Homeowners facing average rates rises of 15% with no relief in sight

Photo: RNZ / Dom Thomas

Kiwi homeowners are facing an average rates rise of 15 percent over the coming year - and there is no sign of relief in sight.

Local Government New Zealand (LGNZ) came to that figure by collating the planned rate rises of 48 of the country's 78 councils.

Among those likely to see biggest rates hikes this year are Canterbury residents, who are facing a hefty 24.2 percent average rates rise.

Hamiltonians are likely to see a jump of 19.9 percent, while Whangārei is looking at a record hike of 17.2 percent.

LGNZ commissioned a report from Infometrics principal economist Brad Olsen to show why rates were rising so much.

It found over the past three years, bridges, sewerage systems, and roads had all become more than 25 percent more expensive to build.

Bridges, meanwhile, were an eye-watering 38 percent more expensive.

"Those increases are larger then what headline inflationary gains have been in recent years. With local government they're not buying usual household items, they're not buying bananas and similar, they're buying some of that core critical infrastructure and that has continued to get more expensive," Olsen said.

He said there was a difference of up to 20 percent between what projects were expected to cost when planned and what they actually cost now.

"To put that in perspective, if a council had five $20 million projects [in its] last long term plan, they would now have to cut one of those entirely to pay for the cost escalation on the other four."

Local Government New Zealand vice-president and Lower Hutt mayor Campbell Barry said councils were trying to grapple with what projects to prioritise.

"What I would say though, is we already have a $52 billion deficit in infrastructure spending as of right now. So we know the problems may only get worse, and that's the challenge."

Local Government New Zealand vice president, and Lower Hutt Mayor, Campbell Barry with Infometrics principal economist Brad Olsen. Photo: RNZ / Libby Kirkby-McLeod

Hamilton City Council is about to consult the public on its proposed 19.9 percent rise.

Mayor Paula Southgate said there just was not anything left for her to cut.

"We've already been through this budget with a fine tooth comb," she said.

That included cutting staff numbers.

"We've been through a rightsizing exercise with the council. If we cut more staff, it's my personal view that we will start to cut services."

The council said it cost $5.60 per resident per day to run the city, but that amount was expected to jump in the year ahead to $6.80 for the same services.

Whangārei mayor Vince Cocurullo said the proposed 17.2 per cent rates increase would enable the council to maintain what it offered ratepayers, and no more.

"This is the cost of running our [essential] infrastructure, it's not about all the extra bells and whistles," Cocurullo said.

The price of goods and services had risen quickly over the last few years and the council's income no longer covered everyday costs, he said.

Major increases in construction and insurance costs had contributed to the rise.

Barry said it was time to get serious about ways to pay for local infrastructure that did not involve going deeper into ratepayers' pockets.

"Congestion charging could be an option for a city council which could help. Accommodation levies for those that experience an influx of visitors would be helpful as well," he said.

He said a share of GST on housing growth, which had been put forward by the government, would also help - but by itself it was not enough.

"That simply won't cut the mustard when it comes to the type of costs we are staring down."

Amalgamating councils or having a smaller number could help, but that was not the quick fix it might seem, Barry said.

"It we reorganised or amalgamated councils and we left them with the same levers that they're current got, we'd simply be moving the deck chairs around the Titanic."

Barry said the pressure on local councils had reached tipping point, and with an average rate rise of 15 percent, ratepayers were probably feeling that way too.