HBRC rates review – no cause for panic

With their superficial commentaries in Hawke’s Bay Today, Anna Lorck and Linda Hall have been stoking angst over the HB Regional Council’s current rates review, now before the public for consultation.

Issues to be debated, sure; cause for panic, no.

To be clear, what this review sets out is not a plan for what HBRC’s rates will be, or to what programmes and priorities they will be devoted. Those really tough choices will be put to public consultation – just like the rates and spending plans of our four territorial councils, with much bigger ratepayer wallet implications – in March/April when all councils propose their next Long Term Plans, which will take effect, after that consultation and adoption, in July. 

If any ratepayer imagines they will not be facing rate increases across the board from our councils, they are living in fantasyland. I’ll come back to this in a moment.

So, what is all the current fuss about over HBRC’s rates review?

What that review has generated, after a very complex process that those opining might study before wailing, is a preferred proposal regarding how the HBRC’s rate base should be constructed. Across the range of programmes and activities the Council would normally be expected to undertake, who – more precisely, which categories of ratepayers – should bear the cost and how?

In broad terms, those categories are the general ratepayer, commercial or industrial ratepayers, or more targeted groups (like farmers or growers) who are most directly related to the expenditures required.

For example, assuming HBRC finances HB Tourism, should only businesses pay for that as the most direct beneficiaries, or all ratepayers?

If farming practices pollute our waterways, should farmers pay for the science and regulatory apparatus to mitigate that, or should the cost be shared in some other way?

If some of us need (or should use) the option of public transportation, but it is only available in parts of HB, who in the region should pay for it?

HBRC has worked its way through a myriad of allocation issues like these … and there is no easy, let alone perfect, answer to any of them.

The result is that some activities wind up being paid for – to varying degrees – by all ratepayers and some are paid by fairly defined and targeted groups. And any of those proposed allocations – put forward clearly in the consultation document – can be disputed by ratepayers during the current consultation process, ending January 28. Here’s where you can find the consultation documents.

The business of local government and providing needed services must go on. In HBRC’s case, without some feedback on its proposed ‘method’ of collecting rates, it cannot get on with the even tougher job of deciding what the rate take should be in the next few years.

Underlying all these targeting choices is the matter of what the basis of valuing each HB property should be in the first place.

HBRC has signaled its preference for shifting to a capital-based valuation (where improvements on a property – home, orchards, manufacturing plants – are included) instead of its current land-only based scheme.

It has estimated the overall effect of that shift (under present rates) as follows:

“Overall, the cumulative impact of the proposed changes has an average impact ranging from a ($1,138) average decrease to a $485 average increase per year. In total 55% of residential ratepayers would experience a reduction in rates or a maximum increase of $50, 93% of non-residential ratepayers would experience a reduction in rates or a maximum increase of $500. Overall, 23% of ratepayers experience a decrease to their current rate.”

The main effect of this change is to shift a bit more of the rates burden from pastoral properties to urban properties. At what “highway robbery” (according to commentator Lorck) average cost to our urban dwellers? A whopping $46 a year to Napier residents and $77 a year to Hastings residents.

Those who find this unconscionable seem to believe that our urban residents have zero stake in the environmentally-focused programmes of HBRC, which is nonsense. No stake in flood control. No stake in public transport. No stake in regional parks. No stake in stopping our local councils from putting their sewage in our waterways, the Ahuriri estuary, and our marine environment. No stake in mitigating and adapting to climate change.

In making the shift to a capital-based scheme, HBRC is getting in step with the other ten regional councils in NZ. All those others have deemed that spreading the rates burden according to capital value better reflects property owners’ relative ability to pay. From there, ‘user pays’ takes over to justify any targeted additions to any ratepayer’s levy.

Having studied the HBRC consultation documents closely, I can find bits of the targeting allocations that I might have tilted differently, mainly to ensure that the productive sector pays appropriately for its environmental responsibilities HBRC must fulfill. However, on balance I think HBRC has done a good job of allocating the overall burden. 

And that includes its recommendation to adopt a capital-based rating scheme, an imperfect but not irrational approach to placing rate burdens on those either more likely to be creating needs for service and/or more able to pay.

The proposed rates scheme, with the examples given in supporting documents, does not in itself increase HBRC’s overall rate take. It does shift who might pay more (or less) when rates are actually struck.

And have no doubt about it, your rates are going to increase. It’s not an evil plot hatched by uncaring councillors. It’s a responsible and unavoidable response to the hand nature and past fiscal neglect has dealt us. And sure, there will be plenty of room in months ahead for debate about priorities and efficiencies.

For those residents who find outrageous a possible increase of $46 to $77 a year in their share of the HBRC rate pie as it presently stands, I suggest you reserve your ammunition until March/April, when all councils propose their rating and spending plans. At that point you can identify which activities you do not want to see your councils spend money on – flood control, cultural amenities, bridge repair, CBD upgrades, clean rivers and streams, what?

But as you stock up on ammo, consider carefully the lessons underscored by Cyclone Gabrielle. We underfund our core infrastructure and our environmental sustainability at our growing peril.