Submission on Wellington City Council’s Long-Term Plan Amendment and 2025-26 Annual Plan

Executive Summary

Wellington businesses play an essential role in the prosperity of our capital, providing employment, value for customers and tourists, producing exports, helping build key infrastructure and sharing the benefits of growth. 

Businesses are a critical part of our community and deserve a say in the city’s future, especially in light of the significant contribution businesses pay in commercial rates. 

Businesses are happy to pay for their share of Council services and investment, but the Chamber is deeply concerned that the proposed LTP Amendment and Annual Plan impose disproportionate costs on business that do not reflect the benefits they receive.  

As detailed below, Wellington businesses will be paying 48% of the rates burden, despite owning a fraction of the city’s property. This is a record level of impost on business and risks further damage to the local economy at a time when conditions are already tough. 

These decisions – alongside large rates rises – have an impact on the wider community. Business closures, restructures and withheld investment affect more than just business owners – they also have a negative impact on Wellington residents, customers and staff. 

Wellington must compete with other cities to attract business and investment, and we are increasingly concerned our city’s business conditions risk driving talent, consumers and innovators elsewhere. 

We would welcome a conversation with Council about improving competitive business conditions, including the commercial rates differential, application of the Downtown Levy, investment in infrastructure and quantum of rates. Our recommendations are detailed below. 

Submission on the Long-Term Plan Amendment 

Insurance and Investment Risks 

The consultation document proposes three options to address the city’s underinsurance gap and poorly diversified investment portfolio. 

The Chamber has consistently supported Option 3 – the sale of the Council’s holdings in Wellington Airport Limited and the establishment of a Perpetual Investment Fund.  

This remains the most effective option to address the Council’s financial risks and provide additional disaster headroom. Our position on this remains consistent with our feedback on last year’s LTP. 

Capital Programme Review 

However, since the passing of the LTP, Council has indicated its preferred option is to reverse this decision and retain the shares in Wellington Airport. Additional debt headroom would be created through cuts to the Council’s capital programme. 

We support the Council’s efforts to reduce expenditure – both as a means of increasing debt headroom and for the secondary benefit of decreasing rates. But the Chamber is concerned that the cuts proposed fall well short of addressing the city’s insurance risk. 

On November 26^th 2024 Council officers recommended $400m-$600m of spending be removed from capital programme. This was intended to create $1b of debt headroom to respond to significant disasters or events.  

Option 1 falls well short of the recommended savings, delivering just $700m of debt headroom and a $68m investment fund. It leaves the Council significantly short of its $1.8b-$2.6b insurance gap. 

As such, Option 1 fails to address a myriad of challenges: underinsurance, poorly diversified investments and large increases to residential and commercial rates. 

Recommendation: 

Submission on the 2025/26 Annual Plan

Proposed rates increases 

The Chamber and its members are highly concerned by the Council’s proposal to impose a 12.2% rates increase (including the sludge levy), on top of an 18.5% increase last year. 

Combined rates rises of more than 30% in two years are unaffordable for ratepayers of all kinds, but due to the commercial rates differential, they impact on business most of all. The additional costs to business owners are passed on to tenants in lease agreements, with staff, customers and residents all affected down the line.  

The combined effect of large rates increases with the commercial rates differential risks further damage to the local economy, business closures and loss of jobs. 

Other councils in the region have found significant savings as part of their Annual Plan process. Porirua City Council (PCC) began its Annual Plan process with a proposed 15% average rates increase – after revisions to its budget, that figure was reduced to 6.75%.  

We support the Council’s investment in water infrastructure and recognise its contribution to rates, but we submit that the Council should acknowledge the current track for rates is unsustainable.  

Significant efforts should be made to bring rates increases down. 

Recommendation: 

Commercial rates differential 

Wellington’s commercial rates differential of 3.7 is the most expensive in the country. Concerningly, this year’s Annual Plan takes the commercial sector’s share of rates revenue from 44% to 48% - despite businesses owning just 15% of Wellington’s property value. 

This arrangement is inequitable, damaging to business, and the Chamber is concerned this year’s Annual Plan not only embeds but accelerates this disparity.  This damages Wellington’s ability to compete with other cities and holds the economy back. 

Analysis by Sense Partners supports our position that a high business differential decreases employment and reduces income for workers. Their model suggests that decreasing the business differential by 1% would boost employment by a little under 0.1%; decreasing the differential by 50% would increase employment by about 4%.  

A lower differential would supply productivity improvements to deliver an additional $185.83 of income for incumbent workers each year. Overall, a lower differential could induce a $29.3 million increase in city-wide GDP for Wellington. 

Recommendation: 

Downtown targeted rate 

CBD businesses also contribute more than $18m a year to Council through the Downtown Levy, or Downtown Targeted Rate. But businesses have no input or accountability for how this money is spent. 

The Auditor-General’s guidelines on fees and levies set a number of important principles, including that public organisations “regularly engage with fee and levy payers”. 

We have repeatedly submitted concerns around the use of the Downtown Levy funds. While we are not necessarily opposed to the use of targeted rates, there must be a clear purpose for the rate, a connection to the activities it funds and transparency on how the money is spent. 

The Downtown levy’s initial purpose was to subside free parking in the city, and the resulting rates revenue was administered separately from other Council activities. There was a clear justification for a targeted levy with the impact of free parking clearly correlated with downtown businesses. 

However, since free parking ended in 2008, the application of the downtown levy has focused solely on “tourism promotion”. 

Downtown businesses don’t believe that these activities produce distinct benefits for their businesses that justify a targeted levy. At the same time, city centre retailers are facing challenging conditions as workers and shoppers increasingly opt to spend their time and money in the suburbs. 

We submit that the Downtown Levy would be appropriate source of funds to provide financial compensation to businesses affected by works on the Golden Mile. 

Recommendation: 

Short-term accommodation rating policy 

In principle, we support the Council’s proposal to ensure commercial providers of short-term accommodation are charged commercial rates. If a property is used for predominantly commercial purposes, it’s appropriate the Council treats it as such. 

However, we have several concerns with the design of the new Rating Policy proposed in this year’s Annual Plan. 

Short-term accommodation plays an important role in supporting the city’s tourism industry, particularly during major events. A poorly designed system risks short-term accommodation being removed from the market at scale, and it could result in a significant shortage at times of high demand. 

The 60-day threshold is not an appropriate measure to capture truly commercial activity. It represents just 16% of the year. Council proposes to charge these properties full commercial rates – a 3.7 differential. This lack of a graduated system means properties with very low occupancy would be charged at the same level those occupied for most of the year. 

Full commercial rates would prove unaffordable for many providers of occasional short-term accommodation. This is exacerbated by the size of the rates differential in Wellington, which we note is already too high. The inevitable consequence is that these properties would be removed from the market en masse. 

Other councils have designed proportionate models to recognise different levels of occupancy and charge an appropriate level of rates. 

Queenstown-Lakes District Council classifies properties as being “mixed use” when occupied between 28 and 180 days. These properties receive a 25%-35% increase in rates, in proportion with occupancy levels. Only properties rented for more than 180 days are classified as truly “commercial”. 

Auckland Council and Rotorua Lakes Council also have graduated models, and Rotorua ringfences additional funding to fund tourism and economic development through RotoruaNZ.  

Wellington City Council’s proposed approach risks failing to capture commercial properties and driving owners out of the market.  

Design of the new rating policy should be determined by the problem Council is trying to solve. It’s not clear whether Council intends this policy to increase the size of the rental market, support the local hotel industry or create a more equitable distribution of commercial rates. 

We submit that the new policy should be equitable and enforceable and requires a significant redesign. 

Recommendation: 

Conclusion 

Thank you for taking the time to review our submission on the Long-Term Plan Amendment and this year’s Annual Plan. 

The Chamber is committed to working with the Council to create a more prosperous city, where residents and visitors have the best opportunities to live, work and play. 

We submit that the following recommendations would provide greater opportunities for Wellingtonians; attract investment, tourism and business; and accelerate economic growth. 

Recommendations: