Rating differentials must be abolished

Today’s release of the Productivity Commission’s report into local government funding and financing reinforces many of the points the Wellington Chamber of Commerce has been making, most importantly the Commission’s recommendation to abolish rating differentials.

"We strongly oppose the Wellington City Council’s recent decision to increase their rating differential for businesses from 2.8 to 3.25, so we’re very pleased to see the Productivity Commission recommend today that differentials be abolished within five years," says Chief Executive John Milford.

"It also calls into question the Greater Wellington Regional Council’s decision to introduce a business differential for the first time this year.

"Multiplying by an arbitrary number the rates bill that businesses must pay has never made sense.

"Councils often conflate and confuse the benefit and ability-to-pay principles.

"Instead, the Commission recommends abolishing both differentials and uniform annual general charges and replacing them with more transparent targeted rates. This allows councils to set rates primarily based on who benefits from them.

"The Commission examines councils’ ability to fund the infrastructure they need to support a growing population. They find that new infrastructure is affordable as long as councils act soundly and fund infrastructure in the right way.

"We support councils re-examining their current assets and asking whether funding construction of new assets is more important than maintaining ownership of their current assets - particularly commercial enterprises.

"The Commission found that the cumulative burden of ‘unfunded mandates’ - central government shifting responsibilities without funding onto local government - is becoming increasingly severe for some councils.

"It is surprising, then, the lack of questioning by Wellington’s councils of the substantial funding burden placed on ratepayers to fund the Let’s Get Wellington Moving transport package.

"Wellingtonians already pay their fair share of fuel excise tax every time they fill up their car. Yet councils will be significantly increasing rates in coming years to pay for state highway projects that are normally the responsibility of central government.

"Today’s Productivity Commission report is a significant piece of work looking to enhance the way local government is managed and funded. We will be making a further submission to support their work."

Contact: Brent Webling

Phone: 021 821 383