41, and concluded that the WCC had not acted unlawfully in striking the relevant rates. On fiduciary obligations, the CA suggested that those owed to ratepayers might be more readily applicable to spending decisions but could not be used to undermine Wednesbury principles. On judicial review generally, the CA observed that the "larger the policy content and the more the decision making is within the customary sphere of those entrusted with the decision, the less well equipped the courts are to reweigh considerations involved and the less inclined they must be to intervene". (28 pp) (source: The Capital Letter)

In 1995 the Appeal Court held that there were no grounds for legal intervention in the setting of Wellington’s rates. At that time the differential was commercial 7 to 1 residential in the general rate.

Despite the Council winning the case it was argued that the differential could not be legally upheld and so business rates began to be switched onto the residential rates bill. Political people started to talk about a contract between the Council and the business community. It is now proposed that the rates differential be further moved to 3.4 commercial to 1 residential with a target of 2.8 in 2011/12.

On top of these changes has been the compounding of rates increases over the time that the differential has been shifting.

At the close of the Draft Long-Term Council Community Plan 2009 - 20019 Councillor Bryan Pepperell moved an amendment opposing the continued shift of the business rate onto the residents’ rates bill and was supported by Councillors Cook, Gill and Ritchie.

What is happening to the rates?

Here is the next 3 years

Forecast Real Rate Increases

These increases are set against the biggest wealth destruction that has taken place since the 1930s depression.

Residential property (valued at $532,000) rates will be $1920 per annum in 2009/10


2009/10 2.38% Residential indicative 4.5 %


2010/11 5.48% Residential indicative 7 %


2011/12 3.67% Residential indicative 5 %


In a public submission on the Draft LTCCP Mr Simon Smelt said that in “2010/11 the planned average rates increase after allowing for growth in the ratepayer base is 5.48%, or before such growth 5.98%. Most citizens will pay what is called the general rate rather than the average rate. That’s due to rise to an amazing 8.67%. Whether before or after inflation that is an unacceptably high number; all the more so when many households will be facing tighter budgets. “


Bryan Pepperell